A Sheriff's deputy and on-site nurse give medications to an inmate at a detention facility in Santee, California.
By Bianca Tylek and Andrew Seeder
Incarcerated people have a constitutional right to healthcare. Yet many corrections agencies — 29 state prison systems and nearly two-thirds of the local jails across the U.S. — outsource medical care for incarcerated people to private corporations whose profit motives stand in direct conflict with their duty to provide care.
The results have been disastrous with formerly incarcerated people experiencing a mortality rate 3.5x higher than the general population a year after release due simply to poor health. While incarcerated people often enter the system in worse health than the average American, their health often worsens while incarcerated as a direct result of systemic neglect and profit-driven healthcare.
Yet, the private correctional healthcare market is estimated to bring in $6 billion per year, and the largest player in space, Wellpath, owns nearly half of that with $2.7 billion in annual revenues. Wellpath operates in 550 facilities across 37 states, serving more than 300,000 patients. But its predatory business model has caused it to amass roughly 1,500 outstanding lawsuits for medical malpractice in just the last seven years.
Like other players in the space, Wellpath has routinely denied incarcerated people care to pad its bottom line. When these decisions injure or even kill people, they often end up litigated in court, and that pattern was one of the factors in Wellpath’s recent bankruptcy. The corporation, then-owned by private equity firm HIG Capital, was turned over to a lender group, allowed to clear its balance sheet of hundreds of millions of dollars in legal liabilities, and just start over.
But this bankruptcy was not simply business as usual, not with Worth Rises involved. We organized a creditor group — made up of the families of three formerly incarcerated people harmed by Wellpath — to object to the bankruptcy. We challenged the emerging business model, dependent on the abuse of bankruptcy, in this field. We learned that Wellpath has operated without third-party insurance for years. We found Wellpath staff that take issue with its corporate policies and practices. We tested the tenets of bankruptcy with the help of brilliant experts that helped lead to an unprecedented deal. And most importantly, we found a way to center and lift up the stories of those harmed by Wellpath, especially Niki Capaci, Frankie Jacquez, and Jerry Moone, in meaningful ways.
Here’s what we learned.
1. Bankruptcy is part of the business model.
Profit is driven by raising revenue, slashing costs, or both. But when this logic is applied to healthcare, patients tend to see reductions in staffing, training, preventative care, and other medical needs. Things get worse when investors, like private equity firms, are involved and demand their own payouts. In fact, research shows that private equity ownership of hospitals leads to worse health outcomes, including increased deaths. This was certainly the case with Wellpath, which made thousands of headlines for medical tragedies in its facilities.
And Wellpath’s downfall provided a window into the broader correctional industry. In just 2023 and 2024, three of the nation’s largest correctional healthcare corporations filed for bankruptcy under mountains of legal liabilities for medical malpractice. First, it was the oldest market player, Corizon, which had over a billion dollars in settlements on its balance sheet when it filed for bankruptcy. Then it was Armor Health, a smaller player in the jail space, which liquidated with hundreds of millions of such settlements. Finally, came Wellpath.
All three corporations continue to operate today because, in correctional healthcare, bankruptcy is not the unfortunate result of bad management, it is the business model. These corporations routinely deny people care knowing that people will be injured and die, but also knowing that it will be years before such cases make it through court. In that time, they can allow these cases to mount and when the burden gets too big, bankruptcy is there to offer an exit with no responsibility or consequence. Sure, the owners may lose control, as HIG Capital did with Wellpath, but not before they’ve pulled out all they need to turn a profit on their investment. Bankruptcy, for these corporations, isn’t a last resort — it’s a business strategy.
2. Wellpath operates across the U.S. correctional landscape without insurance.
Every healthcare provider plans for medical malpractice claims against them. In the case of correctional contracts, this generally means demonstrating that the contractor has third-party insurance. Wellpath executives have signed hundreds of such contracts attesting to just that, but were they telling the truth?
As part of Wellpath’s bankruptcy proceedings, nearly all pending litigation against the corporation was stayed. Tort claimants with medical malpractice cases appeared before the court in droves seeking to lift the automatic stays so they could seek judgments against Wellpath’s insurance provider, amongst other parties not protected by the bankruptcy. That’s when Wellpath’s Director of Insurance took the stand to explain that the corporation was effectively self-insured to the tune of $15 million per claim. Eyebrows rose and heads turned.
Now, it is not uncommon for large healthcare providers to self-insure, setting aside funds to cover medical malpractice settlements against them. But there were questions about Wellpath’s insurance scheme, whether it demonstrated compliance with its government contracts, and the adequacy of what it set aside to cover settlements.
Here’s how it works: First, there is $3 million of coverage per claim under a “fronting policy,” an insurance instrument secured from a third party insurer that the insured entity then indemnifies. Second, there is $5 million of coverage per claim that is plainly self-insured. Third, there is $7 million of coverage per claim under “captive insurance,” or insurance provided by a wholly owned subsidiary of the insured entity that exists solely to insure its parent. Now, only if a settlement tops $15 million, in that it exhausts each of these earlier tranches of insurance, would it trigger the last tranches of coverage, which are provided by third party insurers.
No settlement against Wellpath had reached that threshold and triggered the performance of any of its third-party insurance in years. Instead, each settlement just mounted on its balance sheet, and soon became unmanageable, with roughly 1,500 lawsuits still pending. That meant victims — families like Niki’s, Frankie’s, and Jerry’s — were left to collect from the same undercapitalized pool, over and over again. And no one knew.
3. Medical staff at private correctional healthcare providers can be allies.
There are no doubt stories of negligent and careless medical staff who have dismissed the health needs of incarcerated people, and they have been and should continue to be sued alongside their employers for the impact of their conduct. But we learned that many healthcare practitioners are stymied by their employers from providing the care they would like and would prefer public options that do not prioritize profits over people.
Through their representatives, we listened to the stories of Wellpath workers who explained that they would wait for their supervisors to leave the facility before calling an ambulance for an incarcerated patient because corporate practices discouraged it due to the cost. Stories like these were not just reinforced by medical malpractice cases, but even the millions of dollars in bills Wellpath left agencies in states like Georgia and Michigan for ambulatory services when it filed for bankruptcy.
Many of these healthcare workers were too afraid to testify and risk reprisal from Wellpath, but they were allies behind the scenes, sharing testimonies and information.
4. There are novel ways to challenge bankruptcies and experts want to help.
When Wellpath filed for bankruptcy, we immediately began consulting bankruptcy lawyers, professors, and experts. We couldn’t let another one of these go through without a challenge. We knew allies would fight to get incarcerated people with potential claims notice and medical malpractice plaintiffs as much as possible in the final settlement, but our goals were different. We wanted to amplify the voices of those impacted, expose the emergent model in the business, and demand improvements to the provision of medical care. And we didn’t want to just file amicus briefs with ethical arguments, we wanted real grounds to fight in court.
After much conversation, a strategy emerged centered on a very basic requirement of bankruptcy restructurings, so basic that it’s rarely questioned: is the restructured business even feasible? Too often, it’s assumed that a corporation with a clean balance sheet is financially sound, but what if we could show that it wasn’t — that the corporation would be back in bankruptcy barring a meaningful shift in how it operated?
We engaged economists at The Brattle Group, whose financial projections would later show that Wellpath’s restructuring plan continued to significantly underestimate its future medical malpractice costs. Unless the corporation addressed the deficiencies in its medical care that led to the volume of lawsuits it faced prior to bankruptcy, it would soon be struggling to pay legal liabilities again, and as such the restructuring plan failed to demonstrate solvency.
Brattle’s expert report changed the calculus at the negotiating table for all parties. Now, admittedly, we weren’t the big fish at the table, that was the Unsecured Creditors Committee (UCC), which represented primarily tort claimants and unpaid vendors. But the strength of our objection helped extend proceedings and boosted their negotiating power, and something unprecedented happened. The UCC negotiated a $15.5 million settlement, but the kicker was a 33% equity stake in the restructured entity. What exactly that’ll mean is yet to be determined, but it’s huge.
For our part, despite hours of negotiations with Wellpath attorneys, we never folded our objection. Wellpath executives were forced to defend, in writing and before the court, the feasibility of their plan, specifically what they were doing to improve healthcare. What started as two sentences in their first draft ended up being four pages. They explained how they were investing millions of dollars in staff training and had recently created an emergency hotline for staff, incarcerated people, and their families. Was it enough, no? Was the tone appropriate, no? With more resources and time, we could’ve gotten more. But was it something, yes, because it showed that the executives and the court were finally paying attention.
5. Incarcerated people and their families should demand to be heard.
Over and over again, hearing after hearing, we made sure that the court heard from those impacted by Wellpath’s gross corporate conduct. During the final hearing, a statement was shared on behalf of Teesha and Carey, daughters of Frankie and Jerry, respectively, who both died in Wellpath’s care, about the conditions that led to their fathers' deaths.
Teesha’s father, Frankie, grew gravely ill while incarcerated, and, despite worsening symptoms over several weeks, repeated pleas for help were ignored. Eventually, other incarcerated people had to carry him to the medical unit. Even then, he was turned away. He died shortly after, and Wellpath settled with the family.
Carey’s father, Jerry, suffered from serious mental illness and was placed in solitary confinement for over 200 days without treatment or medication. The only mental health provider assigned to his unit was a part-time nurse working remotely. The nurse consistently recorded that he was “refusing care,” even though no meaningful care was ever offered. He later died alone in his cell.
In their final address to the court, they explained, “It’s easy to get lost in dollar signs in bankruptcy proceedings, but these dollar signs are the cost of lives that deserve to be recognized. This court is the last opportunity for accountability, to ensure that what’s happened to [our] families doesn’t happen to another.”
***
Wellpath’s bankruptcy restructuring plan was eventually approved despite our objection. But we did much of what we came to do and saw unexpected results. We’ll be ready for the next correctional healthcare provider that wants to try the same tactic, and we will expect even more.