Bankruptcy Court Dismisses Adversary Complaint Against CMS for Terminating Debtors’ Provider Status

Finance and restructuring partner Andrew Kassner and counsel Joseph Argentina co-authored an article for The Legal Intelligencer titled “Bankruptcy Court Dismisses Adversary Complaint Against CMS for Terminating Debtors’ Provider Status.” 

The co-authors detail a recent decision from the U.S. Bankruptcy Court of the Northern District of Texas, In re Prospect Medical Holdings. In that case, the Bankruptcy Court ruled in favor of the government, dismissing an adversary proceeding filed against the Department of Health and Human Services and Centers for Medicare and Medicaid Services (CMS) alleging the government violated sections of the Bankruptcy Code in in connection with termination of a provider agreement involving the closure of Crozer Chester Medical Center. 

Kassner and Argentina explain how In re Prospect Medical Holdings shows how courts interpret and apply the interplay between two federal statutes – the Bankruptcy Code and Medicare Program Act – determines the disposition of hundreds of millions of dollars of claims for reimbursement that support the health care system.

“Bankruptcy courts have, and will continue to grapple with many issues regarding the interplay between the Medicare Act and Bankruptcy Code, including, but not limited to, the status of the provider agreements as an executing contract, the proper venue for adjudication of Medicare reimbursement claims, what claims and rights constitute property of the bankruptcy estate, and when the automatic stay applies to actions taken by CMS regarding Medicare provider agreements and reimbursement claims,” the co-authors conclude. “This case demonstrates the difficulty at times of separating the roles of CMS as a governmental regulator and creditor in bankruptcy cases.”