Treatment of Medicare and Medicaid Provider Agreements in Bankruptcy — Recent Developments May Increase Bargaining Power for Distressed Healthcare Providers

As providers contemplate potential restructuring options, there are specific difficulties unique to the healthcare industry. One such challenge is the ability to deal with actual and potential government liabilities. Medicare and Medicaid provider agreements—a necessary prerequisite for receiving government reimbursement—are often among the more-valuable assets of healthcare providers. This article examines the developing bankruptcy case law surrounding two key provider agreement-related issues, successor liabilities under transferred provider agreements and suspension/withholding of Medicare or Medicaid reimbursements by the government, and highlights how recent developments may increase healthcare providers’ leverage in negotiations with the government and provide for greater ability to restructure providers’ businesses or sell them without the burden of government liabilities linked to provider agreements.