Radiology provider Envision Healthcare hopes to position itself for future growth following its bankruptcy filing on Monday, May 15. Credit analysts, however, are expressing concern its operating performance will continue to deteriorate in the months ahead.

The Nashville, Tennessee-based multispecialty group recorded roughly $6.9 billion in revenues for the 12 months ending on Sept. 30. But Envision has faced continuing business pressures and increased interest expenses. Both have resulted in negative free cash flow and “very weak” liquidity, Moody’s experts wrote May 16 following the chapter 11 filing.

Analysts affirmed the multispecialty group’s C credit rating, the lowest point on its scale, denoting debt that is likely in default with “little prospect for recovery of principal and interest.”

“Envision’s C corporate family rating reflects ongoing decline in profitability, and Moody's expectation that operating performance will continue to deteriorate,” Jaime Johnson and Ola Hannoun-Costa, with the investor service’s Corporate Finance Group, wrote Tuesday.

Envision additionally has been challenged by its out-of-network status with UnitedHealthcare, analysts noted. Back in late 2020, the nation’s largest insurer knocked Envision physicians off of its health plans, citing “egregiously high rates.” The physician group scored a victory earlier this year, however, with an arbitrator ordering UHC to pay Envision $91.2 million to settle a billing dispute. Despite this win, legislation to address surprise medical billing, implemented in early 2022, continues to hamper Envision, analysts noted.

“Governance risk is a consideration in the rating action,” they added. “The company operates with aggressive financial policies reflected in very high debt levels, resulting in capital structure that is untenable.”

Moody’s said it is withdrawing all of Envision’s ratings following the chapter 11 filing. In its bankruptcy announcement, the group estimated it had $7.7 billion in debts, with hopes of canceling about 60% of that total.

Envision Healthcare Corp. is a “leading” provider of emergency services in the U.S., the analysis noted. It operates an “extensive” network of outsourced radiologists, emergency medicine specialists, hospitalists, anesthesiologists and neonatologists. The company also operates 250 ambulatory surgery centers spanning 34 states.

S&P issued its own credit downgrade on May 16, dropping Envision to a “D” rating. The agency said this designation typically signals a general default, through which the borrower will fail to pay most or all of its obligations as they come due.

“The bankruptcy filing follows a prolonged period of operational challenges and weaker operating prospects in the physician services business,” S&P experts noted.

An Envision Healthcare spokesperson declined to comment on the ratings actions Thursday.