Florida Bankruptcy Judge’s Groundbreaking Order Prohibits Termination of Debtor’s Medicare and Medicaid Provider Agreements

by I. Paul Mandelkern

Recently the United States Bankruptcy Court for the Middle District of Florida issued an order prohibiting the Centers for Medicare and Medicaid Services (CMS), the Florida Agency for Health Care Administration (AHCA) and any managed care company from terminating the debtor skilled nursing facility’s provider agreements. This ruling is significant because it determined that the facility’s Medicare and Medicaid provider agreements are part of the bankruptcy estate and cannot be terminated unilaterally by CMS or AHCA when the facility has petitioned for federal bankruptcy protection.

In this case a 159 bed skilled nursing facility located in St. Petersburg filed for Chapter 11 bankruptcy protection. At that time 106 out of 108 residents of the facility were beneficiaries of the Medicare or Medicaid programs, and its Medicare and Medicaid provider agreements with CMS and AHCA were in effect. Seven days after the bankruptcy petition was filed, fourteen AHCA employees arrived at the facility and hand-delivered notices to the residents stating that federal law required that AHCA terminate the facility’s Medicaid provider agreement and thereafter would not pay for services provided to the residents.

Later that day the facility filed with the bankruptcy court an emergency motion to prohibit the termination of the facility’s Medicare and Medicaid provider agreements. In its motion the facility claimed that AHCA was essentially requiring the residents of the facility to leave by intimidation and threatening non-payment under the facility’s Medicaid provider agreement, and if the residents left the facility it would be unable to pay its post-bankruptcy petition obligations and would be forced to close. After an evidentiary hearing this motion was granted by the bankruptcy court.

Stay tuned however, as AHCA is appealing the bankruptcy court’s order to the United States District Court.

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