Radiology provider Envision Healthcare plans to file for chapter 11 bankruptcy protection “as soon as this weekend,” according to a report published by the Wall Street Journal late Tuesday.
The move would mark the largest loss ever for its private equity backers at KKR, which invested some $10 billion in the Nashville-based multispecialty group (including debt). Industry watchers have long anticipated the filing, with Envision missing an interest payment in April and March 31 deadline to file financial statements.
“The failure of Envision illustrates the risks of layering debt onto a business in a rapidly changing industry,” WSJ reporters Miriam Gottfried and Alexander Saeedy wrote May 9. “The company went from generating more than $1 billion in earnings before interest, taxes, depreciation and amortization in the year ended September 2020 to less than $250 million two years later, according to people familiar with the matter.”
An Envision spokesperson declined to comment to Radiology Business on Wednesday.
The filing is expected to wipe out New York-based KKR’s entire investment in Envision, which first took the publicly traded physician group private in a $5.5 billion buyout initiated in 2018. Envision now carries some $7 billion in outstanding debt, WSJ noted, trading at about “10 cents on the dollar as the company’s finances have steadily deteriorated over the last two years.”
“They have been pressured by high labor costs, a bruising battle with insurer UnitedHealth and federal legislation that took aim at a key component of Envision’s business model,” the report noted, referring to the No Surprises Act.
Following a “costly public fight” over the NSA, the provider group has reportedly moved its high-margin, out-of-network contracts in-network. Envision also has adopted a corporate policy prohibiting surprising billing, “cutting into the company’s profit.”
Envision currently employs some 17,000 physicians primarily in emergency and hospitalist medicine, anesthesiology and neonatology. The tally also includes more than 500 radiologists, with its providers completing roughly 8 million radiology reads last year, according to its 2022 Clinical Impact Report, released in late April
The provider group scored a recent victory after arbitrators ordered UnitedHealthcare to pay more than $91 million to Envision for breaching a contract and “unilaterally reducing reimbursement rates.”
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Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.