ER Doctors Vow to Pursue Case Against Envision Even in Bankruptcy

CAL/AAEM News Service at
Mon May 15 10:13:37 PDT 2023

*May 15, 2023*

*ER Doctors Vow to Pursue Case Against Envision Even in Bankruptcy*

*California Healthline
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If Envision Healthcare files for bankruptcy, a group of emergency room
doctors would seek permission to continue their federal lawsuit that claims
the private equity-backed company is violating California’s ban on
corporate control of medical practices.

“I anticipate that we would ask the bankruptcy judge to let our case
proceed,” said David Millstein, an attorney representing the
Milwaukee-based American Academy of Emergency Medicine Physician Group.
“Among other things, Envision’s practices violate the law, are continuing,
and need to be addressed.”

Still, the future of the lawsuit is uncertain since it’s unclear how a
judge might rule.

On May 9, The Wall Street Journal reported that Envision planned to file
for Chapter 11 bankruptcy protection, possibly as early as this weekend.
That would allow the company, based in Nashville, Tennessee, to reduce its
debt while reorganizing its business. The Journal said Envision failed to
report quarterly financial results by a March 31 deadline and missed an
interest payment in April.

Envision spokesperson Aliese Polk declined to comment.

The emergency doctors’ lawsuit does not ask for monetary damages, so the
Milwaukee group would presumably not have a financial claim against
Envision. Instead, the doctors are seeking a declaration by the court that
the company’s alleged use of shell business structures to retain de facto
ownership of ER staffing groups is illegal. A trial in San Francisco had
been scheduled to start next January, but the date has been pushed back.

The doctors believe that a victory in their case would lead to a ban on
that business strategy across California — not just in ERs run by Envision
but also by TeamHealth, another private equity-owned medical staffing firm,
and in other medical services the two companies provide, including
anesthesiology, hospital-based medicine, and gynecology.

Many doctors, nurses, consumer advocates, and even some lawmakers, hope a
legal victory would spur prosecutors and regulators in other states to take
the issue of medical practices controlled by corporations more seriously.

Envision runs 467 emergency departments across the country and TeamHealth
operates 511, according to Ivy Clinicians, a startup job search website for
emergency physicians. Together, the two companies control more than 17% of
emergency departments, the data shows.

Envision was acquired by the investment firm KKR in 2018 for $9.9 billion,
making it the largest private equity deal in health care during that
decade. The deal saddled Envision with about $7 billion in debt. Last
September, analysts at S&P Global Ratings estimated that the company’s debt
was 29 times its earnings in 2022, a staggeringly high figure that raised
alarms about its ability to pay its obligations.

At the same time, Envision’s revenue picture has deteriorated. The federal
No Surprises Act, which protects patients from unexpected bills sent by
out-of-network providers, sapped a key source of revenue. The pandemic
shrank patient volumes, and burnout among health care workers fueled
staffing shortages that have jacked up labor costs. A fierce battle with
insurance giant UnitedHealthcare over payments for patient care also hit

“The financial profile of the company is just not strong enough to manage
the debt they have on the balance sheet, and I think that’s really what the
bottom line is,” said David Peknay, a director at S&P Global Ratings.

*Brian Potts** MD, MBA*
Managing Editor, CAL/AAEM News Service

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