Moody’s Investors Service added to Envision Healthcare’s financial woes by downgrading the debt of the company that provides outpatient surgery and physician staff on Wednesday.
“The downgrade reflects Moody’s view that Envision’s capital structure is unsustainable, the likelihood of bankruptcy or major restructuring is high, and the recovery rate for most of the company’s debt will be low,” the report said. Moody’s report said. Envision declined to comment.
The credit rating agency has assigned a “C” rating, the lowest of any non-investment bond typically applied to debt that is insolvent and has little prospect of recovery for the interest and principal balance. In its report, Moody’s cited falling profits, weak liquidity and expected poor performance due to rising labor costs and interest rates.
Envision Healthcare, headquartered in Nashville, Tenn., generates approximately $7 billion in annual revenue, provides emergency services and outsources physicians, and operates more than 250 ambulatory surgery centers in 34 state. Private equity firm KKR acquired Envision for nearly $10 billion in 2018.
Jaime Johnson, senior healthcare analyst at Moody’s, said project Envision analysts could default within the next few years.
Envision restructured some of its debt by issuing new agreements through its subsidiary AmSurg and extending maturities, which improved short-term liquidity, but the restructuring did not eliminate any debt, Johnson said. “We were pretty clear that they were 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 UnitedHealth Group over complaints following last year’s decision to remove Envision from the company’s network. The No Surprises Act would also deal a blow to earnings, and Envision was recently arrested for profiting from emergency department patients with unexpectedly high bills.
