Ruling might give operators a new bankruptcy incentive

Attorney Alan C. Horowitz
Attorney Alan C. Horowitz

A Florida nursing facility targeted for termination of its Medicare and Medicaid provider agreements was allowed to stay open due to a “milestone” bankruptcy court ruling.  

The court's decision is groundbreaking because it offers a new level of protection to providers that are designated for termination from the federal programs based on alleged deficiencies that are immediately remedied.

When Bayou Shores SNG LLC was informed its Rehabilitation Center of St. Petersburg would lose federal funding in 23 days, its lawyers successfully appealed for a temporary restraining order in federal court. Ultimately, a Dec. 31 ruling determined that Bayou Shores could enter bankruptcy and emerge with its Medicare and Medicaid contracts in place because termination had not been completed before the bankruptcy filing.

“This will open a Pandora's box,” said Alan Horowitz of Arnall Golden Gregory LLP, who filed for the TRO. “The government painted themselves into a corner on this.”

Horowitz said his prompt requests to meet with regulators were rejected, leading him to file for the pivotal TRO.

Now, other providers may consider filing for bankruptcy protection to preserve Medicare and Medicaid funding streams, he said.

The judge's decision essentially says that the Medicare statute does not trump the bankruptcy code, Horowitz observed.

“I don't think that's ever occurred before,” he explained. “It provides a new window of opportunity for terminated providers. I argued that the facility came into substantial compliance prior to the 23rd day.”

The Centers for Medicare & Medicaid Services is appealing the ruling.