Navigating the Unique Challenges of Healthcare Insolvencies

The pandemic caused financial hardship for many healthcare providers nationwide. Despite significant government support, healthcare providers lost billions due to canceled services, reduced outpatient visits, and significantly increased costs, among other things.

Other contributing factors that were putting pressure on providers even before the pandemic include cuts to Medicare and Medicaid payments, increased charitable care, low levels of reimbursements by insurers and third-party administrators, and mismanagement. For healthcare debtors, lenders, creditors, and investors, there can be significant legal issues and factors that make healthcare restructuring very complicated:

• How will the courts balance creditors' rights and interests against the desire to keep a hospital open and operating--particularly if the hospital is the only one available to an underserved population?
• Will Medicare provider agreements be treated as executory contracts that can be assumed and assigned to a buyer (subject to the cure of any existing defaults)? Can Medicare obligations be extinguished in a Section 363 sale? What is the role of a transition services agreement with respect to a Medicare provider agreement?
• How are state quality assurance fees, which are structured as broad-based healthcare taxes under the Affordable Care Act, treated under the Bankruptcy Code--as general unsecured claims or as priority taxes that must be paid in full?
• What is the impact of the Bankruptcy Code's automatic stay on efforts by insurers and TPAs to recoup alleged overpayments? May the debtor sue the insurers and TPAs in the friendly forum of the bankruptcy court? How might this be affected by ERISA preemption?
• How can a buyer return a bankrupt healthcare provider to profitability given all of the challenges these entities face?

Counsel and financial advisers to distressed healthcare providers, their lenders, creditors, and investors must carefully consider the implications of the unique issues when navigating bankruptcy and framing a restructuring strategy.

Listen as our authoritative panel of practitioners examines the unique aspects that arise when insolvency involves a healthcare facility, including the impact of the automatic stay on Medicare provider agreements, special issues arising in Section 363 sales, and potential pitfalls and opportunities. The panel will guide counsel to providers and provider creditors for strategically navigating insolvency and the bankruptcy process.

1. Overview of the state of healthcare bankruptcy filings
2. Impact of pandemic and the CARES Act
3. Unique aspects of healthcare insolvencies for numerous stakeholders and competing interests beyond the debtor-creditor dynamic
   1. Impact of the automatic stay on Medicare provider agreements and recoupments
   2. Patient care ombudsman/cost of maintaining patient care
   3. Maintaining/monetizing certificates of need
   4. Challenges in Section 363 sales, including regulatory compliance issues
   5. Privacy issues and HIPAA requirements; retention of medical records
   6. Pre-petition malpractice claims
   7. Operational restructuring
4. Guidance on navigating the bankruptcy process for healthcare providers and their creditors

The panel will review these and other key issues:

• What are the unique issues facing hospitals and other healthcare providers when it is time to restructure or file for bankruptcy?
• What impact will these unique issues have on insolvency?
• What steps can counsel take to increase the chances of a successful reorganization through the bankruptcy process?