American Physician Partners, a Brentwood, Tennessee-based hospital staffing firm, announced Tuesday that it and its affiliates have filed for Chapter 11 bankruptcy protections “to complete the orderly wind-down of its business affairs following the transition of its clinical operations.”
The company, which was founded in 2015 and is a portfolio company of Brown Brothers Harriman Capital Partners, provided emergency medicine, hospital medicine and critical care management services to hospitals and health systems across 15 states.
It had over 150 active contracts with emergency departments and hospitals earlier this year and began winding down those services this summer when the plans to close were made public, the company said in the announcement. Those contracts were spread across more than 100 sites and involved more than 2,500 physicians.
“Effective July 31, 2023, the company had transitioned all its clients to other strategic emergency medicine companies or insourced with the respective hospitals or health systems,” APP said in the bankruptcy announcement. “Through the transition, there was no interruption to patient care and APP satisfied or arranged for the satisfaction of significant obligations of the company.”
APP is seeking approval from the U.S. Bankruptcy Court for the District of Delaware for approval to consensually use cash collateral during the wind-down.
The company said it also “intends to uphold its commitments to its continuing employees” and has filed requests with the court to continue wages and benefits for staff, “which the company believes will be approved in short order,” it said.
Prior to the July transition period, APP said it employed about 2,546 people in 29 states. It now staffs 27 people who are managing the wind-down.
The filings submitted by APP indicate that the company has between $100 million and $500 million in estimated assets but that its estimated liabilities are within the $500 million to $1 billion range.
Annual revenues consistently rose from $438 million in 2019 to $645 million in 2022; however, APP shouldered net losses ranging from $101 million to $148 million during each of those years, according to filings.
In a declaration filed with the court, John DiDonato, APP’s chief restructuring officer, said that the company had “experienced significant organic growth reflective of the success of the [APP’s] differentiated model,” which focused on collaborative management, but that the pandemic “produced significant industry challenges” that impacted APP’s revenue from hospital stipends “and placed significant pressure on the company’s operations and liquidity.”
Other recent headwinds included rising labor costs across the healthcare industry, inflationary pressures and “strong and unique regulatory headwinds” stemming from the No Surprises Act.
“Although the legislative policy behind the No Surprises Act is sound, the regulatory implementation of the No Surprises Act was problematic, effectively shifting the balance of power in payment disputes too far in the favor of insurance companies (payors) and enabling them to significantly delay and unilaterally reduce or deny payments,” DiDonato wrote. “Of the eligible claims the company submitted through the independent dispute resolution process, only a small portion has been resolved, and of those that were resolved, many remain unpaid by health insurers.”
Just over $30 million in government COVID-19 relief funds to replace lost revenues that the company received in 2020 and 2021 were not enough to offset the losses, DiDonato said.
APP had sought replacement financing and restructuring with Goldman Sachs but was “unable to reach any consensual resolution,” DiDonato said in the filing. The company then went on to explore a full sale of its contracts and other assets as well as later discussions over “a material portion” that similarly did not pan out.
The filing did not name any of these potential buyers, though Bloomberg previously reported discussions between APP and SCP Health, another hospital staffing firm.
APP’s bankruptcy comes less than six months after a similar story played out for Envision Healthcare.
The physician staffing giant had reported $7.7 billion in debt as of its May bankruptcy filing and said it faced similar struggles stemming from financial headwinds and the No Surprises Act’s reforms. Envision had also been embroiled for months in a multifront legal battle with UnitedHealthcare.