Holding cells at the Josephine County Jail.
Dave Blanchard / OPB
One of the country’s largest correctional health care companies that also operates in Oregon and Washington jails filed for Chapter 11 bankruptcy Monday in the Southern District of Texas, according to court filings. The company said it will continue to operate while reducing nearly $550 million in debt.
For years, Wellpath has been embroiled in a series of wrongful death lawsuits over allegations it delivered low-quality medical care. Since 2020, three federal judges in Oregon and Washington have ruled against Wellpath after company leaders intentionally destroyed emails they were ordered to preserve for trial.
At least one case in Oregon could be affected by the bankruptcy. Earlier this year, Wellpath settled a wrongful death lawsuit with the family of Janelle Marie Butterfield, who died in the Josephine County Jail in 2018. According to court documents filed in August, Butterfield’s mother “reached an agreement in principle to resolve her claims against” Wellpath, but the financial settlement is still outstanding and the amount is unknown.
The company was previously known as Correct Care Solutions, which had its own history of lawsuits related to inmate injuries and deaths, before changing its name to Wellpath in 2018.
The company said in a statement that this restructuring will include the sale of its Recovery Solutions division, which provides inpatient and residential treatment in seven states, including Washington. The bankruptcy also includes a separate reorganization of Wellpath Correctional Healthcare, the side of the company that contracts with local and state governments.
“In the last several years, we have experienced a number of challenges initially brought on by the COVID-19 pandemic, including unexpected labor investments and costs for equipment, testing, and vaccines,” Chief Executive Officer Ben Slocum said in a statement Wellpath posted on its website Tuesday. “Additional macroeconomic headwinds exacerbated these issues, including high inflation and rising interest rates.”
The company said it has secured “up to $160 million in new financing.” Of that, Wellpath announced it will receive $105 million immediately to keep up operations, and $55 million once it exits Chapter 11.