In a March 12, 2021 case analysis provided to the ABI Health Care Committee, partner Frank A. Oswald and associate Minta J. Nester explain a recent decision from the Court of Appeals for the Ninth Circuit where the court held certain deductions of unpaid fees and payments by California State’s Medicaid program constituted impermissible setoffs and violated the automatic stay. In doing so, the Ninth Circuit reversed the lower courts’ rulings that interpreted such deductions as equitable recoupment and therefore permitted by certain exceptions to the automatic stay. As Medicare and Medicaid program payments are critical to hospitals and healthcare providers, the decision provides key support for debtors seeking to protect an important source of revenue after filing for chapter 11 protection.
The decision is In re Gardens Regional Hospital and Medical Center Inc., 975 F.3d 926 (9th Cir. 2020). The article is available here.