Jail Health Care Provider Has Declared Bankruptcy

Kip Hallman (left) Superintendent Chantell Jewell (right). Screenshot from committee livestream.

The company providing health care in the Milwaukee County Jail sought to assure supervisors Monday that its recent bankruptcy filing will not impact health care in the jail.

Kip Hallman, co-chairman of the board of Wellpath, assured county supervisors on the board’s Committee on Audit that the firm will continue to honor its contract with the county.

“So, unequivocally, I can say that this will result in no reduction of staffing at any site that we serve period, full stop,” Hallman said.

Wellpath Holdings Inc. filed for bankruptcy in November. It’s seeking to clear up approximately $550 million in debt and secure $160 million in financing to maintain its current operations.

Wellpath is one of the largest correctional health care providers in the country. The company is owned by private equity firm H.I.G. Capital. It took over medical and mental health care in the county jail and the Community Reintegration Center in 2019, replacing Armor Correctional Health Services.

The COVID-19 pandemic is one of the reasons Hallman gave supervisors for the company’s bankruptcy. Federal stimulus funding for hospitals boosted compensation for nurses and made labor costs more expensive. Wellpath did not receive this stimulus boost, Hallman said.

“The impact of Covid was to dramatically increase the cost for us to provide pretty much everything, but staffing was the big thing,” Hallman said.

It wasn’t just labor costs, though. The firm’s bankruptcy filing said $110,000,000 in legal settlements “further strained Wellpath’s financials.”

The county initially contracted with Wellpath in 2019 for approximately $39.7 million over two years. In 2021, county policymakers agreed to a five-year, $109.2 million contract extension running until March 31, 2026. In 2022, Wellpath sought a $1 million annual increase to its contract with the county, citing increasing labor costs as health care systems across the country struggled with staffing during the COVID-19 pandemic. The contract increase, retroactive to 2022, will go before the county board for final approval this month.

The private equity firm that owns Wellpath, H.I.G. Capital, will surrender its $300 million equity in the company to restructure the firm’s debt with a banking group, Hallman told supervisors.

“Essentially, the investors are going to lose their investment and the banks are going to take over,” Hallman said. “And so we have a group of banks who are, through this process, they have agreed to fund the business.”

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