The New Exception to the Automatic Stay Permitting the Government to “Exclude” Health Care Providers: The More Things Change, the More Things Stay the Same
by Paul J. Ricotta
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.; Boston
A significant portion of the revenue of many health care providers is dependent upon payments made by governmental health care programs such as Medicare and Medicaid. Payments under the Medicare program, for example, are made based primarily on the provider’s future estimates of costs, and are later subject to a “true-up” when the actual costs are known. As a result of the true-up, the provider may have been over- or underpaid at the time of the prospective payment. If the provider was overpaid, the government is entitled to be reimbursed, which could occur through a cash payment, but usually occurs through setoff of present and future payments owed to the provider. In a distressed situation, where maximizing present cash flow is critical, the setoff of current and future payments against previous overpayments can cripple a health care debtor and frequently contributes to the decision to file for bankruptcy.
Minutes from 2006 Annual Spring Meeting
The Health Care Insolvency Committee and the Court Administration Committee held a joint program at the 2006 ABI Annual Spring Meeting in Washington, D.C., entitled “The Patient Care Ombudsman: Who Are They and What Are They Going to Do to Your Health Care Business Bankruptcy?” The program was chaired by Bill Kannel of Mintz Levin in Boston, who reminded the attendees that ABI recently published the second edition of the Health Care Insolvency Manual. The panel was moderated by Sam Maizel of Pachulski Stang Ziehl Young Jones & Weintraub LLP in Los Angeles and included Nancy Peterman of Greenberg Trauig in Chicago and Suzanne Koenig of SAK Management Services LLC in Chicago.
Ms. Peterman, who was instrumental in drafting the ombudsman legislation, described the historical evolution of the ombudsman provision. She explained, among other things, that she and Keith Shapiro, then chair of the new ABI Health Care Insolvency Committee, were asked in 1997 by Senator Charles Grassley to assist in drafting legislation to deal with the perception that the bankruptcy courts were not adequately addressing the issues. This perception was based in part on problems that had arisen from the Raseda Care Center case from the Central District of California.
Mr. Maizel described the obligations and duties of the ombudsman under the current Bankruptcy Rules and Code provisions. Ms. Koenig then described the various ways in which an ombudsman could contribute to a chapter 11 case of a health care business. Mr. Maizel concluded the program by describing some of the issues that had arisen in the few cases in which an ombudsman had been appointed.
The program handouts included three articles on the ombudsman, including two from the ABI Journal, Bankruptcy Code §333 (requiring the appointment of a patient care ombudsman) and copies of various pleadings related to patient care ombudsmen from two cases in which an ombudsman had already been appointed.