Prisons, Profits And Politics

Gov. Pat Quinn’s administration awarded a lucrative contract to a prison healthcare company with a questionable track record. Turns out that company has ties to Quinn’s political opponent, Republican Bruce Rauner.

Republican gubernatorial candidate Bruce Rauner / Sun-Times files

Republican gubernatorial candidate Bruce Rauner has business ties to a Colorado company that has faced complaints about the healthcare it provides inmates at Illinois youth prisons.

Since December 2012 Correctional Healthcare Cos. has been owned by GTCR LLC – the Chicago private equity firm once led by Rauner.

Rauner, 58, retired as managing director of GTCR in October 2012. But the wealthy venture capitalist still holds a stake in the firm and related investment funds, according to interviews and public records. That means that if elected in November, he could be overseeing a state contract that's potentially enriching him and his former business partners.

undefined
Correctional Healthcare and an affiliate have done business with the State of Illinois since at least 2000. The most recent contract, worth up to $99.3 million over 10 years, was awarded February 2013 — by the administration overseen by Rauner's opponent in the general election: Gov. Pat Quinn, the Democratic incumbent.

The contract, part of a national trend of privatizing services at taxpayer-funded jails and prisons, calls for Correctional Healthcare to provide medical, dental and mental health evaluations and treatment to approximately 900 inmates, ages 13 to 20, at three youth prisons in the Chicago area and another three Downstate.

But in some instances the quality of that care has been called into question – before and since Rauner became an investor – in lawsuits and administrative complaints with the Illinois Department of Juvenile Justice, the government agency that oversees state-run youth detention centers.

quinn_BGA_photo
Illinois Governor Pat Quinn / BGA photo

Rauner campaign spokesman Mike Schrimpf emphasized that many of the problems uncovered by the BGA occurred before GTCR bought Correctional Healthcare. "It happened on Pat Quinn's watch," Schrimpf said. "The prison system is a mess and Bruce isn't in charge of it."

Quinn spokesman Grant Klinzman said the governor had no direct involvement in awarding the contract, didn't know Rauner had connections to Correctional Healthcare and holds all companies doing business with the state to a high standard.

Either way, the Better Government Association found:

  • Since Jan. 1, 2009, state youth prison detainees have filed 41 healthcare-related grievances with Juvenile Justice.

Roughly half of those grievances reference a Correctional Healthcare employee – and relate to anything from a personal medical issue to the care a detainee has received, says Juvenile Justice spokeswoman Alka Nayyar.

Citing privacy concerns, Juvenile Justice refused to turn over copies of those grievances when the BGA asked for them under the Illinois Freedom of Information Act.

Nayyar also wouldn't answer detailed questions about the grievances but says none dealt with issues that "rise to the level of the type that is subject to litigation."

Twenty-four of the 41 grievances were filed after GTCR bought Correctional Healthcare, Nayyar says.

  • Since Jan. 1, 2009, Correctional Healthcare has been sued more than 100 times around the country in federal court. Most cases alleged medical malpractice.

One of the local lawsuits accused the firm of being "deliberately indifferent" to the medical needs of an unnamed Illinois youth prisoner.

A Correctional Healthcare physician sent the detainee to the hospital more than 14 hours after the boy first complained of severe testicular pain. Because of that delay one of the boy's testicles had to be surgically removed, according to the suit, filed May 2011 in U.S. District Court in Chicago, and which names Correctional Healthcare, an affiliate and the physician as defendants. The parties settled November 2012, records show. Terms were not disclosed.

Thirty-one of the 100 lawsuits were filed after GTCR bought Correctional Healthcare; at least two of those suits involve incidents that occurred since GTCR became owner. One was a wrongful death lawsuit involving a prisoner in Indiana.

  • In September 2012 the American Civil Liberties Union of Illinois filed a federal class-action lawsuit that accused Juvenile Justice of, among other things, inadequately treating detainees with mental health conditions.

Correctional Healthcare isn't named in the lawsuit, even though it provides mental health care to some detainees, because the ACLU believes the state is "ultimately responsible" for what goes on in the prisons, says ACLU spokesman Ed Yohnka.

However, a court-appointed expert didn't let Correctional Healthcare off the hook.

"The company is not meeting the needs of the kids," says Dr. Louis Kraus, professor of child and adolescent psychiatry at Rush University Medical Center who filed a report on the youth prisons' mental health care in federal court as part of a consent decree between the ACLU and the state.

Kraus tells the BGA he found some Correctional Healthcare employees lacked the necessary training and certification required for treating juveniles with serious mental health and psychiatric problems.

A federal judge recently approved a plan, filed by the ACLU and the state, that proposes to fix many of the problems Kraus identified.

Through a spokesman, Rauner declined interview requests.

GTCR Fund X, a $3.25 billion buyout fund, paid an undisclosed price in December 2012 for Correctional Healthcare. The for-profit company employs medical professionals that treat an average of 70,000 inmates a day at more than 250 U.S. correctional facilities.

Rauner retired from GTCR roughly two months before the deal closed, and didn't work on the acquisition, nor was he aware Correctional Healthcare had a state contract, Schrimpf says.

In acquiring Correctional Healthcare, GTCR and Rauner are capitalizing on a growing trend of taxpayer-funded jails and prisons throughout the U.S. outsourcing medical and dental care to for-profit companies.

"GTCR invested in Correctional Healthcare after Bruce resigned from GTCR," Schrimpf says in an email. "Regardless, Bruce already pledged to put all of his assets in a blind trust if elected governor to avoid any conflicts of interest or perceived conflicts of interest."

According to a statement of economic interests, filed with the state last November, Rauner maintains a financial interest in GTCR and various investment vehicles, including Fund X.

Schrimpf would not answer questions about what if any income Rauner derives or stands to derive from GTCR's investment in Correctional Healthcare.

However, Fund X doesn't appear to be a losing investment.

The Public Employees Retirement Association of New Mexico, a $14.3 billion pension fund for that state's police, fire and municipal workers, has invested $19.2 million in the fund. From 2011 to 2013 that has generated a total return of 9.8 percent, says portfolio manager Joaquin Lujan.

GTCR is one of Chicago's largest private equity firms, having invested more than $10 billion in more than 200 companies since 1980, according to its Web site. Philip Canfield, GTCR managing director, didn't return messages.

"We are proud of the healthcare services that we provide to the youths at the IDJJ facilities and are continuously evaluating our services and looking for ways to improve upon them," a Correctional Healthcare spokesman says in a statement. "Our primary goal is to provide high quality, cost effective health care services to the individuals we serve."

In acquiring Correctional Healthcare, GTCR and Rauner are capitalizing on a growing trend of taxpayer-funded jails and prisons throughout the U.S. outsourcing medical and dental care to for-profit companies.

The practice is credited with saving money but the head of a Chicago prison watchdog group says the companies need to be closely monitored.

"It's profit-driven," says John Maki, executive director of the John Howard Association of Illinois. "There's an incentive to cut costs and cut care."

As a matter of full disclosure, the Rauner Family Foundation has been a major BGA donor in the past, and Rauner sat on a BGA advisory committee, but the financial and advisory relationships ended when his campaign for governor began.

This story was written and reported by the Better Government Association's Andrew Schroedter, who can be reached at (312) 821-9035 or aschroedter@bettergov.org.

More from Newsroom