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Home / Case News / Feds Objects to Trident USA’s Chapter 11 Plan, Alleging Improper Interference with the Government’s Right to Recoupment and Set-off

Feds Objects to Trident USA’s Chapter 11 Plan, Alleging Improper Interference with the Government’s Right to Recoupment and Set-off

June 21, 2019, Southern District of New York– Last week, the United States of America (the “Government” or the “United States”), by its attorney Geoffrey S. Berman, objected to the second amended joint plan of reorganization (“Plan”) of Trident Holding Company, LLC and its Debtor affiliates. According to the Government, the Plan cannot be confirmed because its treatment of the Debtors’ agreements with Centers for Medicare and Medicaid Services improperly infringes upon the Government’s authority to administer the Medicare program. The Plan vitiates the Government’s rights to determine the scope of Medicare overpayments, recover Medicare overpayments through recoupment, and set off debts owed to the Government with Medicare payments owed to the Debtors.

In short, the Government objected to the health care provider’s Chapter 11 Plan, alleging that it contains illegal restrictions that would make it impossible for the Medicare and Medicaid Services to clawback inflated payments made by the agencies.

As stated in the Government’s objection: “In the objectionable provisions in the Plan, Debtors seek to repudiate their obligations as Medicare suppliers”. The Government contends that the defects in the Plan, which stand in the way of confirmation, arise in part because the Debtors have rejected the prevailing bankruptcy practice for the Debtors to assume their Medicare enrollment and participation agreements as executory contracts. The Government further added that even if the Court agrees that the agreements are executory contracts, the Debtors improperly seeks to assume them “without cure,” which violates the Government’s statutory and contractual rights to estimate Medicare overpayments and recover them through recoupment in the ordinary course.

The Government argued that the Court should accordingly reject the Plan, or, in the alternative, include the Government’s proposed language in the confirmed Plan or confirmation order to avoid the Plan’s improper treatment of the Medicare agreements:

“The Medicare Enrollment Agreements and Participating Physician and Supplier Agreements for each of the Debtors who are currently participating in the Medicare program (the “Medicare Agreements”) shall be assumed under section 365 of the Bankruptcy Code as of the Effective Date of the Plan. In lieu of the designation of a proposed Cure of any defaults under the Medicare Agreements, the Debtors or Reorganized Debtors, as applicable, shall continue their participation in the Medicare program in the ordinary course of business, subject to the terms and requirements incorporated in the Medicare Agreements, including Medicare’s statutes, regulations, policies, and procedures, including all rights of recoupment and setoff of any overpayments. For the avoidance of doubt, the Debtors and Reorganized Debtors will remain liable for any amounts owed under the Medicare Agreements, and the United States may collect such amounts in the manner provided for in the Medicare Agreements, notwithstanding any discharge or other relief provided through these Chapter 11 Cases, and irrespective of whether the amounts owed arose prior to or after the Effective Date of the Plan.”