
Private equity’s growing role in healthcare bankruptcies leaves patients vulnerable
June 23, 2025
A recent Guardian investigation highlights how private equity’s growing role in healthcare bankruptcies leaves vulnerable patients with little recourse. The story highlights the plight of people like Gene Davis, who endured multiple surgeries and implant failures, only to face obstacles in holding manufacturers and their private equity owners accountable. After three implant failures due to recalled devices, Davis sued the two companies he believed were responsible, Exatech and its private equity parent company, TPG.
Davis was one of more than 2,500 personal injury lawsuits against Exactech. A judge dismissed the lawsuit against the private equity owner, leaving Davis only able to hold Exatech liable. Weeks before the trial, however, Exactech filed for bankruptcy, halting all legal claims against the company. A proposed settlement could allow the PE firm to settle liabilities for just $10 million, but a committee of unsecured creditors, which represents everyone owed money by Exactech, estimates that the value of personal injury claims against Exactech exceeds $1 billion.
The report reveals that private equity-backed healthcare bankruptcies can freeze or sideline lawsuits, leaving patients with defective implants or dangerous treatments without justice or adequate compensation.
Private equity was overrepresented in 2024 healthcare bankruptcies, accounting for 7 of the 8 largest healthcare-related bankruptcies of the year, and roughly 21% of all healthcare bankruptcies. Bankruptcy-driven closures or cost-cutting measures leave patients without reliable access to care, disrupting treatment plans and jeopardizing lives. In addition to mass layoffs and loss of access to care, these bankruptcies may hurt patients by allowing companies to skirt legal settlements and malpractice claims.
Wellpath Holdings, a leading healthcare provider in jails and prisons, which filed for bankruptcy in November 2024, is another example of this troubling trend.[1] Wellpath is owned by H.I.G. Capital, which created the company in 2018 by combining two other correctional healthcare companies.[2] H.I.G.’s mismanagement of Wellpath, which led to its bankruptcy, extends past the usual private equity playbook. Prior to bankruptcy, Wellpath had its credit rating downgraded, faced an executive bribery scandal, and drew attention for conditions that endangered and harmed patients under its care. [3][4][5]
In addition to taking on a large debt load, under H.I.G. Capital ownership, the company had several scandals that may have contributed to its collapse. At one California facility, the U.S. Department of Justice’s findings led it to conclude that there was reasonable cause to conclude that “medical care at the jail is inadequate in violation of prisoners’ constitutional rights.”[6] Among other issues, the Justice Department describes medication mismanagement, including delayed medication or not provided at all; wrong dosages or ineffective combinations of medications; and psychiatric staff mismanagement.[7] Additionally, in 2022, Wellpath founder Gerard Boyle was convicted and sentenced to three years in prison after being charged with federal bribery charges.[8]
Wellpath’s bankruptcy raises concerns about private equity firms’ ability to use bankruptcy to skirt obligations to settlements and lawsuits over care and malpractice. Wellpath is named in 1,000 federal lawsuits, pending and closed, across the United States and accused of contributing to at least 70 deaths.[9] In a December 2024 letter to Wellpath and H.I.G. Capital, Senator Elizabeth Warren (D-MA) urged the company to ensure fair payouts to creditors and claimants: “Our bankruptcy system provides companies with the opportunity for a fresh start. Wellpath must not abuse that system to avoid paying what it owes to incarcerated patients with credible claims against it.”[10]
At an April 2025 hearing, the Michigan House Appropriations Committee heard testimony from several groups impacted by Wellpath practices in the state. The Michigan Health & Hospital Association (MHA) testified on behalf of hospitals that are awaiting payment from Wellpath. According to MHA, Wellpath owes more than $35 million to hospitals that provided medical care to incarcerated people from 2022 to 2024, including one hospital missing wages for 25% of its nursing staff. In lieu of payment from Wellpath, the MHA is requesting state appropriations to cover the costs.
This same trend can also hurt workers who are laid off as a result of a bankruptcy. In the case of San Diego-based Rubio’s Coastal Grill, which filed for bankruptcy in June 2024, employees not only lost their jobs but were also reportedly unable to cash in their final checks.[11] Rubio’s, which was acquired by the private equity firm Mill Road Capital in 2010, closed 48 stores and laid off an estimated 1,100 employees.[12][13][14] The laid-off employees who could not cash their final check reportedly were required to file a claim with the bankruptcy court in Delaware, where Rubio’s filed for bankruptcy, adding to their financial uncertainty.[15]
Under the U.S. Bankruptcy Code, claims are ranked to be paid out in a hierarchy. Secured creditors, such as banks and bondholders with collateral, are paid first.[16] Claims such as those from patients harmed by defective medical devices or services may be classified as general unsecured claims, placing them low in the repayment hierarchy.[17]
Private equity firms were behind 56% of large U.S. corporate bankruptcies in 2024.[18] When private equity firms leverage high-risk strategies, they often leave patients, workers, and consumers vulnerable. In the healthcare sector, where lives depend on stable and high-quality care, these risks are particularly concerning. The surge in private equity-backed bankruptcies, particularly in healthcare, highlights the need for investor and legislative oversight.
Read PESP’s 2024 Bankruptcy Report Here
[1]https://www.warren.senate.gov/imo/media/doc/wellpath_bankruptcy_letter.pdf
[2] “H.I.G. Capital – Correct Care Solutions and Correctional Medical Group Companies Join Forces to Deliver Best-in-Class Healthcare,” H.I.G. Capital, October 1, 2018, https://web.archive.org/web/20221201100235/https://higcapital.com/news/release/correct-care-solutions-and-correctional-medical-group-companies-join-forces-to-deliver-best-in-class-healthcare
[3] Diebler, Jack, and David Peknay. “WellPath Holdings Inc. Rating Lowered To ‘CCC’ As Maturities Approach And Removed From CreditWatch; Outlook Negative.” S&P Global. September 20, 2024. https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3254325.
[4] “CEO Sentenced for Bribing Former Norfolk Sheriff.” United States Attorney’s Office Eastern District of Virginia. February 25, 2022. https://www.justice.gov/usao-edva/pr/ceo-sentenced-bribing-former-norfolk-sheriff-0#:~:text=According%20to%20court%20documents%2C%20Gerard,services%20to%20people%20in%20jail.
[5] Civil Rights Division. “Investigation of the San Luis Obispo County Jail.” page 1-3, U.S. Department of Justice, August 31, 2021. https://www.justice.gov/usao-cdca/press-release/file/1429106/download
[6] Civil Rights Division. “Investigation of the San Luis Obispo County Jail.” page 5, U.S. Department of Justice, August 31, 2021. https://www.justice.gov/usao-cdca/press-release/file/1429106/download
[7] Civil Rights Division. “Investigation of the San Luis Obispo County Jail.” page 1-3, U.S. Department of Justice, August 31, 2021. https://www.justice.gov/usao-cdca/press-release/file/1429106/download
[8] “CEO Sentenced for Bribing Former Norfolk Sheriff.” United States Attorney’s Office Eastern District of Virginia. February 25, 2022. https://www.justice.gov/usao-edva/pr/ceo-sentenced-bribing-former-norfolk-sheriff-0#:~:text=According%20to%20court%20documents%2C%20Gerard,services%20to%20people%20in%20jail.
[9] Coin, Julia. “Medical Company’s Bankruptcy Could Hinder Jail Death Lawsuits in Charlotte.” The Charlotte Observer. November 18, 2024. https://www.charlotteobserver.com/news/local/crime/article295565834.html.
[10]US Senator Elizabeth Warren. “Wellpath Bankruptcy Letter.” United States Senate. December 19, 2024. https://www.warren.senate.gov/imo/media/doc/wellpath_bankruptcy_letter.pdf. Pg. 4.
[11]Sowards, Hunter. “Rubio’s Coastal Grill Employees Can’t Cash Final Paycheck after Closures.” CBS News Business. June 7, 2024. https://www.cbsnews.com/sacramento/news/rubios-coastal-grill-employees-cant-cash-final-paycheck-after-closures/.
[12] Jennings, Lisa. “Rubio’s to Be Sold to Mill Road for $91M.” Nation’s Restaurant News. May 10, 2010. https://www.nrn.com/corporate/rubios-be-sold-mill-road-91m.
[13] Sternfield, Marc. “Rubio’s Closing 48 Locations Due to ‘Rising Cost of Doing Business’.” Yahoo! Finance. June 3, 2024. https://finance.yahoo.com/news/rubio-closing-48-locations-due-185647144.html
[14] In March 2024 Rubio’s said in a press release that it had “over 3,000 employees” and operated “over 140 restaurants.”
In the bankruptcy filings submitted three months later, Rubio’s wrote: “As of the Petition Date, the Debtors operated 86 restaurants at leased locations in California, Arizona, and Nevada, and employ more than 1,900 individuals at their restaurants and corporate offices in Carlsbad, California.” (see page 3).
Holzman, Lauren. “Pro Surfers, the Colapinto Brothers, Partner With Rubio’S Coastal Grill.” BusinessWire. March 4, 2024. https://www.businesswire.com/news/home/20240304712085/en/Pro-Surfers-the-Colapinto-Brothers-Partner-With-Rubio%E2%80%99s-Coastal-Grill.; Case 24-11164-CTG Doc 18, MRRC HOLD CO. et al, DECLARATION OF NICHOLAS D. RUBIN IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY PLEADINGS, United States Bankruptcy Court for the District of Delaware, (page 3) Filed 06/5/24. https://cases.stretto.com/public/X333/12883/PLEADINGS/1288306062480000000016.pdf
[15]Sowards, Hunter. “Rubio’s Coastal Grill Employees Can’t Cash Final Paycheck after Closures.” CBS News Business. June 7, 2024. https://www.cbsnews.com/sacramento/news/rubios-coastal-grill-employees-cant-cash-final-paycheck-after-closures/.
[16]https://blazek-law.com/blog/who-gets-paid-first-in-chapter-11-bankruptcy/
[17]https://www.uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
[18] Bankruptcies with liabilities of $500 million or greater at the time of filing
