Radiology provider Envision Healthcare officially filed for chapter 11 bankruptcy protection on Monday, ending years of speculation.

The private equity-backed multispecialty group said it has voluntarily entered into an agreement to restructure 60% of its $7.7 billion in debt obligations. Terms of the arrangement establish a path for Envision and AmSurg (its ambulatory surgery center company) to emerge as two separate entities.

“Envision currently has more than ample cash to continue providing quality care and services and funding ongoing clinical operations without interruption,” the company said in an announcement. “The chapter 11 filing will enable Envision to effect the transactions encompassed in the [restructuring support agreement] and facilitate opportunities for long-term growth by reducing its debt and strengthening its capital structure.”

The Wall Street Journal first reported news of Envision’s impending bankruptcy petition on May 9, citing anonymous sources. The move marks the largest loss ever for its private equity backers at KKR, which invested nearly $10 billion in the Nashville-based multispecialty group (including debt) in a highly leveraged buyout completed in 2018. Industry watchers have long anticipated the filing, with Envision missing an interest payment in April and March 31 deadline to file financial statements. The company has been besieged by problems, including the No Surprises Act drying up key revenue streams, and a public fight with UnitedHealthcare over reimbursement rates.

Under the agreement, both Envision Physician Services and AmSurg will operate under the ownership of their respective lenders. The latter plans to purchase some 250 surgery centers held by Envision for $300 million, alongside waiving certain intercompany loans held by AmSurg LLC. Nearly all of Envision’s debt—except for a revolving credit line to cover working capital—will be wiped out, “deleveraging approximately $5.6 billion.”

“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,” the announcement noted. “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 currently employs more than 21,000 clinicians primarily in emergency and hospitalist medicine, anesthesiology and neonatology. Another 500 of its physicians practice in radiology, completing roughly 8 million radiology reads last year, according to its 2022 Clinical Impact Report, released in late April.

The company offered a timeline of the events leading to Monday’s announcement. Patient volumes dropped precipitously amid the COVID-19 pandemic in 2020, cutting upward of 70% of patient visits for Envision specialists in emergency medicine and anesthesiology. At the same time, health insurers including UnitedHealthcare have allegedly refused to provide adequate reimbursement, instead cutting Envision clinicians out of networks. The firm recently scored a key victory against the nation’s largest commercial insurer, after arbitrators ordered UHC to pay Envision $91 million in damages for “unilaterally reducing reimbursement rates.”

Envision cited a third factor fueling its decision to seek bankruptcy protection: the national clinician shortage and rising inflation. The combination of these two factors has caused the company’s labor and related costs to increase by “hundreds of millions of dollars since 2019,” according to the announcement.

“While overall inflationary pressures have eased somewhat, the market for clinician services continues to be extremely competitive,” the announcement noted.

Envision filed the voluntary petition for relief in the U.S. Bankruptcy Court for the Southern District of Texas. It lists 216 affiliated debtors, according to a separate webpage dedicated to the restructuring.

Leaders said the physician services firm is committed to providing quality care during the transition. Last year alone, its providers handled nearly 30 million patient encounters.

“Envision’s teams play a critical role in the functioning of the U.S. healthcare system,” CEO Jim Rechtin, who joined the company in February 2020, said in a statement. “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.”

Amid the restructuring, Envision has filed WARN notices in multiple states, alerting regulators about impending layoffs. The company is terminating 162 administrative workers in Pennsylvania and another 167 in New York state, according to two separate filings. The latter comes after losing a contract with an unnamed hospital-based physician group.

Meanwhile, emergency medicine physicians also have sued Envision, claiming the company is in violation of a California ban on corporate control of medical practices. Those involved have indicated that they plan to continue pursuing the lawsuit post-bankruptcy, according to a report published May 12.