Envision Health files for Chapter 11

August 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

August 2023 Issue

In one of the largest health-related bankruptcies ever seen, US medical group Envision Healthcare Corp. and certain of its wholly owned subsidiaries have filed for Chapter 11 bankruptcy protection.

As part of the process, Envision has entered into a restructuring support agreement (RSA) with its key stakeholders to restructure 60 percent of its approximately $7.7bn debt obligations.

Envision has stated that throughout the Chapter 11 and RSA processes it will continue to operate as usual, maintaining its commitment to providing high-quality patient care.

One of the leading medical groups in the US, Envision delivers physician and advanced practice provider care in settings where patients have the most acute and life-changing needs – emergency departments, surgical suites, intensive care units and birthing suites – through Envision Physician Services.

Additionally, its AMSURG unit partners with physicians to operate more than 250 ambulatory surgery centres nationwide specialising in gastroenterology, ophthalmology and orthopaedic care. Together, the two teams of more than 21,000 clinicians help improve the health of communities across the US through nearly 30 million patient encounters a year.

Under the terms of the RSA, both AMSURG and Envision Physician Services will be separately owned by certain of their respective lenders. AMSURG will purchase the surgery centres held by Envision for $300m plus a waiver of intercompany loans held by AMSURG LLC. All of Envision’s debt, with the exception of a revolving credit facility for working capital, will be equitised or cancelled, deleveraging approximately $5.6bn.

Since its acquisition by global investment company KKR & Co., Inc. in 2018, a series of events has reportedly put significant pressure on Envision’s finances, including: (i) patient volumes sharply declining at the outset of the coronavirus (COVID-19) pandemic; (ii) health insurers excluding Envision clinicians from their networks and not providing appropriate reimbursement for care provided; and (iii) health insurer activism and the flawed implementation of the No Surprises Act (NSA).

In response, Envision recruited a new senior management team, with nine of the company’s 10 executive leaders hired between March 2020 and July 2021. The management team has undertaken wide-ranging and proactive efforts to help Envision weather financial pressures while investing in its clinical teams and quality programmes.

“Envision’s teams play a critical role in the functioning of the US healthcare system,” said Jim Rechtin, chief executive of Envision Healthcare. “We are grateful to the Envision clinicians, physician partners and clinical support teammates for their continued commitment to caring for patients when they need it most.”

Currently, Envision has sufficient cash to continue providing quality care and services and funding ongoing clinical operations without interruption. Moreover, the Chapter 11 filing will enable Envision to effect the transactions encompassed in the RSA and facilitate opportunities for long-term growth by reducing its debt and strengthening its capital structure.

Pending court approval, Envision will use cash collateral generated by ongoing operations to fund operating expenses, including supplier obligations and employee wages, salaries and benefits during the restructuring process. This will enable the company to continue operating its business as usual throughout the process and provide support to critical partners, including clinicians, hospitals, vendors and suppliers.

Envision’s investment banker throughout the Chapter 11 and RSA processes is PJT Partners LP, with Alvarez & Marsal LLC as financial adviser and Kirkland & Ellis LLP as legal adviser.

“We are grateful to have had the support of the board and KKR who have always maintained a clear focus on our mission of providing quality care,” concluded Mr Rechtin. “Envision remains dedicated to delivering outstanding patient care and advancing operational excellence.”

Fraser Tennant