In re University Medical Center
| Decision Date | 07 December 1988 |
| Docket Number | Bankruptcy No. 88-00003S,Adv. No. 88-0838S. |
| Citation | 93 BR 412 |
| Parties | In re UNIVERSITY MEDICAL CENTER, Debtor. UNIVERSITY MEDICAL CENTER and The Official Creditors' Committee, Plaintiffs, v. Otis BOWEN, Secretary of the United States Department of Health and Human Services and Blue Cross of Greater Philadelphia, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Thomas H. Tropp, Philadelphia, Pa., for debtor.
Virginia Powel, Asst. U.S. Atty., Philadelphia, Pa., for Bowen.
David Bongiovanni, Philadelphia, Pa., for Blue Cross.
William G. Frey, Mark H. Gallant, Philadelphia, Pa., for Committee.
Richard Gorelick, Philadelphia, Pa., for Blue Cross.
Before us are (1) A motion by the Secretary of the United States Department of Health and Human Services (hereinafter referred to as "HHS") seeking relief from the automatic stay in the above-captioned main bankruptcy case in order that it can recoup pre-petition Medicare overpayments to the Debtor-hospital against post-petition Medicare payments otherwise due to the Debtor; and (2) An adversary proceeding brought by the Debtor, seeking recovery of the post-petition Medicare payments which HHS has withheld and damages for HHS's alleged violation of the automatic stay in effecting recoupment in the past and at present. The issues raised are difficult ones, but ones which, for the most part, we already resolved in our Opinion of August 12, 1988, in In re St. Mary Hospital, 89 B.R. 503 (Bankr.E.D.Pa.1988). Not surprisingly, we follow our decision in St. Mary, and hold that HHS does not have a right to effect recoupment in these circumstances. The only new issue presented is our treatment of HHS's refusal to return $15,000.00 already recouped from the Debtor and its persistence in declining to remit post-petition payments to the Debtor in the direct face of the St. Mary precedent against it. We hold that, under 11 U.S.C. § 362(h), HHS is obliged to return the $15,000.00 and compensate opposing counsel for all reasonable attorney's fees accrued as a result of maintaining these matters after August 12, 1988, in addition to directing HHS to pay all post-petition Medicare payments to the Debtor. We also hold that the Debtor is entitled to pre-judgment interest on the $15,000.00 and on the post-petition payments which HHS has withheld.
The underlying voluntary Chapter 11 bankruptcy case was filed on January 4, 1988. The Debtor, as Findings of Fact 6-11, pages 414-415 infra, reveal, was initially oblivious to its potential rights to resist HHS's assertions of a right to recoup past Medicare overpayments from present payments for Medicare benefits. It was not until June 17, 1988, over 2½ months after the Debtor had ceased doing business, that it became enlightened as to its potential rights to resist HHS's recoupment efforts and filed the instant adversary proceeding. On August 10, 1988, the Official Unsecured Creditors' Committee (hereinafter "the Committee"), represented by the same firm that served as special counsel in the St. Mary litigation described above, intervened as a party-plaintiff.
On July 8, 1988, belatedly becoming aware that its effectuation of recoupment may have been presumptuous, HHS filed a motion for relief from the stay in the main bankruptcy case, requesting this court to ratify its past recoupment activities as well as allow it to continue such activity in the future.
The parties agreed to present both matters to us together in a consolidated trial on September 22, 1988. At the commencement of the trial, they submitted a Stipulation of Facts which, although filled out somewhat by the following trial, contained most of the pertinent facts. Although the parties supplemented the Stipulation by post-trial Proposed Findings of Fact and Conclusions of Law submitted to us by November 7, 1988, we rely heavily upon the Stipulation in rendering our Findings of Fact. Conclusions of Law, with a Discussion of each issue, reduced in length by our ability to incorporate our more extended treatment of most of the same issues in St. Mary, follows.
1. Although BLUE CROSS OF PHILADELPHIA (hereinafter "BC"), the fiscal intermediary of HHS, was named as a party-defendant in the adversary proceeding, the parties agreed that HHS is the only real party-defendant in interest, and that BC was merely acting as an agent for HHS as to the facts described hereinafter, thereby justifying its dismissal as a defendant in the adversary proceeding.
2. The Plaintiff and HHS entered into a Health Insurance Benefits Agreement (hereinafter "the Benefits Agreement") on April 29, 1966, which, at all times thereafter, remained in effect.
3. The Debtor was overpaid by BC for Medicare services in the following amounts: 1985-$276,042.00; 1986-$470,894.00; and 1987-$65,447.00.
4. Although aware of the Debtor's bankruptcy filing a few days before, BC, by a letter of January 8, 1988, addressed to the Debtor, indicated that it would begin withholding all future Medicare payments to recoup the 1985 overpayment due unless payment of the overpayments were made in full or a request for an extended repayment agreement was received from the Debtor.
5. When no response was received from the Debtor in the next month, BC notified the Debtor, by letter of February 8, 1988, that it would begin withholding all future Medicare benefits as of February 10, 1988.
6. In furtherance of this policy, on February 18, 1988, BC withheld a payment of $58,000.00 otherwise payable to the Debtor under the Benefits Agreement. This action prompted authorized agents of the Debtor to meet that day with Stanley E. Kaimowitz, the BC official in charge of its recoupment activities. In that meeting, it was arranged that BC would allow the Debtor to repay the 1985 overpayment at a rate of $15,000.00 per month, provided that payments were made on the first day of each succeeding month, and provided that the Debtor submitted documentation to establish its need for such a repayment schedule.
7. Mr. Kaimowitz testified that he expressly advised the Debtor's agents that the aforementioned documentation must be submitted within two weeks. Raymond Kipping, the Debtor's administrator, testified that he was equally certain that no express time-limits had been set. This was the only disagreement between the parties' rendition of their dealings, and we need not resolve the difference because it is not significant to the outcome.
8. In light of the arrangement of that date, BC released the $58,000.00 previously withheld on February 18, 1988. On March 4, 1988, the Debtor remitted the first $15,000.00 payment pursuant to the arrangement and BC did not withhold any Medicare payments from February 19, 1988, until March 31, 1988.
9. The parties did not reduce the arrangement of February 18, 1988, to writing, and the Debtor neither sought court approval of this arrangement nor advised any other interested party, including the Committee, that it had made the arrangement.
10. Not having received the requested documentation to establish the need for a repayment schedule as of March 28, 1988, Mr. Kaimowitz informed the Debtor that, unless the complete documentation requested was received by March 31, 1988, BC would once again suspend all current Medicare payments to the Debtor.
11. On March 31, 1988, the Debtor remitted certain documentation to BC, but BC deemed that the submission was incomplete and began withholding all current Medicare payments once again.
12. On that same date, March 31, 1988, the Debtor closed its hospital.
13. The parties agreed that BC could and would make whatever calculations of payments were due and would have been remitted to the Debtor subsequent to March 31, 1988, after the court ruled as to whether the recoupment effected by BC on behalf of HHS was permissible.
14. Neither the Debtor nor the Committee presented any evidence that the closing of the Debtor's hospital would have been averted had BC made all of the submissions of Medicare benefits, or that any other damages arose as a result, except the efforts of counsel for the Debtor and the committee in prosecution of this litigation.
15. The Committee has consistently taken the position that the $15,000.00 payment made to BC on February 18, 1988, should be returned to the Debtor, and the Debtor now takes this position as well.
1. THE DEBTOR CANNOT BE HELD TO HAVE ASSUMED THE BENEFITS AGREEMENT WITH HHS, BECAUSE IT NEVER PRESENTED A FORMAL MOTION FOR COURT APPROVAL OF SAME WHICH WAS GRANTED BY THIS COURT AFTER NOTICE TO ALL INTERESTED PARTIES
In St. Mary, we assumed, without deciding, that a provider agreement similar to the Agreement in issue here was an executory contract. 89 B.R. at 507. In so holding, we acknowledged "a certain degree of force" to the debtor's "appealing argument" that HHS "is not seeking recoupment pursuant to an executory contract, but is merely attempting to pursue recoupment pursuant to federal statues." Id. at 507 n & 4. See also In re Elegant Concepts, Ltd., 61 B.R. 723, 728 (Bankr.E. D.N.Y.1987) (). Nevertheless, assuming arguendo that an executory contract was in issue, we stated, in St. Mary, that "we are disinclined to hold that a debtor has implicitly assumed an executory contract through actions short of presenting a formal motion to assume such a contract to the bankruptcy court." Id. at 507.
We again emphasize that we could conceivably conclude that we are not dealing with an executory-contract situation here at all, and that therefore 11 U.S.C. § 365 does not come into play at all. However, assuming arguendo that the Agreement is an executory contract, we note that the one area in which the facts are stronger in favor of HHS here than in St. Mary is that the actions of the Debtor here...
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