Sudden turnover at the top, financial downgrade raise flags about state prison provider Corizon

By Dan Christensen, BrowardBulldog.org 

The two top executives of a state vendor who negotiated a $1.2 billion contract with the Florida Department of Corrections to provide medical care for thousands of state prisoners were abruptly dismissed on Wednesday.

Tennessee-based Corizon, operating subsidiary of Valitas Health Services, declined to discuss the reason for the departures of Chief Executive Officer Rich Hallworth and President Stuart Campbell.

The move, however, followed a Sept. 23 announcement by Moody’s Investors Service that it had downgraded approximately $360 million in Valitas’s corporate debt securities – changing the company’s rating outlook from stable to negative and increasing the likelihood of default.

Last week, BrowardBulldog.org reported that Corizon, which began work in August at 41 state correctional facilities in north and central Florida, was sued 660 times for malpractice across the country in the last five years. Nearly half of those cases remain open. Of those that are closed, 91 – one in four – ended with confidential settlements.

Wexford Health Sources, which has a five-year agreement worth $240 million to provide health services to state inmates in South Florida, was hit with 1,092 malpractice claims – suits, notices of intent to sue and letters from aggrieved inmates – from January 1, 2008 through 2012. Wexford paid a total of $5.4 million to settle those cases.

Among the reasons cited by Moody’s for Valitas’s deteriorating financial position are the recent loss of prison health contracts with Maine, Maryland, Tennessee and Pennsylvania, as well as “competitive pricing pressure” elsewhere.

New Corizon CEO Dr. Woodrow Myers, left, and former CEO Rich Hallworth

Corizon/Valitas is the nation’s largest provider of healthcare services to correctional facilities, in charge of medical care for 410,000 inmates in 29 states. The company could be upgraded financially next year if earnings increase, according to Moody’s.

Yet the sudden departure of the two executives who landed the enormous Florida contract, and Moody’s generally weak financial portrait of the company, are raising prior concerns about Corizon’s performance.

In 2006, when known as Prison Health Services, Corizon walked away from a 10-year, nearly $800 million contract with Florida to provide healthcare to thousands of inmates in state prisons in South Florida.

The Sun-Sentinel reported then that a spokesman said the contract had “underperformed financially.”

“The company said higher than anticipated use of hospitals located off prison grounds was the main reason it was ending the agreement,” the newspaper reported.

The Department of Corrections awarded Corizon the contract in 2005 “despite protests from legislators and competitors who said the company’s bid was too low to provide quality service.” That bid was $80 million less than its nearest competitor, the newspaper said.

While there is concern that history might be repeating itself, a Corizon spokesman offered reassurance that was not the case.

“This change in company leadership should not impact day-to-day operations with Corizon’s clients. The company will continue to focus on patient safety and exceeding client expectations in every aspect of our service delivery,” said spokesman Pat Nolan.

Florida Corrections spokeswoman Misty Cash said the state is not concerned about Corizon’s future performance.

“The placement of a new CEO at Corizon will have no impact on our contract with the company. The Department of Corrections looks forward to working with new CEO Woodrow A. Myers Jr., M.D. and his leadership team.”

Corizon announced the appointment of Myers as CEO on Thursday, effective immediately. Myers is a Valitas board member and former executive vice president and chief medical officer of Indiana-based WellPoint.

Valitas is majority owned by Beecken Petty O’Keefe & Company, a Chicago-based private equity management firm. It reported revenue of approximately $1.2 billion for the twelve months that ended June 30.