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A Florida nursing home operator’s bankruptcy plans could be in jeopardy as federal regulators argue that granting the provider protection would prevent residents and their families from pursuing future lawsuits. 

The Department of Justice’s U.S. Trustee division challenged the bankruptcy plan by Gulf Coast Health Care, which operates under Omega Healthcare Investors, ahead of a scheduled hearing. A Delaware court was slated to decide the case this week, Reuters first reported Monday.

The company first filed for bankruptcy last October due to more than $200 million in debt with $49 million in rent owed to Omega. It cited drops in occupancy, staffing shortages and increased expenses related to the COVID-19 public health emergency. 

Its proposed bankruptcy plan would pay $13.25 million to unsecured creditors and is supported by Omega, company owners and top lenders. It would protect affiliated service providers from potential liability lawsuits, according to court documents.  

The federal government suggested that the release also granted protection to Gulf Coast’s insurers, were “non-consensual” and there was no opportunity for families to opt-out of them. 

Gulf Coast in a response Thursday noted the releases do not cover the company or its insurers and amended its proposal to make that clear. 

“[Gulf Coast is] in discussions with various case constituents regarding potential revisions to the litigation claims procedures and will file any such revisions in an amended plan supplement,” the company said in court filings.

Gulf Coast operates 28 nursing homes in Florida, Georgia and Mississippi.