Private equity firm H.I.G. Capital is the owner of healthcare provider Wellpath, which provides services in jails and prisons. Wellpath has recently seen its credit rating downgraded, faced an executive bribery scandal, and has continued to draw attention for conditions which endanger and harm patients under its care.
—See PESP’s full report on H.I.G’s ownership of Wellpath —“Private Equity Firms Rebrand Prison Healthcare Companies, But Care Issues Continue“
In July 2022, Moody’s downgraded Wellpath’s corporate family rating to B3 from B2 because of persistent labor issues as well as an increase in pharmacy supply costs.[i] In April 2022, one recently unionized Wellpath worker at a pretrial facility in Bakersfield, California, said in a press release “We are overworked and not compensated fairly.”[ii]
At one California facility that the U.S. Department of Justice’s findings led it to conclude that “medical care at the jail is inadequate in violation of prisoners’ constitutional rights” (p. 5).[iii] Among other issues, the Justice Department describes medication mismanagement, including delayed medication or not provided at all (p. 12); wrong dosages or ineffective combinations of medications (p. 10); and psychiatric staff mismanagement (p. 20). Another report identified involuntary medication administration absent emergencies and a “significant number of [emergency treatment orders] administered for reasons that do not comply” with state law.[iv]
In October 2019, Wellpath founder Gerard Boyle was indicted on federal bribery charges, along with a Virginia sheriff.[v] In a 2020 news report, associates commented that Boyle’s local ties and position as board chairman helped Wellpath win contracts with Massachusetts state and county jails, as well as a hospital. The sheriff had also been a reference while the company was seeking business in Massachusetts.[vi] The private equity firm remains active in prison services, including owning TKC Holdings, which provides food, commissary, and telecom services to jails, prisons, and immigrant detention centers.[vii]
H.I.G. Capital has also been named as a defendant in lawsuits related to its healthcare portfolio companies. In Massachusetts, the Office of the Attorney General alleged that H.I.G. knew about fraudulent Medicaid claims submitted by one of its mental health portfolio companies. The company paid $4 million to settle the False Claims Act violations in 2018[viii] and declared bankruptcy in 2021.[ix] In October 2021, H.I.G. Capital paid a $19.95 million settlement related to the allegations but admitted no wrongdoing.[x]
Given H.I.G.’s track record with reputational, regulatory, and litigation risks, limited partners should consider limiting future investment with H.I.G. Capital.
For further information on Wellpath, you can access PESP’s November 2022 report here.
[i] Moodys.com. “Moody’s Downgrades Wellpath Holdings, Inc.’s Corporate Family Rating to B3, Outlook Stable,” July 11, 2022. http://www.moodys.com:18000/research/Moodys-downgrades-Wellpath-Holdings-Incs-Corporate-Family-Rating-to-B3–PR_467713.
[ii] National Union of Healthcare Workers. “More Wellpath Employees Join NUHW,” April 27, 2022. https://nuhw.org/more-wellpath-employees-join-nuhw/.
[iii] Civil Rights Division. “Investigation of the San Luis Obispo County Jail.” U.S. Department of Justice, August 31, 2021. https://www.justice.gov/usao-cdca/press-release/file/1429106/download.
[iv] “Public Report: Efficacy of Service Delivery Reforms at Bridgewater State Hospital (BSH) and Continuity of Care for BSH Persons Served.” Disability Law Center, Massachusetts, July 2022. https://www.dlc-ma.org/wp-content/uploads/2022/07/DLC-BSH-Report-July-2022-Final.pdf.
[v] Private Equity Stakeholder Project PESP. “Founder of HIG Capital-Owned Wellpath Indicted on Federal Bribery Charges,” December 5, 2019. https://pestakeholder.org/news/founder-of-hig-capital-owned-wellpath-indicted-on-federal-bribery-charges-2/.
[vi] “Pain And Profits: Sheriffs Hand Off Inmate Care To Private Health Companies,” March 24, 2020. https://www.wbur.org/news/2020/03/24/jail-health-companies-profit-sheriffs-watch.
[vii]Jonathan Hemingway. “TKC Holdings Completes Upsized $320M Pay-in-Kind-Toggle Term Loan; Terms.” S&P Global Market Intelligence, February 8, 2022. https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/tkc-holdings-completes-upsized-320m-pay-in-kind-toggle-term-loan-terms-68800135.
[viii] Office of Attorney General Maura Healey. “Mental Health Center to Pay $4 Million under AG Settlement for Illegally Billing MassHealth for Unlicensed Patient Care | Mass.Gov.” Mass.gov, February 8, 2018. https://www.mass.gov/news/mental-health-center-to-pay-4-million-under-ag-settlement-for-illegally-billing-masshealth-for-unlicensed-patient-care.
[ix]Jonathan Randles. “Mental Health Services Provider Community Intervention Files for Bankruptcy.” Wall Street Journal, January 5, 2021. https://www.wsj.com/articles/mental-health-services-provider-community-intervention-files-for-bankruptcy-11609886971
[x] Nate Raymond. “Private Equity Firm HIG Capital Settles Fraud Case for $20 Million | Reuters.” Reuters, October 14, 2021. https://www.reuters.com/legal/government/private-equity-firm-hig-capital-settles-fraud-case-20-million-2021-10-14/.