By Dietrich Knauth
NEW YORK (Reuters) -Envision Healthcare, a provider of outsourced emergency department services to hospitals that is backed by private equity firm KKR, received U.S. bankruptcy court approval on Wednesday to split into two companies and cut over $7 billion in debt.
U.S. Bankruptcy Judge Christopher Lopez approved Envision's restructuring at a court hearing in Houston. Lopez commended Envision's bankruptcy lawyers for putting together an "incredibly complex" financial transaction while minimizing disruption to patients needing emergency care and the more than 20,000 doctors employed by Envision.
"This is going to remain a viable business and those people have not been forgotten," Lopez said.
The bankruptcy restructuring will split Envision Healthcare into two separate companies, Envision Physician Services (EVPS) and AMSURG.
EVPS will focus on providing doctors to hospital emergency rooms, intensive care units and birthing suites, while AMSURG will operate outpatient surgery centers specializing in gastroenterology, ophthalmology and orthopedic care.
KKR, which acquired the company in a 2018 buyout valued at $10 billion, will lose ownership when the restructuring is complete. AMSURG and EVPS will then be owned by different groups of lenders that provided separate pre-bankruptcy loans to the two businesses. Asset managers Blackstone (NYSE:BX) and Brigade Capital will be among AMSURG's new owners, according to court filings.
After the restructuring, AMSURG will have $1.875 billion in debt and approximately $1.675 billion in equity value, according to bankruptcy court filings. EVPS will have $250 million in debt and approximately $550 million in equity value.
The company filed for bankruptcy in May, saying its high debt was unsustainable due to rising interest rates, high labor costs and payment disputes with health insurers.
Envision had said its financial problems were exacerbated by the recent U.S. ban on "surprise" medical bills. These are typically sent to patients who unwittingly receive treatment from an out-of-network doctor, despite visiting a hospital or other medical facility that is in-network for their insurance.
Envision said in bankruptcy court filings that the "surprise billing" ban had unintentionally emboldened insurers in reimbursement negotiations, causing some to unilaterally refuse or delay payment for medical care after it was provided.