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Investment Firm Buys Corizon

Flacks Group specializes in “operational-turn-around of under-utilized companies.”

In other words, it purchases companies that have good prospects, but are performing poorly and improves their performance. It has over 7,500 employees and manages in excess of $2.5 billion in assets. It had recently announced that it was looking for bargain-price purchases of companies that had been stressed by the pandemic.

Corizon employees number more than 5,000 and the company’s annual revenue is around $800 million. A Corizon spokesperson said the transaction was not related to the pandemic but caused by Corizon’s maturing debt. Corizon’s debt had reached $300 million before Blue Mountain Capital Management became its majority owner in 2017. In November 2018, Blue Mountain injected another $100 million into the company, reducing its debt load to less than $90 million.

Unmentioned in the press releases were Corizon’s numerous litigation issues and the collapse of its business. In 2018, Corizon contracted with 534 facilities in 27 states to provide prisoner health care. That meant about 15% of U.S. prisoners received their health care from Corizon. Currently, Corizon contracts with 149 facilities in 16 states, a severe contraction in business.

“Our debt was coming for maturity at the end of the second quarter,” Corizon Health CEO James Hyman said in a press release. “As we started to talk to people in the industry … we realized that we were going to face other types of investors that might be better than our previous investors. Our previous investors were basically banks and the private equity firms. They have a pretty clear mandate of rapid growth, rapid exit. … What we got [instead] was someone who could take a longer-term view … and they were willing to substantially reduce our debt burden.”

So, what caused the collapse of Corizon? It could be the numerous lawsuits the company lost for providing substandard health care as reported on page 20 of the March 2020 PLN. That article also mentioned several states that had fined Corizon millions of dollars for substandard performance and short-staffing. It is unlikely that facilities receiving such poor performance and possibly incurring liability themselves were eager to renew contracts with Corizon.

Between July 2015 and December 2018, Kansas fined Corizon $1 million for under performance and $6.4 million for understaffing in its prison system. Yet Corizon continued to short-staff and provide substandard health care.

“Corizon is simply writing off the liquidated damages they’re having to pay as the cost of doing business in [Kansas] without doing anything meaningful to improve,’’ said Eric Balaban, a senior staff attorney with the American Civil Liberties Union’s Nation Prison Project.

That seems to be Corizon’s business plan — write off the fines and court awards as business expenses but spend nothing to correct the problems. According to the American Civil Liberties Union, Corizon was sued  for malpractice 660 times in the preceding five years. The most recent court award was $10 million in an Oregon federal lawsuit over Corizon employees ignoring a young woman’s pleas for medical attention while she died of heroin withdrawal. The contract non-performance fines and court awards may well explain Corizon’s debt problem and shrinking customer base.

“From a customer’s perspective, they are seeing their municipal and state budgets under extraordinary pressure, and the health care for detainees and inmates is one of the only things in health care that is constitutionally mandated,” Hyman said in the press release. “So helping our customers through that process, helping our patients through that process is going to be all consuming for the next 12 months.”

One can only hope that the Flacks Group promotes a business model that includes actually delivering the health-care services Corizon contracts to provide. If that happens, the buyout will be a boon for all. If not, prisoners will continue to suffer and die because of Corizon’s unethical practices. 


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