Finance and restructuring partner Andrew Kassner and counsel Joseph Argentina wrote on Apr. 16 about a recent decision by the U.S. Bankruptcy Court of the Northern District of Texas regarding Prospect Medical Holdings. The court dismissed an adversary proceeding against the Department of Health and Human Services and Centers for Medicare and Medicaid Services (CMS) related to the termination of a provider agreement following the closure of Crozer Chester Medical Center.
The decision is significant because it highlights how courts address conflicts between federal statutes, specifically the Bankruptcy Code and Medicare Program Act, in cases involving large reimbursement claims that impact health care funding.
Kassner and Argentina described how In re Prospect Medical Holdings demonstrates judicial interpretation when two major federal laws intersect. The case centered on whether government actions in terminating a provider agreement during bankruptcy proceedings violated provisions of the Bankruptcy Code.
The authors said, “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.”
They concluded that “this case demonstrates the difficulty at times of separating the roles of CMS as a governmental regulator and creditor in bankruptcy cases.”
The ruling is expected to influence future disputes involving health care providers navigating both bankruptcy protections and regulatory requirements from agencies like CMS.
