CMS Pub. 100-06, ch. 3, § 140.2.3

The petition date (i.e., the date the debtor files its petition in bankruptcy with the Bankruptcy Court)

draws a line in the sand between pre-petition and post-petition actions. Events that occur before the

petition date are pre-petition. Events that occur on or after the petition date are post- petition. The

automatic stay governs many actions that Contractors may take concerning a debtor post-petition.

Contractors shall therefore consult with the servicing CMS Office before taking action, concerning the

debtor post-petition.

Medicare's right to recover overpayments in a bankruptcy case can depend on whether the overpayment

relates to pre-petition or post-petition periods. The CMS Office directs its Contractors on the

procedures for recovering both pre-petition and post-petition overpayments to ensure that Medicare

maximizes its recovery in accordance with the Bankruptcy Code. The distinction between pre-petition

and post-petition overpayments is based on the date of service, not the date of the demand for

repayment. Additionally, the ability of Medicare to recover overpayments may vary depending on the

district in which the bankruptcy is filed, as courts in different jurisdictions can interpret and apply

bankruptcy and Medicare recovery rules differently.

140.2.4 Bankruptcy Affects Nearly All Medicare Operations

(Rev. 13825; Issued: 06-11-26; Effective: 07-13-26; Implementation: 07-13-26)

Bankruptcy can affect every aspect of the interaction between the Medicare program and a debtor. Each

Contractor staff member who may encounter a debtor, is effectively a part of the Medicare "bankruptcy

team" for that case. The Contractor point of contact must ensure that all potential bankruptcy team

members notify the servicing CMS Office of any anticipated actions regarding the debtor and coordinate

those actions with the CMS Bankruptcy Analyst or the assigned CMS Counsel. In bankruptcy, both

inaction and inappropriate action hurt Medicare's chances of recovery. Some commonly affected areas

are:

1. Overpayment Recovery

Medicare's right to recover pre-petition and post-petition overpayments varies by federal jurisdiction.

(see discussion on set-off and recoupment in section F below). If the Contractor has overpaid a debtor,

they shall consult the servicing CMS Office and take appropriate action to maximize recovery of

Medicare overpayments. Contractor overpayment staff shall not send any manual letters to the debtor

until the CMS Office approves them for release, with the exception of NPRs and revised NPRs.

2. Fraud and Abuse

The Contractor shall ensure consultation with the CMS Program Integrity staff and the CMS

Bankruptcy Analyst before suspending an entity for fraud and/or abuse, recovering fraud overpayments,

or continue suspensions. If there is evidence that the provider filed for bankruptcy due to fraud it

committed, advise the CMS Bankruptcy Analyst handling the bankruptcy.

3. Reimbursement

Contractor reimbursement staff shall suspend payments if the provider does not timely file a cost report,

unless the CMS Office or CMS Counsel contacts the Contractor that suspension is not appropriate due

to circumstances requiring further review. DO NOT issue tentative settlement payments in bankruptcy

cases unless explicitly requested by the CMS Office.

Unless otherwise directed, Contractor reimbursement staff should continue to review and audit cost

reports following their usual procedures. The CMS Office will inform the Contractor of any stipulations

or settlements that may affect the review or audit process. In such situations, the CMS Office will

evaluate the costs and benefits of auditing cost reports when recovery is unlikely and will provide

appropriate guidance.

Contractors are no longer required to submit notices of program reimbursement (NPRs) or revised

NPRs to the CMS Office for review and approval when dealing with bankrupt providers. However, if the

CMS Office determines that a bankruptcy case is unique or exceptional, it will provide written direction

requesting the Contractor to submit NPRs or revised NPRs for the CMS Office’s review and approval

prior to issuance to the provider.

Once a final cost report settlement has been determined, Contractors shall ensure the required

language is included in the NPR or revised NPR before issuing it to the provider. If needed, Contractors

may contact the CMS Office to confirm any necessary actions for proper handling of the determination

in the Health Integrated General Ledger Accounting System (HIGLAS).

a. Cost Report Overpayment Letters shall include the following language:

Note: If you have filed a bankruptcy petition or are involved in a bankruptcy proceeding, please

follow the instructions found at the end of this letter.

If You Have Filed a Bankruptcy Petition

If you have filed a bankruptcy petition or are involved in a bankruptcy proceeding, Medicare

financial obligations will be resolved in accordance with the applicable bankruptcy process.

Nothing in this letter should be considered as a request or demand for payment. Accordingly, we

request that you immediately notify us about this bankruptcy so that we may coordinate with both

the Centers for Medicare & Medicaid Services and the Department of Justice to assure that we

handle your situation properly. If possible, when notifying us about the bankruptcy, please

include the name the bankruptcy is filed under, the docket number, and the district where the

bankruptcy is filed.

If you have already notified CMS of the bankruptcy, the purpose of this letter is to inform you of

the overpayment owed to Medicare. Due to the automatic stay in bankruptcy, this letter does not

demand that you submit payment at this time. Because of the bankruptcy, recovery of Medicare

financial obligations will be resolved in accordance with the applicable bankruptcy process, and

pursuant to applicable jurisdictional and other provisions of the Medicare Act and regulations.

Please note that in bankruptcy, CMS may still exercise recoupment rights, which constitute a

defense to payment. Thus, we do not believe that the bankruptcy petition prohibits Medicare’s

recoupment rights, subject to the limitation on Medicare recoupment at section 1893(f)(2) of the

Social Security Act and the implementing regulations at 42 C.F.R. § 405.379.

If you dispute this overpayment determination, please follow the appropriate rebuttal and/or

appeals process described elsewhere in this letter.

To the extent any of the general instructions in this letter is not consistent with the bankruptcy

law and procedures, they may be modified to comport with bankruptcy law.

b. Cost Report Underpayment Letters shall include the following language:

Note: If you have filed a bankruptcy petition or are involved in a bankruptcy proceeding, please

follow the instructions found at the end of this letter.

If You Have Filed a Bankruptcy Petition

If you have filed a bankruptcy petition or are involved in a bankruptcy proceeding, Medicare

financial obligations will be resolved in accordance with the applicable bankruptcy process.

Nothing in this letter should be considered as a request or demand for payment. Accordingly, we

request that you immediately notify us about this bankruptcy so that we may coordinate with both

the Centers for Medicare & Medicaid Services and the Department of Justice to assure that we

handle your situation properly. If possible, when notifying us about the bankruptcy, please

include the name the bankruptcy is filed under, the docket number, and the district where the

bankruptcy is filed.

If you have already notified CMS of the bankruptcy, the purpose of this letter is to inform you of

the underpayment amount. Because of the bankruptcy, recovery of Medicare financial

obligations will be resolved in accordance with the applicable bankruptcy process, and pursuant

to applicable jurisdictional and other provisions of the Medicare Act and regulations. Please

note that in bankruptcy, CMS may still exercise recoupment rights, which constitute a defense to

payment. Thus, we do not believe that the bankruptcy petition prohibits Medicare’s recoupment

rights, subject to the limitation on Medicare recoupment at section 1893(f)(2) of the Social

Security Act and the implementing regulations at 42 C.F.R. § 405.379.

If you dispute this underpayment determination, please follow the appropriate rebuttal and/or

appeals process described elsewhere in this letter.

To the extent any of the general instructions in this letter is not consistent with the bankruptcy law

and procedures, they may be modified to comport with bankruptcy law.

4. Payment

Contractor payment staff must receive approval from the CMS Office before taking any action that

changes the amounts payable or owed by a debtor.

5. Appeals

Contractor staff will be asked about any recent or ongoing appeals involving a provider in bankruptcy,

including Redeterminations, Qualified Independent Contractor (QIC) reviews, Administrative Law

Judge (ALJ) hearings, Provider Reimbursement Review Board (PRRB) cases and Department Appeal

Board (DAB) cases.

The Contractor should keep the CMS Office or CMS Counsel informed of material developments related

to appeals activity in bankruptcy cases that become known to it in the course of its operational

responsibilities that may affect the overpayment amount or CMS’ proof of claim.

If an appeal decision is favorable to the provider and reduces the overpayment amount, CMS or CMS

Counsel may determine that amendment of the proof of claim is required. In some cases, the CMS Office

may also direct the contractor to suspend or freeze outgoing funds.

6. Change of Ownership (CHOW)

A debtor may attempt to transfer provider agreements so that both parties may avoid overpayment

recovery. The Center for Clinical Standards and Quality (CCSQ) staff will notify the servicing CMS

Office when a debtor provider files for a CHOW and immediately notify the CMS Counsel who is

assigned the bankruptcy. The CHOW will not be processed until the CCSQ Office obtains the

concurrence of the CMS Counsel assigned the bankruptcy. In addition to CCSQ, the Medicare

Administrative Contractor’s provider enrollment staff and the Provider Enrollment Operations Group

(PEOG) within CPI also coordinate with the CMS Office assigned to the bankruptcy upon learning that

a debtor provider has initiated or plans to initiate a CHOW.