Moody’s: Envision Healthcare is at risk of bankruptcy and default on the loan

Moody’s Investors Service exacerbated Envision Healthcare’s financial woes by downgrading the company’s outpatient surgery and recruiting debt on Wednesday.

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

The credit rating agency has assigned a ‘C’ rating, the lowest among non-investment grade bonds, which is typically applied to defaulted debt with little prospect of repaying interest and principal. In its report, Moody’s cited declining profitability, weak liquidity and expected poor operating performance due to labor costs and rising interest rates.

Envision Healthcare, based in Nashville, Tennessee with annual revenue of approximately $7 billion, provides emergency care and physician outsourcing services and operates more than 250 outpatient surgery centers in 34 states. In 2018, private equity firm KKR acquired Envision for nearly $10 billion.

Analysts predict that Envision could default within the next few years, said Jaime Johnson, senior health analyst at Moody’s.

Envision restructured some of its debt, entering into new agreements through subsidiary AmSurg and extending maturities that improved short-term liquidity, Johnson said, but the restructuring did not eliminate any debt. “We are quite clear that at some point they will run out of money,” she said.

Envision has struggled throughout the pandemic, including a net loss in the first half of this year. The company continues to fight UnitedHealth Group over claims after the insurance company’s decision to remove Envision from its network last year. The No Surprises Act will also hurt revenue, and Envision has recently come under fire for profiting from emergency room patients with unexpectedly high bills.