ER doctor vows to sue Envision even in bankruptcy

Envision Healthcare announced Monday that it has filed for Chapter 11 bankruptcy protection, but a group of emergency physicians has vowed to continue a federal lawsuit alleging the private equity-backed company violated California’s ban on corporate control of medical practices.

“I expect we will ask the bankruptcy judge to let our case go ahead,” said David Milstein, an attorney representing the Milwaukee-based American Association of Emergency Medicine Physicians. “Envision’s practices, among other things, violate the law, continue and need to be addressed.”

Envision said it filed with bankruptcy court in Houston under Chapter 11 , looking to liquidate most of its $7.7 billion in debt and restructure the business. So far, its plan has the support of creditors who hold about 60% of its debt, and it expects support “to increase in the coming days,” the company said. The Wall Street Journal first reported on May 9 that Envision, which is preparing to restructure its business, missed an interest payment in April and failed to report quarterly financial results by the March 31 deadline.

Envision spokeswoman Aliese Polk declined to comment on the EMT’s lawsuit but said the company complies with state law. Polk said other legal challenges to its business model “have proven worthless.”

The suit does not seek monetary damages, so the physician group presumably will not seek financial compensation against it. Claims foreseen. Instead, the doctors sought legal determination that the company’s alleged use of a shell business structure to retain effective ownership of the ER workforce was illegal. The San Francisco trial was originally scheduled to begin next January, but the date has been pushed back.

Physicians believe winning their case will lead to an injunction on the California business strategy — including not only the ER run by Envision, but also one owned by another private equity firm Medical staffing company TeamHealth, as well as other medical services offered by both companies, including anesthesiology, inpatient medicine and gynecology.

Many doctors, nurses, consumer advocates, and even some lawmakers are hoping the legal victory will prompt other state prosecutors and regulators to take corporate control more seriously medical practice issues.

According to Ivy Clinicians, Envision operates 467 emergency departments nationwide, while TeamHealth operates 511 emergency departments. Together, the two companies control more than 17 percent of emergency departments, the data showed.

Envision was acquired by investment firm KKR for $9.9 billion in 2018, becoming the largest privately held fair deal in healthcare that decade. The deal saddled Envision with about $7 billion in debt. In September, analysts at S&P Global Ratings estimated the company’s debt was 29 times its 2022 earnings, a staggeringly high figure that has raised concerns about its ability to service its debt.

At the same time, Envision’s revenue situation has deteriorated. The federal No Surprises Act protects patients from surprise bills sent by out-of-network providers, but it cripples an important source of revenue. The pandemic has reduced patient volumes and staff shortages have been exacerbated by burnout among health care workers, driving up labor costs. Envision’s bitter battle with insurance giant UnitedHealthcare over patient care costs also weighed on the outlook.

Envision said the bankruptcy proceedings will allow it to get rid of about $5.6 billion in debt, which will either be canceled or exchanged for equity in the restructured company. Its ambulatory surgery subsidiary, AMSURG, will become an independent company.

Envision said it has “more than enough cash” to continue operating without interruption.

“Companies are not in a strong enough financial position to manage the debt on their balance sheets, and I think that’s the real bottom line,” said S&P Global Director David Pechner. Peknay) for scoring.

This article was sponsored by KFF Health News, It publishes California Healthline, an editorially independent service of CalHealth Foundation .