Prices tumble for debt backing KKR’s $9.9bn Envision buyout

[EctopicFetus]

Prices tumble for debt backing KKR’s $9.9bn Envision buyout

Healthcare provider stumbles as support grows for medical billing reform

www.ft.com

IMO this is more about the future of EM and much less about the view of the crappy nature of debt held by CMGs though with the price discrepancy thats a part of it.


The debt backing KKR’s $9.9bn buyout last year of Envision Healthcare has tumbled in value, reflecting investor fears that greater government scrutiny of US medical billing practices could reduce the company’s revenues. Fitch, the rating agency, highlighted the concerns this week, placing the company’s $5.4bn loan on its list of “struggling” deals, in another sign of the cracks emerging in the $1.4tn leveraged loan market. There are now $94.1bn of loans on the Fitch list, up from $74.5bn in July. Envision is the biggest of the 114 loans on the list, which is based on a loan’s rating, its market price and “adverse market information”. There is uncertainty and that hurts the loan price because there aren’t many people wanting to buy the debt Ron Launsbach, a senior portfolio manager at asset manager Columbia Threadneedle Last year’s deal for Envision — a supplier of medical staff to US hospitals and clinics — was one of the biggest buyouts since the financial crisis, and was criticised by some debt market analysts for a lack of investor protections. “[Envision] was a very aggressive deal,” said one loan investor. “The deal got done at the top of the market when everyone had money they needed to put to work.” Envision’s $5.4bn loan maturing in 2025 has fallen from 86.2 cents on the dollar at the start of August to 77.3 cents on the dollar on Wednesday, compared with a decline from 97.1 cents on the dollar to 96.3 cents on the dollar for the broader market. A $1.2bn bond sold by the company dropped from almost 71 cents on the dollar to just over 54.9 cents on the dollar over the same period. The debt came under pressure after bipartisan support emerged in Congress for bills that would prevent patients from being hit with unexpectedly large charges though a practice known as “surprise billing”. In such cases, patients seek treatment at an “in-network” facility covered by their insurance but wind up being treated by a “out-of-network” doctor, such as those employed by Envision. These doctors typically try to recoup costs from the patient’s insurer but often end up passing them on to the patient. “If revenues fall for the providers then we could run into a cash flow problem with all of this debt,” said Ron Launsbach, a senior portfolio manager at asset manager Columbia Threadneedle. “Clearly there is uncertainty and that hurts the loan price because there aren’t many people wanting to buy the debt.” Recommended Loan funds on course for worst outflows on record Fitch also added a $2.7bn loan from Blackstone-backed TeamHealth, another large healthcare provider, to its list of struggling deals. That loan’s price has sunk from 87.6 cents on the dollar to 80.8 cents on the dollar this month. Moody’s changed its outlook for TeamHealth to negative this month, reflecting the rating agency’s uncertainty over the company’s ability to reduce its 8.2 times debt to Ebitda (earnings before interest, taxes, depreciation and amortisation) leverage after insurer UnitedHealth terminated two-thirds of its in-network contracts with the healthcare provider and “significantly reduced” payments for out-of-network services. Envision declined to comment. TeamHealth said it had been successful in getting “reasonable reimbursements” for the treatment it provides, adding: “We expect to be successful in those efforts going forward.”

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[deleted109597]

Expect the wheels to fall off soon. Hourly rates for Envision will drop, and they'll lose tons of docs. They'll try to replace them with FM/IM/desperate assassins. Hospitals will start cutting their contracts.
HCA will end up forming their own staffing group likely. Imagine an HCA job somehow being worse than it currently is.

 

[TooMuchResearch]

Death to EMCare/Envision? Hurray.

 

[EctopicFetus]

Private equity wont allow a loss like that. The fact that their debt has gotten so cheap is impressive.

 

[GeneralVeers]

As much as I'd love to see Envision, Teamhealth and USACS die horribly and painfully, I can't think of what the alternative will be. I doubt SDGs are making a comeback on a broad scale. As RF pointed out, the large hospital systems will probably just start directly employing EPs which has potentially catastrophic consequences for our salary and profession.

 

[TooMuchResearch]

Maybe. In my area, two hospital employed "groups" of EPs were recently Incorporated into bigger local SDGs because the hospital systems didn't know how to manage the ED or code/bill properly and were losing money. We were one of groups (SDG) and didn't exactly lose money on the deal.

As much as I'd love to see Envision, Teamhealth and USACS die horribly and painfully, I can't think of what the alternative will be. I doubt SDGs are making a comeback on a broad scale. As RF pointed out, the large hospital systems will probably just start directly employing EPs which has potentially catastrophic consequences for our salary and profession.

 

[deleted941485]

Maybe. In my area, two hospital employed "groups" of EPs were recently Incorporated into bigger local SDGs because the hospital systems didn't know how to manage the ED or code/bill properly and were losing money. We were one of groups (SDG) and didn't exactly lose money on the deal.

Yeah there was a similar fiasco at our mega health Corp. they swallowed up all the local anesthesia groups and thought they’d make a killing on the billing with better contracts but alas their billers knew nothing and ended up losing $20M accross the system on anesthesia.

Ofcourse now there contract is up and there already looking at 5-10% in salary and more work hours.

Long story short they found a new biller and maybe they’ll turn it around

 

[DO3]

I know docs who were in SDG groups that saw 20-30% salary increases after a CMG took the contract, simply because the CMG knew how to bill and the SDG didn’t.

 

[RustedFox]

As much as I'd love to see Envision, Teamhealth and USACS die horribly and painfully, I can't think of what the alternative will be. I doubt SDGs are making a comeback on a broad scale. As RF pointed out, the large hospital systems will probably just start directly employing EPs which has potentially catastrophic consequences for our salary and profession.

If we were employed directly, we could (maybe?) unionize and then go that route for practice environment improvement.

While I'm thinking about this; I could see my job being made so much easier (like, I could see 2.5+ patients/hour and not hate it) if the documentation requirements were less stringent, and the EMR was less awful.

Seriously, I could fly thru patients if it weren't for having to satisfy all the little CERNER quirks.

 

[Apollyon]

Did you try to put in an image? T'ain't nuthin' there, brother!

 

[Hercules]

I know docs who were in SDG groups that saw 20-30% salary increases after a CMG took the contract, simply because the CMG knew how to bill and the SDG didn’t.

That would be an extremely poorly run SDG. There’s no excuse for poor billing as this is one part of EM that is extremely easy to outsource if an SDG doesn’t want/isn’t capable of handling it in-house.

 

[RustedFox]

Did you try to put in an image? T'ain't nuthin' there, brother!

Clicked too quickly and posted a blank post. I had to bust out an old mouse and plug it in. This mouse needs Ativan; so damn sensitive.

 

[Brigade4Radiant]

An HCA staffing group would just go belly up it is the worst hospital to staff.

One of the hospitals just worked with us and staff us directly after the frustration of CMG.

Our salaries went up. The CMG pay themselves first if they fall you won’t have all these bloated admin salaries.

It is just getting the hospital coders up to speed. We are way happier now

 

[sum dude]

As much as I'd love to see Envision, Teamhealth and USACS die horribly and painfully, I can't think of what the alternative will be. I doubt SDGs are making a comeback on a broad scale. As RF pointed out, the large hospital systems will probably just start directly employing EPs which has potentially catastrophic consequences for our salary and profession.

Word on the street is that USACS is already not paying out their stock...the end is neigh. Add in the legislation in DC, and the bottom is falling out in EM. Good luck to all the residents and MS's applying to EM--we probably have seen highwater pay for EM.

 

[GeneralVeers]

Word on the street is that USACS is already not paying out their stock...the end is neigh. Add in the legislation in DC, and the bottom is falling out in EM. Good luck to all the residents and MS's applying to EM--we probably have seen highwater pay for EM.

Glad I just sold my house and got out of my expensive mortgage. Going to live debt free, with an Australia escape plan if things go South here.....

 

[Dr Mantis Toboggan]

Preach.

Word on the street is that USACS is already not paying out their stock...the end is neigh. Add in the legislation in DC, and the bottom is falling out in EM. Good luck to all the residents and MS's applying to EM--we probably have seen highwater pay for EM.

 

[NYEMMED]

Word on the street is that USACS is already not paying out their stock...the end is neigh. Add in the legislation in DC, and the bottom is falling out in EM. Good luck to all the residents and MS's applying to EM--we probably have seen highwater pay for EM.

While USACS cut salaries to their docs as well. Their promised "partner shares" payout, promised for this year, didn't happen. They cut staffing hours. They cut benefits. Its now dangerous at Facilities staffed by them.

And you have the privilege of taking all the risk for little compensation in comparison

 

[fuegofrio]

IMO this is more about the future of EM and much less about the view of the crappy nature of debt held by CMGs though with the price discrepancy thats a part of it.

I think Ectopic hit the nail on the head with his initial comments. This is not an occurrence or finding specific to CMGs but rather a leading indicator for the future of our industry. Wall Street is predicting a significant haircut to the profitability of billing and collecting on emergency medical services if the currently proposed "surprised billing" legislation passes (one so large as to trigger a default on debt). Thus, this is Wall Street's forward looking estimation on the value of future cash flows of an emergency physician based upon a reimbursement system in which insurance companies significantly control the payment rate. So before much cheering and jubilation is made over the demise of the CMG, one must realize that this economic phenomenon has potential devastating effects to the individual provider's future reimbursement as well.

 

[carbonizedeyesockets]

I know docs who were in SDG groups that saw 20-30% salary increases after a CMG took the contract, simply because the CMG knew how to bill and the SDG didn’t.

That wouldn't surprise me, but I'd have a hard time believing that the 20-30% increase occurred with the same staffing as the SDG. Regardless, I'm ok with less pay if better staffing, autonomy, and not being under some garbage corporation. That has a lot of value (for myself, anyways).

 

[TooMuchResearch]

Exactly. We staff heavy at our busiest site because we prefer to staff heavy. We could cut physician hours by 20% without increasing PA staffing and still sit under 2 pph, but we like our pace now.

We're also considering cutting PA staffing somewhat and increasing physician coverage, but no decisions have been made.

That wouldn't surprise me, but I'd have a hard time believing that the 20-30% increase occurred with the same staffing as the SDG. Regardless, I'm ok with less pay if better staffing, autonomy, and not being under some garbage corporation. That has a lot of value (for myself, anyways).

 

[GeneralVeers]

My vituity job just cut the hourly $10 because they are running a "deficit". These stupid doctors actually voted for a pay cut with the promise that it will go up again when the site is "profitable". I laughed at that one, as if we'd ever be shown the real books. Goodbye Vituity!

 

[GonnaBeADoc2222]

So...maybe someone can explain this to me. I've talked to the chair of a large community-academic ED (volume ~100K; large medicaid population) and they don't seem worried able this legislation. What gives?

 

[GonnaBeADoc2222]

My vituity job just cut the hourly $10 because they are running a "deficit". These stupid doctors actually voted for a pay cut with the promise that it will go up again when the site is "profitable". I laughed at that one, as if we'd ever be shown the real books. Goodbye Vituity!

Why are people so stupid?

 

[RustedFox]

My vituity job just cut the hourly $10 because they are running a "deficit". These stupid doctors actually voted for a pay cut with the promise that it will go up again when the site is "profitable". I laughed at that one, as if we'd ever be shown the real books. Goodbye Vituity!

Site would be profitable if there were less suits running around doing nothing.

I remember you saying that you encountered the CMG's newest hire; their "director of diversity" once.

Looks like there could be room to cut some regional assistant vice jerkwads.

 

[GeneralVeers]

Why are people so stupid?

A lot of the doctors had all their eggs in the Vituity basket and can't go a few months without salary so were stuck. They were basically told that if the hourly wasn't cut there would be firings.

 

[fuegofrio]

So...maybe someone can explain this to me. I've talked to the chair of a large community-academic ED (volume ~100K; large medicaid population) and they don't seem worried able this legislation. What gives?

They don't fully understand the economic ramifications of pegging out-of-network EM reimbursement to the median in-network rate. Insurance companies can manipulate this rate to whatever level they choose by setting lower in-network rates. As the article above states, United Healthcare just terminated 2/3 of Team Health's in-network contracts, forcing them out-of-network. Thus, the old legacy contracts will expire or be terminated and new in-network reimbursement rates will be markedly lower. EM physicians who do not agree with that rate will have no remediation and be unable to balance bill.

 

[deleted941485]

They don't fully understand the economic ramifications of pegging out-of-network EM reimbursement to the median in-network rate. Insurance companies can manipulate this rate to whatever level they choose by setting lower in-network rates. As the article above states, United Healthcare just terminated 2/3 of Team Health's in-network contracts, forcing them out-of-network. Thus, the old legacy contracts will expire or be terminated and new in-network reimbursement rates will be markedly lower. EM physicians who do not agree with that rate will have no remediation and be unable to balance bill.

Autonomy has a price? Lol. You might get out from under the CMG only to have Uncle Sam calling the shots. Screw that.

 

[deleted109597]

So...maybe someone can explain this to me. I've talked to the chair of a large community-academic ED (volume ~100K; large medicaid population) and they don't seem worried able this legislation. What gives?

Well, (s)he's wrong.
Look at what the insurance companies have started doing. They're advertising balanced billing legislation on national television. They're not advertising for decreases in premiums.
It's a war on doctors, and if you aren't out there doing advocacy, you're going to lose. We all are.

 

[Hercules]

Well, (s)he's wrong.
Look at what the insurance companies have started doing. They're advertising balanced billing legislation on national television. They're not advertising for decreases in premiums.
It's a war on doctors, and if you aren't out there doing advocacy, you're going to lose. We all are.

Agree 100%. If any of you haven’t taken the 30 seconds to email your congressman, please do so now. It seriously is that quick and easy.

I’m not an alarmist, but this is the biggest piece of legislation as far as an impact on your future in EM that we have seen since EMTALA. This has much broader reach than midlevel encroachment or residency expansion which both get discussed on here ad nauseam. If you don’t see this as an issue that will affect you (regardless of SDG, CMG, hospital employee, academician) then you are either ignorant as to the details or have your head buried in the sand.

 

[GonnaBeADoc2222]

I've already emailed and called my representatives. What else can i do to help?

 

[deleted109597]

I've already emailed and called my representatives. What else can i do to help?

Tell your patients to do the same.
Make sure they know that this will affect access to care very, very quickly. It already has in rural areas.

 

[GonnaBeADoc2222]

Tell your patients to do the same.
Make sure they know that this will affect access to care very, very quickly. It already has in rural areas.

How do you like to broach this with patients and which patients are you selecting to talk to about this?

 

[alpinism]

How do you like to broach this with patients and which patients are you selecting to talk to about this?

Sir it looks like you did too much heroin this evening. We had to give you the narcan medication cause you weren’t breathing. I know you’re probably upset and in a lot of pain but have you heard about the balance billing legislation currently being debated in Congress?

 

[deleted109597]

How do you like to broach this with patients and which patients are you selecting to talk to about this?

Anybody that brings up the cost. Which is about half.
Clearly not the Medicaid, but most of the Medicare/Medicare secondaries, and nearly all of the privately insured ones with high deductibles.

 

[Rekt]

As a current resident, how screwed are our future salaries? What do you guys think the absolute bottom salary would be?

 

[deleted109597]

As a current resident, how screwed are our future salaries? What do you guys think the absolute bottom salary would be?

There are people out there that will work for 100-120 an hour. I don't know of any physicians that will work ER for less than that. I've known some that work UC for 90 an hour or less.
So, 50-66% paycut.

 

[deleted941485]

I’m really surprised at the lack of shock among other specialties outside of EM, gas, rads. Proponents claim this is about “surprise” medical billing. But really they want to apply this to ALL medical billing regardless of weather or not it’s a surprise to patients.

It seems Washington and state govt have decided to throw the kitchen sink at physicians. There’s quite a bit that needs to be fought.

 

[GonnaBeADoc2222]

I’m really surprised at the lack of shock among other specialties outside of EM, gas, rads. Proponents claim this is about “surprise” medical billing. But really they want to apply this to ALL medical billing regardless of weather or not it’s a surprise to patients.

It seems Washington and state govt have decided to throw the kitchen sink at physicians. There’s quite a bit that needs to be fought.

The insurance industry has successfully made "surprise bills" into a false flag. We are boned.

 

[RustedFox]

The insurance industry has successfully made "surprise bills" into a false flag. We are boned.

Why must there be an "in-network/out-of-network" qualifier for emergency needs?

There shouldn't be, if its a true emergency visit.

I'm all for creating an autotext to use in my charts that says:

"I certify that this patient's presentation meets the prudent layperson standard for seeking emergency care, and therefore may have an emergency condition. In accordance with EMTALA, this patient's medical needs require emergency evaluation, and are not subject to network negotiations."

Put the power back in the hands of the docs, and not in the hands of old, suit-wearing screwballs who just want to collect money.

 

[southerndoc]

Groups are already getting the "take it or leave it" approach from some insurers. Some companies have been told "we'll just wait for the surprise billing law to pass if you don't like our offer." People have been hearing that the sky is falling with salaries in emergency medicine. I think the time is here.

 

[RustedFox]

These insurers, ... man.

They're the real devil.

"Take it or leave it"

Nope. Pay what you promised to pay.

If you're going to argue on behalf of the insurers, I'll refer you to the "Physicians v. Administrators" line graph that has been publicized so many times on here before.

Care wouldn't cost so much... if there weren't five nurse managers and thirteen regional vice jackoffs that all made sure that things were running smoothly.

 

[TooMuchResearch]

Pretty sure I could do utilization review of something similar from my couch for $100-120/hr. No way I'm doing EM for that. Or even UC if "couch pay" is comparable.

There are people out there that will work for 100-120 an hour. I don't know of any physicians that will work ER for less than that. I've known some that work UC for 90 an hour or less.
So, 50-66% paycut.

 

[wolverine10k]

I had a quick discussion with my group and none of the other 10 providers had even heard about this proposed legislation going through congress, which is part of the problem with lack of physician engagement in these issues. We're hospital employed so they may have their heads in the sand. They think it won't affect them because we don't have any "out of network" billing, but it will affect everyone in EM. I made sure to stress if we're paid RVU based on MGMA data, what do you think happens if compensation drops across our geographic location....

I do have a small glimmer of hope that congress is too inefficient to do anything. The August recess seems to have given hospitals/doctor advocate groups some footing to get their campaign strategy together to fight this. There is also the chance that Democrats hold off on anything going through right now in the fear that it would give Trump a "healthcare win." Overall pretty stressful as a relatively new attending worrying about the floor dropping out on my income.

 

[southerndoc]

Our problem is the enormous power of the insurance industry's lobbying efforts. They have more money and more lobbyists than we can ever imagine having. They will win. The question is when.

 

[VA Hopeful Dr]

Our problem is the enormous power of the insurance industry's lobbying efforts. They have more money and more lobbyists than we can ever imagine having. They will win. The question is when.

In 2017 the AMA and the AHA were numbers 6 and 7 for most lobbying money spent. Admittedly behind BC/BS at 5 (but only by like 200k out of 20+ million) but no other insurance company made the top 20.

Y'all need to get the hospitals on board with fighting this.

 

[deleted109597]

Why must there be an "in-network/out-of-network" qualifier for emergency needs?

There shouldn't be, if its a true emergency visit.

I'm all for creating an autotext to use in my charts that says:

"I certify that this patient's presentation meets the prudent layperson standard for seeking emergency care, and therefore may have an emergency condition. In accordance with EMTALA, this patient's medical needs require emergency evaluation, and are not subject to network negotiations."

Put the power back in the hands of the docs, and not in the hands of old, suit-wearing screwballs who just want to collect money.

We have a phrase that says essentially that.
Texas law requires them to pay in-network rates for emergency visits, but 70% of the plans are ERISA or similar and not subject to Texas Department of Insurance oversight.
It's bizarre.

 

[Apollyon]

We have a phrase that says essentially that.
Texas law requires them to pay in-network rates for emergency visits, but 70% of the plans are ERISA or similar and not subject to Texas Department of Insurance oversight.
It's bizarre.

ERISA - "Employee Retirement Income Security Act" a/k/a "Every Ridiculous Idea Since Adam"

 

[deleted941485]

I had a quick discussion with my group and none of the other 10 providers had even heard about this proposed legislation going through congress, which is part of the problem with lack of physician engagement in these issues. We're hospital employed so they may have their heads in the sand. They think it won't affect them because we don't have any "out of network" billing, but it will affect everyone in EM. I made sure to stress if we're paid RVU based on MGMA data, what do you think happens if compensation drops across our geographic location....

I do have a small glimmer of hope that congress is too inefficient to do anything. The August recess seems to have given hospitals/doctor advocate groups some footing to get their campaign strategy together to fight this. There is also the chance that Democrats hold off on anything going through right now in the fear that it would give Trump a "healthcare win." Overall pretty stressful as a relatively new attending worrying about the floor dropping out on my income.

I’ve been out 3 years and while I don’t do out of network. I can definitely see how this contagion will spread to every corner of healthcare very quickly and will be used by ins, govt, and big hospitals to start ratcheting comp down.

Physicians have so much to contend with this election it’s unbelievable. Btw Bernie and warren and even Biden promising people everything but the tooth fairy and insurance companies claiming to protect patients it’s gonna be a hard couple of years.

Since the ACA, the onslaught has been pretty much relentless.

I still live like a resident and save money because that’s the only thing that helps me sleep at night. Meanwhile, forming connections on the management consulting side and pharma get resumes out. Will probably make less but hell if I go back to clinic for what some insurance bean counter wants to pay me.

 

[VA Hopeful Dr]

ERISA - "Employee Retirement Income Security Act" a/k/a "Every Ridiculous Idea Since Adam"

Well yes, but it can actually work out very well too. Its one way businesses can a) ignore ACA requirements and b) potentially save money on health care. I worked for an in-house clinic at a large employer here in town. They negotiated good rates with local groups for things like PT, colonoscopies, outpatient ortho. Saved the company a bunch, made billing easier for the doctors involved (simply submitted an invoice to the company and got paid within 1 week), and the patients had basically no copays if they used this system.

I know work for the hospital that did most of the business with them and they love the arrangement.

 

[southerndoc]

In 2017 the AMA and the AHA were numbers 6 and 7 for most lobbying money spent. Admittedly behind BC/BS at 5 (but only by like 200k out of 20+ million) but no other insurance company made the top 20.

Y'all need to get the hospitals on board with fighting this.

Wait til you see the 2019 data. They are outspending us. My neighbor is a lobbyist for Walmart. He and I had a lengthy discussion the other day about balance billing and how his colleagues are doing.