On March 30, Envision Healthcare was awarded $91.2 million in breach of contract action against United Healthcare over allegations that United Healthcare unilaterally reduced reimbursement to Envision clinicians in violation of a network agreement. This arbitration award involved only claims from 2017 and 2018.
This award highlights how some insurers may negotiate in bad faith when compensating medical providers for their services.
Despite this victory, Envision continues to have financial troubles. On May 15, Envision filed multiple documents in Texas federal court seeking Chapter 11 Bankruptcy protection.
Types of Bankruptcy Proceedings
There are several types of bankruptcy proceedings, including Chapter 7, Chapter 11 and Chapter 13.
Chapter 7 bankruptcy involves the liquidation of assets to repay debts. There is no plan to repay debts and the proceeds from the debtor’s assets are used to pay creditors in accordance with the Bankruptcy Code.
Chapter 13 bankruptcy allows individuals with regular income to restructure their debts and pay them off over 3-5 years.
Chapter 11 bankruptcy is typically used by businesses to reorganize their finances while retaining control of their operations – rather than being forced to immediately liquidate assets and dissolve the business.
Usually, the debtor may continue to operate its business and may even borrow additional money with court approval. Once a business proposes a reorganization plan, creditors vote on whether to approve the plan, and the court then approves the reorganization plan if there is sufficient creditor approval and the reorganization plan satisfies other legal requirements under the Bankruptcy Code.
A Summary of Envision’s Financial Position
Envision’s filings state that it has a reported total consolidated debt of $7.7 billion and $655 million cash on hand at onset of filing. In the restructuring, Envision Physician Services and AMSURG (an ambulatory surgery subsidiary involving gastroenterology, ophthalmology, and orthopedic care) will be separately owned by specific lenders.
AMSURG Envision’s surgery center holdings for $300 million and will receive a waiver of intercompany loans held by AMSURG LLC. Through additional loans, approximately $5.6 billion of Envision’s debt will be equitized or cancelled.
A 177-page declaration filed by Paul Keglevic, the Chief Restructuring Officer for Envision, cites multiple causes leading up to Envision’s bankruptcy petitions including:
- An alleged $1.9 billion negative impact on revenues and decreased earnings in 2020 and 2021 due to COVID.
- Negative impact of No Surprises Act with difficult and ineffective arbitration provisions. Thus far, Envision claims it has submitted 117,000 claims to federal arbitration related to disputes over payment from insurers.
- Payor activism. United Healthcare has reportedly reduced reimbursement by 60% over past 5 years resulting in decreased revenue of $400 million. United Healthcare also reportedly denies payment on more than 35% of all emergency medicine claims submitted. Envision also alleges that United Healthcare underpaid claims by more than $200 million – up to 50% less than third party benchmarks and well below cost of delivering care.
- Reported increases in physician payments to a “post-COVID ‘new normal’” with reportedly $330 million annual increase compared to 2019. Medical hospital labor expenses increased by 25%.
If the court approves Envision’s petitions, Envision expects to emerge from restructuring in 150 days.
What Does Envision’s Bankruptcy Filing Mean for Physicians?
Envision has stated that it has sufficient cash reserves to maintain clinical operations without interruption during the bankruptcy proceedings – which it estimates will be 150 days. There will likely be little short-term impact of Envision’s Chapter 11 bankruptcy filings on physicians who contract with Envision. However, this assumes that Envision’s debtors agree with the restructuring plan and that the bankruptcy court approves Envision’s petition.
The issues underlying Envision’s bankruptcy petition remain a significant longer term concern. If healthcare insurer activism can help drive a large national staffing company into bankruptcy, how well will smaller groups and hospitals fare against those same insurers?
Although Envision claims that hospital labor expenses increased by 25% compared to 2019, I don’t know many physicians whose pay increased by 25% during that time frame. If anything, there is a trend toward paying emergency physicians less and decreasing staffing in larger emergency departments. The No Surprises Act has been a morass from its inception. Insurance companies shaped the narrative leading up to this law as one of greedy physicians demanding outrageous payments for their services. The issue was never one of “surprise medical bills.”
Instead, it has always been a “surprise denial of insurance coverage.” Our professional organizations did little to counter that narrative. By the way, while Envision is filing for bankruptcy protection, UnitedHealth’s profits increased from $17 billion in 2021 to more than $20 billion in 2022.
Speaking about “No Surprises,” If our government is so concerned with surprise medical bills, why weren’t hospitals, labs, and pharmaceutical companies subject to the terms of the No Surprises Act?
Instead, patients receive bills for services that can be orders of magnitude greater that the same services provided at outpatient facilities and are charged thousands of dollars per month for medications that insurance companies refuse to include on their formularies.
While the coming months will undoubtedly be difficult for Envision and its employees, the restructuring plan provides hope that Envision’s operations will continue without significant disruption. It remains to be seen how this bankruptcy filing will affect physician compensation, job security, and potentially insurance coverage in the long term.
Envision has created a website to answer some questions regarding its bankruptcy filing here.
