Court Says Bankruptcy Court Lacks Jurisdiction over Issues Related to Medicare/Medicaid Programs

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The following article is about whether bankruptcy courts can help providers
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Elizabeth E. Hogue, Esq.

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Court Says Bankruptcy Court Lacks Jurisdiction over Issues Related to
Medicare/Medicaid Programs

On July 11, 2016, the U.S. Court of Appeals for the Eleventh Circuit issued
its decision in the Bayou Shores case, No. 15-13731. This decision is
important to all providers who participate in the Medicare and Medicaid
Programs because it says that bankruptcy courts have no jurisdiction over
termination of providers from the Programs. This means that providers that
are terminated from the Programs or that are subject to suspensions of
payments, for example, cannot avoid these actions by seeking protection in
the bankruptcy courts.

In this case, Bayou Shores operated a skilled nursing facility (SNF).
Primary sources of revenue for the SNF were the Medicare and Medicaid
Programs. The SNF was found out of compliance with Medicare Conditions of
Participation (CoPs), including a finding of immediate jeopardy, and its
provider agreement was terminated which, in turn, triggered loss of its
Medicaid provider agreement.

To avoid termination of its provider agreements, Bayou Shores first sought
help from the U.S. District Court. The Court determined that it had no
jurisdiction because the nursing home had not exhausted its administrative
remedies, i.e., completed the appeals process regarding the decision to
terminate its provider agreement.

The nursing home then sought protection in the U.S. Bankruptcy Court for the
Middle District of Florida. The Bankruptcy Court enjoined the U.S.
Department of Health and Human Services (HHS) from terminating the provider
agreements, determined that Bayou Shores was qualified to participate in the
Programs, and required CMS to continue payments to the nursing home.

On appeal, the U.S. District Court reversed the order of the Bankruptcy
Court. Bayou Shores then appealed to the U.S. Court of Appeals, which
upheld the U.S. District Court's decision that the Bankruptcy Court lacked
jurisdiction to take the action described above.

The Court concluded that bankruptcy courts clearly lack jurisdiction over
Medicare claims, as evidenced by the Social Security Amendments from 1939
until 1984. According to the Court, the statute that prohibits jurisdiction
by the bankruptcy courts was recodified in 1984 to clarify this point. The
statutory revision in 1984 makes it clear that Congress did not intend to
give bankruptcy courts jurisdiction over Medicare claims.

The Court said:

".HHS, not the bankruptcy court, has been charged by Congress with
administering the Medicare Act and regulating Medicare providers. Indeed,
the bankruptcy court's action here stymied the direct statutory mandate from
Congress to HHS to take appropriate action (including potentially
terminating a provider agreement) when, as here, a survey determines that a
nursing home's condition 'immediately jeopardize(s) the health or safety of
its residents'.And though charged with broad jurisdiction to deal with
issues related to a debtor's bankruptcy estate, bankruptcy courts generally
lack the institutional competence or technical expertise of HHS to oversee
the health and welfare of nursing home patients or to interpret and
administer a 'massive, complex health and safety program such as Medicare.'"

Based upon the above, it is increasingly clear that providers cannot turn to
the bankruptcy courts for protections from actions by HHS that essentially
put them out of business, such as, for example, termination of provider
agreements based on noncompliance with CoPs or suspension of payments.
Although providers may have rights to appeal these decisions, the appeals
process takes substantial amounts of time to complete so that providers are
often essentially out of business before the process is complete because
they lack the funds to sustain their businesses while they are not receiving
payments from the Medicare and Medicaid Programs.

The larger issue is, of course, whether providers that repeatedly fail to
comply or are the subject of credible allegations of fraud should be allowed
to continue in the Medicare and Medicaid Programs. The essential practical
issue seems to be whether providers have an opportunity to be heard before
they lose their businesses. Increasingly, it is apparent that the Courts
think there are adequate opportunities for providers to get a fair shake in
processes established by HHS without protections from bankruptcy courts or
other third parties.

It's a different day in healthcare and it is clearer that non-compliant
providers are simply unwelcome in the Medicare and Medicaid Programs. It is
also clear that HHS and CMS now have the tools to ensure that unwelcome
providers can no longer participate in the Programs. Providers beware! The
key, of course, is to get it right in the first place.

CCopyright, 2016. Elizabeth E. Hogue, Esq. All rights reserved.

No portion of this material may be reproduced in any form without the
advance written permission of the author.
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