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Moody’s: Envision Healthcare faces bankruptcy and defaults

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Moody’s Investors Service added to Envision Healthcare’s financial woes by downgrading the outpatient surgery and physician recruitment company’s debt on Wednesday.

“The ratings downgrade reflects Moody’s view that Envision’s capital structure is unsustainable, the likelihood of bankruptcy or major restructuring is high, and the recovery rates of a much of the company’s debt will be low,” said a Moody’s report. Envision declined to comment.

The credit rating entity assigned a “C” rating, the lowest among lower-grade bonds that is typically applied to debts in default with little prospect of collection of interest and principal balances. In its report, Moody’s referred to declining profitability, low liquidity and expected poor operating performance due to labor costs and rising interest rates.

Nashville, Tenn.-based Envision Healthcare, which generates about $7 billion in annual revenue, provides emergency services and physician outsourcing, and operates more than 250 outpatient surgery centers in 34 states. Private equity firm KKR acquired Envision for nearly $10 billion in 2018.

The Envision analyst project could default within the next two years, said Jaime Johnson, senior health care analyst at Moody’s.

Envision restructured some of its debt by issuing new agreements through its subsidiary AmSurg and extending maturity dates, which improved short-term liquidity, but the restructuring did not eliminate any debt, Johnson said. “It’s pretty clear to us that they’re going to run out of money at some point,” she said.

Envision has struggled throughout the pandemic, including net losses in the first half of this year. The company continues to battle with UnitedHealth Group over claims following the insurer’s decision to remove Envision from its network last year. The no surprises law will also take a toll on revenue, and Envision has recently come under fire for taking advantage of emergency department patients with surprisingly high bills.