It is well known that the health care industry as a whole has undergone significant changes, challenges and uncertainties in recent years. Many hospitals, senior living facilities, pharmaceutical companies, laboratories and other health care providers are struggling to operate in an industry that has ever-changing state and federal regulations, increasing competition and demanding technological needs. Taken together, these challenges have caused a number of health care companies to financially struggle and have resulted in a number of restructurings.

Further complicating the financial and operational issues experienced by health care companies is the increased prevalence of governmental and quasigovernmental civil claims. Many health care companies have been the target of investigations under the False Claims Act by an interagency taskforce created in 2009 among the Department of Health & Human Services, Office of Inspector General, the Centers for Medicare & Medicaid Services (CMS), and the U.S. Department of Justice (DOJ) known as the Health Care Fraud Prevention and Enforcement Action Team. As a result of the government’s efforts, the DOJ obtained more than $2.5 billion in settlements and judgments in 2016 from civil cases involving fraud and false claims against the government by participants in the health care industry. In addition, an increasing number of health care providers face Medicare or Medicaid “charge-back” claims pursuant to which CMS seeks to recoup amounts previously paid to providers based on a review of prior payments which CMS retroactively determines were improper. In many instances, these government investigations and claims are the tipping points for already distressed health care companies causing them to seek Chapter 11 protection. As discussed herein, governmental involvement in these financial restructurings at the very least complicates the process of reorganizing these entities.