Nearly every assisted living and nursing facility in the country depends heavily upon its Medicare and Medicaid provider agreements to fund the cost of caring for their residents. Termination by the government of either or both typically results in closure or sale of the affected facility. In a recent Florida bankruptcy case—In re Bayou Shores SNF, 2014 Bankr. LEXIS 5200 (M.D. Fla., Dec. 31, 2014)—that could have far-reaching ramifications, however, one operator successfully fought back and in the process may have created a pathway for others to maintain access to the Medicare and Medicaid systems over the government’s objection. In Bayou Shores, the debtor, which derived substantially all of its revenue from Medicare and Medicaid, filed a Chapter 11 petition in an effort to stay termination of its provider agreements. The debtor was not only successful in enjoining the termination, but subsequently confirmed a Chapter 11 plan that included assumption of the provider agreements over the objection of both the federal and state governments.
Medicare is a federal program that provides payment for skilled nursing services for aged or disabled individuals. Medicaid is a joint federal and state program that provides medical assistance to low-income individuals who are disabled. The U.S. Department of Health and Human Services (HHS) administers the Medicare and Medicaid programs through the Centers for Medicare & Medicaid Services (CMS). A skilled nursing facility must comply with specific federal requirements to receive payment under the Medicare and Medicaid programs and is subject to surveys by the state regulators and CMS to certify compliance. If a skilled nursing facility is certified to be in noncompliance, CMS may, in addition to other remedies, terminate the provider agreements.
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