A major prison healthcare provider has secured approval for a $75 million bankruptcy settlement, but not without a fight—incarcerated patients and their families won the rare right to bypass the deal and take their grievances to court.
A Texas bankruptcy judge greenlit the agreement on Monday, marking the latest chapter in a high-stakes legal battle over claims that YesCare, formerly Corizon Health, provided dangerously inadequate medical treatment in prisons across the country. Half of the settlement fund will go directly to personal injury and wrongful death claims, a stark increase from the initial offer that would have capped those payments at just $8 million.
The ruling represents an unusual victory for claimants, who are often forced into restrictive bankruptcy settlements that limit their ability to sue. Instead, the judge made it clear: opting out means a clean break, with no additional legal obstacles.
The case stems from a controversial corporate maneuver known as the “Texas two-step,” which allowed Corizon to split into two entities—one inheriting the company’s lucrative prison contracts, while the other, Tehum Care Services, absorbed its mounting legal liabilities and filed for bankruptcy. Critics, including U.S. lawmakers, condemned the move as a blatant attempt to dodge accountability for hundreds of lawsuits linked to deaths and injuries in detention facilities across 27 states.
Initially, Tehum sought to use bankruptcy proceedings to block all lawsuits against YesCare and its private equity backers. That plan collapsed under legal pressure, leading to a renegotiated settlement that boosted compensation for victims and preserved their right to sue other parties, including state prison systems that contracted with YesCare.
While most claimants opted for financial compensation and closure, a dozen plaintiffs chose to fight their cases in court. The final deal includes a $50 million cash payout, plus additional benefits such as tax credits that push the total settlement value to $75 million.
The case faced an unexpected detour last year when its original mediator, a former judge, resigned from the bench amid revelations of an undisclosed romantic relationship with an attorney involved in the negotiations. That scandal briefly threatened to derail talks, but the revised agreement ultimately won broad support from creditors, including hospitals that had sued Corizon over unpaid medical bills.
The settlement marks a rare instance where a bankruptcy case tied to prison healthcare ends with victims retaining significant legal leverage. Whether those who opted out can hold YesCare and its financial backers accountable in court remains to be seen.
