Envision Healthcare considering bankruptcy filing

https://mailchi.mp/0d4b1a52108c/the-weekly-gist-april-24-2020?e=d1e747d2d8

KKR-backed Envision Healthcare hires restructuring advisers ...

 

National physician staffing firm Envision Healthcare is considering filing for bankruptcy, according a report from Bloomberg. Sources say the company, backed by private equity (PE) firm KKR, which acquired Envision for $9.9B in June 2018, has hired restructuring advisors and is working with an investment bank. The abrupt halt to elective surgeries and reduction in emergency room volumes due to COVID-19 has caused Envision’s business to shrink by 65 to 75 percent in just two weeks at its 168 open ambulatory surgery centers (ASCs), compared to the same time period last year.

The Nashville-based company, which employs over 25,000 physicians and advanced practitioners, has already been reducing pay for providers and executives, in addition to implementing temporary furloughs. Envision is also struggling with a debt load of more than $7B, resulting from its 2018 leveraged buyout, and has been unable to convince its bondholders to approve a debt swap.

It remains to be seen whether Envision will be a bellwether for how other PE-backed physician groups will weather the ongoing COVID crisis. While Envision’s composition of mainly hospital- and ASC-based providers, coupled with its huge debt load, leave it on especially shaky financial footing, many PE-backed physician groups will struggle this year to achieve anything close to the 20 percent annual rate of return often promised to investors.

If high-profile PE-backed groups like Envision end up declaring bankruptcy, it will likely impact the calculus of the many independent practices which may have previously looked to PE firms for acquisitionand temper the enthusiasm of investors, who might see physician staffing and practice roll-ups as less attractive as volumes continue to fluctuate.

 

 

 

UnitedHealth likely to keep squeezing physician staffing firms

https://www.healthcaredive.com/news/unitedhealth-likely-to-keep-squeezing-physician-staffing-firms/573679/

Image result for UnitedHealth likely to keep squeezing physician staffing firms

The nation’s largest private insurer has been terminating its contracts with physician staffing firms in a bid to extract lower prices, part of a years-long pattern analysts say could spur other payers to follow.

UnitedHealthcare contends it is simply trying to curb the rising cost of healthcare by driving out high-cost providers that charge far more than the median rate in its network. The payer said it had hoped to keep these firms in network “at rates that reflect fair market prices,” a UnitedHealthcare spokesperson told Healthcare Dive.

The most recent action targeted Mednax, a firm that provides specialty services including anesthesia, neonatology and high-risk obstetrics in both urban and rural areas. United cut Mednax contracts in four states, pushing those providers out of network, potentially putting patients at risk of balance bills.

United also recently canceled its in-network contracts with U.S. Anesthesia Partners in Texas, starting in April, which caused Moody’s to change its outlook to negative for the provider group because the contracts represent 10% of its annual consolidated revenue.

These latest moves to end relationships with certain physician staffing firms seem to have escalated in recent years, Sarah Kahn, a credit analyst for S&P Global, told Healthcare Dive.

Since the insurer’s 2018 tussle with ER staffing firm Envision, “it’s sort of ramped up and become more aggressive and more abrupt and more pervasive,” Kahn said of the contract disputes.

 

United said the volume of negotiations it’s involved in has not changed in recent years, and added that it expects to renegotiate the same amount of contracts in 2020 that it did in 2019. However, United pointed a finger at a small number of physician staffing firms, backed by private equity, that are attempting to apply pressure on United to preserve the same high rates.

Private equity firms have been increasingly interested in healthcare over the past few years, accelerating acquisitions of medical practices from 2013 to 2016. Private equity acquired 355 physician practices, representing 1,426 sites of care and more than 5,700 physicians over that time frame, according to recent research in JAMA. The firms had a particular focus on anesthesiology with 69 practices acquired, followed by emergency physicians at 43.

Mednax is a publicly traded company. But Envision is owned by investment firm KKR; TeamHealth is owned by private equity firm Blackstone; and U.S. Anesthesia Partners is backed by Welsh, Carson, Anderson & Stowe.

 

Proposed legislation around surprise billing may be influencing United’s actions, Kailash Chhaya, vice president and senior analyst at Moody’s, told Healthcare Dive. Congress has been weighing legislation that seeks to eliminate surprise billing, mainly through two vehicles, either using benchmark rates or arbitration.

If Congress ultimately decides on a bill that uses benchmark rates, or ties reimbursement for out-of-network providers to a benchmark rate (or average), it would benefit insurers like United to lower its average rate for certain services, Chhaya said. One way to do that is to end relationships with high-cost providers.

“It would help payers like UnitedHealth if that benchmark rate is low,” Chhaya said.

In late 2018, United threatened to drop Envision from its network, alleging the firm’s rates were responsible for driving up healthcare costs, according to a letter the payer sent hundreds of hospitals across the country. United and Envision eventually agreed to terms, but United seemed to outmuscle Envision as the deal secured “materially lower payment rates for Envision” that resulted in lower earnings, S&P Global analysts wrote in a recent report.

In 2019, United began terminating its contracts with TeamHealth, which has a special focus on emergency medicine. The terminations affect two-thirds of TeamHealth’s contracts through July 1. The squeeze from United caused Moody’s to also change Team Health’s outlook to negative as an eventual agreement would likely mean lower reimbursement and lower profitability for company, the ratings agency said.

“They’re trying to lower their payments to providers. Period,” David Peknay, director at S&P Global, told Healthcare Dive.​

 

Data shows prices — not usage — is driving healthcare spending. Physician staffing firms are frequently used for ER services and the ER and outpatient surgery experienced the largest growth in spending between 2014 and 2018, according to data from the Health Care Cost Institute.

United said it had been negotiating with TeamHealth since 2017 and does not believe TeamHealth should be paid significantly more than other in-network ER doctors for the same services. United alleges its median rate for chest pains is $340. But if a TeamHealth doctor provides the care it charges $1,508.​

“As Team Health continues to see more aggressive and inappropriate behavior by payors to either reduce, delay, or deny payments, we have increased our investment in legal resources to address specific situations where we believe payor behavior is inappropriate or unlawful,” according to a statement provided to Healthcare Dive.

TeamHealth said it will not balance bill patients in the interim.

 

The pressure from payers, particularly United, is unlikely to relent. The payer insures more than 43 million people in the U.S. through its commercial and public plans.

“I don’t think anyone is safe from such abrupt terminations,” Kahn said. However, United disputes the characterization of abruptly terminating contracts and says in many cases it has been negotiating with providers to no avail.

Likely targets in the future may include firms with a focus on emergency services, which tend to be high-cost areas, S&P’s analysts said. In their latest report, Kahn and Peknay pointed to The Schumacher Group, which is the third-largest player in emergency staffing services. However, it commands a market share of less than 10%, far less than its rivals Envision and TeamHealth.

Smaller firms may not be able to weather the pressure as effectively as very large staffing organizations.

For those smaller groups, it may be wise for them “to sit tight on their cash or prepare from some pressure,” Kahn said.

Although some believe it may influence other payers to follow suit, Dean Ungar, vice president and senior analyst with Moody’s, said United may be uniquely placed to exert this pressure because it has its own group of providers it can use and considerable scale.

“They are better positioned to play hardball,” Ungar said.

 

 

 

 

Physician staffing firm suing patients

https://www.axios.com/newsletters/axios-vitals-bd00103b-e940-45bb-ad9a-a4576971fc39.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

Image result for team health billing lawsuits

An emergency room staffing firm owned by TeamHealth has filed thousands of lawsuits against patients in Memphis in the last few years, ProPublica and MLK50 report.

This is a collision of two storylines: the aggressive billing practices of private equity-backed health care companies, and providers’ decision to take patients to court to collect their medical debts.

  • Media reports have, until now, mostly focused on hospitals’ lawsuits, but ProPublica and MLK50’s reporting suggest the practice could be more widespread.

Between the lines: TeamHealth has already been in hot water for its role in surprise billing.

  • Emergency room physicians send patients surprise medical bills more often than other specialties, especially physicians employed by TeamHealth.
  • These doctors then have leverage to obtain higher in-network payment rates, making the practice lucrative.
  • The group is also one of the main funders of the dark-money group that has run millions in ads against what was Congress’ leading solution to surprise medical bills.
  • The company was acquired by the Blackstone Group in 2017.

By the numbers: The Memphis subsidiary Southeastern Emergency Physicians has filed more than 4,800 lawsuits against patients in Shelby County General Sessions Court since 2017, per ProPublica and MLK50.

  • TeamHealth said last week, after receiving questions from reporters, that it will no longer sue patients and won’t pursue the lawsuits it’s already filed.