vol 16, num 4 | October, 2019
 
 
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Health Care
 
AN ABI COMMITTEE NEWSLETTER
 
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► In This Issues:
SAVE THE DATE: MARCH 5, 2020
ABI's Second Annual HealthCare Conference JW Marriott Hotel; Nashville, Tenn.
Plan to join us in Nashville for ABI second conference on health care restructuring. Please contact the committee Co-chairs Andrew Helman or Suzanne Koenig if you have an interest in planning.
 
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The Role of Government Regulators in Chapter 11 Health Care Restructurings
Stuart M. Brown
 
Stuart M. Brown
DLA Piper LLP (US)
Wilmington, Del.
 
Thomas R. Califano
 
Thomas R. Califano
DLA Piper LLP (US)
New York
 
Rachel Nanes
 
Rachel Nanes
DLA Piper LLP (US)
Miami
 
 
It is well established that health care businesses are confronted with significant financial challenges, including lower reimbursement rates, constant changes in the delivery of services, increased competition and the need for expensive capital improvements to adopt the latest technology. Recent political uncertainty and heightened government scrutiny has only exacerbated these challenges. As a result, a broad range of industry participants, including cancer treatment centers, diagnostic companies, hospitals, free-standing emergency rooms and skilled nursing facilities, have and will continue to seek relief under chapter 11 of the Bankruptcy Code to either restructure their financial obligations, sell substantially all of their assets to healthier companies or, in rare instances, implement an orderly plan of closure. In fact, to date in 2019, health care companies with liabilities totaling approximately $3.2 billion sought chapter 11 relief.

The Benefits and Challenges of a Health Care Restructuring
While a chapter 11 restructuring can provide a number of immediate and long-term benefits to health care companies in distress, it does not come without attendant challenges. For example, health care companies facing thin profit margins can find relief in right-sizing their long-term debt obligations and rejecting burdensome contracts in bankruptcy. Additionally, bankruptcy can provide health care companies with the breathing room necessary to address significant claims asserted by the government or litigants.

The process of restructuring a health care company, however, can present several unique and challenging issues. In particular, the process requires not only the typical adjustment of debtor/creditor relationships and the negotiation and execution of a restructuring plan as typically required in a corporate restructuring, but also the consideration of legal issues that extend beyond the Bankruptcy Code and to which the protections afforded to debtors in bankruptcy may be subordinate.

 
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Will Chapter 11 Provide a Cure for the Opioid Epidemic?
Madlyn Gleich Primoff
 
Madlyn Gleich Primoff
Freshfields Bruckhaus Deringer US LLP
New York
 
Alexander Adams Rich
 
Alexander Adams Rich
Freshfields Bruckhaus Deringer US LLP
New York
 
Henry Vaughn Hutten
 
Henry Vaughn Hutten
Freshfields Bruckhaus Deringer US LLP
New York
 
 
Insys Therapeutics, a drug company that produced and marketed a fentanyl-based painkiller, filed for chapter 11 protection in Delaware on June 10, 2019. It is the first bankruptcy case of the opioid era, and it will not be the last.

Like the tobacco litigation of the 1990s and the asbestos crisis that led to numerous bankruptcies, the opioid epidemic has given rise to the filing of mass tort claims across the U.S. So far, more than 1,800 state and local governments have filed opioid-related lawsuits against manufacturers, distributors, providers of medical care and other individuals and businesses.

Many more lawsuits are expected from private plaintiffs, as well as federal, state and local governments. As with the tobacco litigation and the asbestos crisis, depending on the particular circumstances involved, chapter 11 may prove to be a useful tool for companies to address opioid-related liabilities.

The Opioid Crisis and Related Litigation
The opioid epidemic kills an estimated 130 Americans every day. In 2017, the U.S. Department of Health and Human Services declared the opioid epidemic a public health emergency. The crisis has become a hot-button issue in U.S. politics and has led to at least one criminal conviction of a pharmaceutical executive.

Unsurprisingly, the epidemic has led to an onslaught of civil litigation against companies that manufacture opioids and other businesses that participate in the opioid market, including but not limited to distributors, medical care providers and insurance companies. Cases include actions brought by state and local governments, federal government civil and criminal actions, multidistrict litigation, attorneys’ general actions and private actions. Some estimates suggest that the aggregate liabilities faced by businesses that participated in the opioid market could run into the tens of billions of dollars.

 
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Supreme Court Adopts Provider-Favorable Construction of Medicare Act Notice and Comment Procedures
Ana Alfonso
 
Ana Alfonso
Willkie Farr & Gallagher, LLP
New York
 
Agustina Berro
 
Agustina Berro
Willkie Farr & Gallagher, LLP
New York
 
 
The Supreme Court handed a major procedural victory to hospitals in its June 3, 2019, opinion in Azar v. Allina Health Services. By a 7-1 majority, the Court found that the government’s imposition of controversial Medicare payment calculations without a public notice and comment period violated the Medicare Act. Although the opinion has received modest attention in provider circles, it should serve as welcome news for financially stressed providers that are dependent upon Medicare and are especially vulnerable to rate changes. The Court’s analysis makes clear that Medicare’s notice requirements are more stringent than the requirements imposed on other regulatory agencies subject to the Administrative Procedures Act (APA).

Background
At issue in Allina was the calculation of additional payments made to a disproportionate share hospitals (DSH) under the Medicare Program. DSH payments are calculated in part using a hospital’s “Medicare fraction.” The fraction’s denominator represents the total number of days in a year that a particular hospital spent caring for patients who are entitled to benefits under Medicare Part A. The numerator represents the number of Medicare days for beneficiaries who both are entitled to benefits under Medicare Part A and also receive supplemental security income (SSI) payments. The larger the fraction, the higher the DSH payment a hospital receives.

 
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Register Now for Winter Leadership Conference!
Join the Health Care Committee at ABI's Winter Leadership Conference. The Terranea Resort in Rancho Palos Verdes, California is the setting for this year's annual program, which features topics designed for consumer and business practitioners, as well as financial advisors.

As always, the conference provides numerous social and fun events to network and renew friendships with your colleagues from around the nation and overseas. We look forward to seeing you in December!

This year, the Committee will be pairing with the Bankruptcy Litigation Committee to host a session titled, “Litigation Issues in a Health Care Case.”

Speakers for this session include:
  • David E. Gordon – Polsinelli - Atlanta
  • Tania M. Moyron – Dentons - Los Angeles
  • Margaret M. Newell – Department of Justice Civil Division, Commercial Litigation Branch - Washington D.C.
  • Andrew H. Sherman – Sills Cummis & Gross P.C. - Newark, NJ.
 
 
 
 
abiLIVE webinar 10/17/19
 
 
 
Winter Leadership Conference
 
 
 
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