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A new evaluation of Alabama’s prison healthcare provider YesCare documents how the private equity-owned company used a bankruptcy strategy to evade liabilities for the conditions of the patients in its care.
The study, “YesCare Dodges Liability for Prison Conditions: Merger, Division, and Bankruptcy,” written by Private Equity Stakeholder Project (PESP) researcher Michael Fenne, chronicles the consequences of YesCare’s private equity ownership.
APR has previously reported how YesCare took a series of steps to restructure the company and divide it into two companies: YesCare and a newly rebranded Corizon Health.
“As of late 2021, YesCare had faced more than 1,000 lawsuits alleging substandard care,” Fenne said. “According to one estimate for a five-year period, YesCare was sued for wrongful death or sexual abuse more than 1,300 times.”
Most egregious, the report states, was YesCare’s use of a convoluted bankruptcy scheme that allowed it to continue to operate while shedding liabilities and lawsuits against it into a different business entity. Coined the “Texas Two-step Bankruptcy,” this restructuring allowed private equity firms to profit off of YesCare’s operations while debt obligations were shuffled to the newly branded Corizon Health,where legal claims against the company could be paused in bankruptcy. The Texas Two-step has been described by U.S. Senator Dick Durbin as a “get out of jail free card.”
“The bankruptcy strategy may allow YesCare and its PE owners to evade accountability for millions in liabilities,” Fenne said. “Through this bankruptcy scheme, YesCare and its private equity owners have attempted to shake off responsibility for the potential liability for company misdeeds. Healthcare providers seeking profits from prisons and jails should not have an escape hatch if they are found liable for harms created by poor services.”
Just announced this month is a $37 million settlement in bankruptcy court reached by YesCare and its backers. More than 350 personal injury claims filed by inmates are estimated to recover rates between 17 percent and 36 percent if the deal is approved.
Fenne suggests that if policy makers and regulators allow privately-held healthcare companies to evade legal liability for harmful business practices, more bad actors may be drawn to do the same, exploiting patients and families for short-term gain.
