A healthcare company in Florida has hit a financial wall. What that means for patients
A health company that runs psychiatric hospitals and mental health services for the state of Florida has declared bankruptcy.
Nashville-based Wellpath Holdings, with more than $644 million in debt, this week filed for Chapter 11 protection in U.S. Bankruptcy Court for the Southern District of Texas.
Wellpath is owned by private equity firm H.I.G. Capital and and has more than 13,000 employees. The company is considered one of the largest healthcare providers to prisons and jails across the country..
The company runs medical and mental health services, telehealth and pharmacies for nearly 200,000 patients daily at 420 facilities across 39 states, according to court documents. The company serves prisons, jails, state hospitals, inpatient and residential treatment facilities, forensic treatment facilities, and civil commitment centers. It plans to sell part of its business to help reduce about $550 million in debt.
Wellpath has not disclosed which county jails and state prisons they provide services to in the country.
The Miami-Dade County jail said it doesn’t work with Wellpath. The Broward County Sheriff’s Office confirmed to the Miami Herald that Wellpath provides healthcare services for inmates at Broward’s jail facilities. The sheriff’s office said it doesn’t expect any service interruptions and referred additional questions to Wellpath.
The company, also known as Wellpath Recovery Solutions, also operates at least five Florida facilities:
▪ South Florida State Hospital, 800 E. Cypress Dr. in Pembroke Pines. Wellpath took over operations of the Broward County psychiatric hospital in 1998, under contract with the Florida Department of Children and Families. The hospital, across the street from North Perry Airport, provides services for “severely and and persistently mentally ill adults who are involuntarily committed to the hospital when community treatment alternatives are no longer effective,” according to Wellpath’s website.
▪ South Florida Evaluation and Treatment Center, 18680 SW 376th St. in Florida City. Wellpath assumed operation of the licensed forensic psychiatric hospital in Miami-Dade County in 2005 under contract with the Florida Department of Children and Families. The facility serves patients who were declared “incompetent to proceed to trial” due to their mental health condition or were found “not guilty by reason of insanity” by the state courts for the crime they were accused of committing, according to the Florida Department of Children and Families website.
▪ Florida Civil Commitment Center, 13619 SE Highway 70, in Arcadia. The mental health facility in DeSoto County specializes in treatment for sex offenders. Wellpath assumed operations of the center in 2006 under contract with the Florida Department of Children and Families.
▪ Treasure Coast Forensic Treatment Center, 96 SW Allapattah Rd. in Indiantown. Wellpath established the Martin County treatment center in 2007 under contract with the Florida Department of Children and Families. The center is for men who were criminally charged with a felony offense and were determined to be “incompetent to proceed to trial” due to their mental health condition “or not guilty by reason of insanity” by the state courts, according to the Florida Department of Children and Families.
▪ Wellpath is also the parent company of NeuroBehavioral Hospital of the Palm Beaches, which has locations in Boynton Beach and West Palm Beach.
DCF did not respond to the Miami Herald’s request for comment on Wellpath’s bankruptcy and whether it would affect care at the Florida facilities.
Wellpath, in a news release, said it expects operations to continue as usual during the bankruptcy process. The company declined to answer additional questions from the Miami Herald.
Why is Wellpath filing for bankruptcy?
Wellpath’s bankruptcy filing comes after several years of rising costs and other challenges, including a recent unsuccessful endeavor to sell its behavioral health segment.
The company’s revenue mainly comes from long-term contracts with government. Wellpath, in court records, said it had seen substantial revenue growth since 2006, reporting revenue of about $2 billion in 2022.
But the company saw “significant financial challenges in recent years” including rising operating and labor costs, more expensive professional liability insurance related to settlements, high interest rates, and the “underperformance on several significant contracts,” which led to “increased liabilities, deferred payables, and liquidity shortfalls,” according to a declaration made by Timothy J. Dragelin, the company’s chief restructuring officer and chief financial officer.
Some of the challenges were related to the COVID-19 pandemic, such as increased demand for medical supplies, including PPE, testing and vaccines, as well as bonuses and retention programs to address labor shortages, according to Wellpath executives.
Other financial issues stemmed from rising professional liability insurance costs.
Wellpath CEO Ben Slocum says bankruptcy is the best way to stabilize the company.
Wellpath bankruptcy: What happens now?
Wellpath says it has secured up to $522 million from lenders to support business operations during the bankruptcy process. It will also try to once again sell parts of its business.
“This action will enable us to continue providing for our patients, clients, providers, and team members as we deliver essential services to vulnerable populations ... We look forward to emerging from this process under new ownership and being better equipped for sustainable growth,” Slocum said in a statement.
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An upcoming sale
Wellpath has indicated in court records that it will once again try to sell its behavioral health division, Recovery Solutions, and will consider selling its jail and prison division as well.
The company has already entered into a purchase agreement with RS Purchaser for its behavioral health division, Recovery Solutions, though interested buyers still have until Dec. 13 to make their own bids. RS Purchaser is associated with a group of lenders that gave Wellpath new money to keep its operations running during bankruptcy, according to Wellpath’s news release. Under the proposed purchase agreement, RS Purchaser would take over Wellpath’s behavioral health business. In return, Wellpath would have $375 million of debt wiped clean.
The company hopes to finalize the sale by the end of December, although it has an alternate sale timeline for its jail and prison division if it’s unable to sell all three parts of the business as a bundle.
Financial trouble at other health companies
Wellpath is one of several health companies with a Florida footprint to recently declare bankruptcy:
▪ MCR Health, a Bradenton-based nonprofit that specializes in healthcare for low-income communities, with centers and pharmacies across Manatee, Sarasota and DeSoto counties earlier this month filed for bankruptcy under Chapter 11.
▪ Steward Health Care, which operated more than a dozen hospitals across the country, including in South Florida, filed for Chapter 11 bankruptcy earlier this year and recently finalized hospital sales.
▪ Miami-based Cano Health, which has more than 70 medical centers in Florida, emerged from Chapter 11 bankruptcy this year, with plans to roll out a series of improvements.
This story was originally published November 14, 2024 at 12:29 PM.
