Document Type

Research Memorandum

Publication Date




Through Chapter 11 bankruptcy, a struggling business can preserve essential property needed to remain operational. However, when a healthcare institution is in financial disarray and becomes noncompliant with federal regulatory standards, courts may block rehabilitation through bankruptcy. Healthcare institutions such as nursing homes, which are in the process curing deficiencies, must stay in compliance with the federal regulations in order to continue to receive Medicare and Medicaid funds. Nursing homes must make the necessary changes before funds are terminated or they will be forced to abruptly close. Courts often scrutinize nursing homes’ ability to care for their patients because of their infirm status and state of dependency. Courts are divided on whether Medicare and Medicaid payments entitled to the debtor are within the jurisdiction of the district court. In addition, it is unclear whether concerns over the potential harm to nursing home patients can trump the United States Department of Health and Human Services (“HHS”) determinations.



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