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A law designed to protect patients from surprise medical bills is contributing to the financial distress of some medical-service providers, which say lengthy billing disputes and payment delays with insurers are hurting their ability to stay afloat, WSJ Pro Bankruptcy reported. The No Surprises Act, which took effect last year, aims to protect patients from surprise medical bills from out-of-network healthcare providers when there are disagreements over reimbursements between insurers and providers. Previously, providers often billed patients to make up for the amounts insurers were unwilling to pay. Numerous healthcare businesses, some owned by private equity, said the legislation is contributing to delays and reductions in payments by insurance companies, hurting their cash flows and earnings. A handful of major healthcare-service providers already have filed for chapter 11 protection this year, specifically naming the law as a major reason for their bankruptcies. These include physician-staffing companies Envision Healthcare and American Physician Partners as well as helicopter-ambulance operator Air Methods. The federal law removed patients from having to deal with payment disagreements but pitted healthcare providers against private insurers, leading to more than 489,000 claim disputes in an arbitration system from April 2022 until July 2023, according to the most recent data available. The number of disagreements submitted in the portal’s first year of operations is 14 times greater than what the U.S. Departments of Labor, Treasury, and Health and Human Services had expected to receive in an entire calendar year, according to a government filing.

A group of Endo International lenders have proposed paying up to $465 million to settle U.S. government claims that have held up the drug company's bankruptcy restructuring, according to court documents filed this week, Reuters reported. The lender group, which includes investment firms Oaktree Capital Management, Silver Point Capital, and Bain Capital, has offered to buy Endo in exchange for wiping out $6 billion in company debt, but objections from the U.S. Department of Justice have blocked the sale from moving forward. The lenders said they have not yet reached final agreement with the Justice Department, and they are seeking financial contributions from other Endo stakeholders for the proposed settlement, according to a Monday court filing in federal bankruptcy court in New York. The lender group had previously agreed to fund nearly $600 million in settlements that Endo had reached with states and people afflicted by the U.S. opioid crisis resolving claims it helped fuel the epidemic with its painkillers.

Lion Star, the private company that operates the Nacogdoches Memorial Hospital, has filed for bankruptcy in federal court after the Nacogdoches County Hospital District voted to terminate its lease with the group last month, CBS19.tv reported. According to a petition filed in U.S. Bankruptcy Court of the Northern District of Texas on Nov. 17, Lion Star owes anywhere between $10 million and $50 million to an estimated 200 to 999 creditors. Another court document that details a list of the 20 largest claims shows Lion Star owes over $2.8 million to a clinical staffing company from Arkansas, over $1 million to an electronic health record company and more then $580,000 to a biomedical services group based in California. Other debts listed include electricity, telephone services and other services and recordkeeping. This bankruptcy filing comes after the Nacogdoches County Hospital District board voted to terminate the 10-year lease agreement with Lion Star on Oct. 13. In the agreement, the district is serving as the landlord while Lion Star is the tenant.

The private insurance market has proved increasingly inadequate in providing financial security for most of the millions of older Americans who might need home health aides, assisted living or other types of assistance with daily living, the New York Times reported. For decades, the industry severely underestimated how many policyholders would use their coverage, how long they would live and how much their care would cost. Only 3 to 4 percent of Americans 50 and older pay for a long-term care policy, according to LIMRA, an insurance marketing and research association. That stands in stark contrast to federal estimates that 70 percent of people 65 and older will need critical services before they die. Repeated government efforts to create a functioning market for long-term care insurance — or to provide public alternatives — have never taken hold. Today, most insurers have stopped selling stand-alone long-term care policies: The ones that still exist are too expensive for most people. And they have become less affordable each year, with insurers raising premiums higher and higher. Many policyholders face painful choices to pay more, pare benefits or drop coverage altogether.

Telemedicine company UpHealth Holdings agreed to sell subsidiary Cloudbreak Health LLC for $180 million in cash, the South Florida Business Journal reported. The sale to private equity firm GTCR comes two months after Delray Beach-based UpHealth filed for chapter 11 bankruptcy in New York federal court. The company will use the proceeds from the sale to pay debts and cover other expenses. Moving forward, UpHealth will focus on growing TTC Healthcare, described as a "cash flow positive" behavioral health platform. "UpHealth is executing on paying down majority of its debt to our noteholders, with the goal of freeing capital to grow our behavioral health business," said Avi Katz, chairman of the board. CloudBreak Health, a provider of healthcare focused language interpretation services, more than doubled its revenue over the past three years, Katz added. The deal comes two years after UpHealth's merger with GigCapital2 and Cloudbreak Health LLC in 2021. In September, it filed for bankruptcy after a contract dispute with investment bank Needham & Co tied to the merger. A judge ordered UpHealth to pay Needham $31 million.

Darius Miles, who was the highest-ever National Basketball Association draft pick to come straight out of high school when he joined the Los Angeles Clippers in 2000, avoided a prison sentence for participating in a fraud scheme aimed at the league’s health care plan, Bloomberg News reported. Miles was given three years’ probation yesterday by U.S. District Judge Valerie Caproni in Manhattan. He pleaded guilty in June and had faced a possible sentence of around two years in prison. The scheme’s ringleader, Terrence Williams, who was the 11th overall pick in the 2009 draft, was given a 10-year prison term in August. Miles was arguably the most famous of the 18 former NBA players charged in October 2021 with defrauding the health plan out of more than $5 million. They were accused of submitting false claims for medical and dental procedures they never received from 2017 to 2021. Many of those charged pleaded guilty, including Williams. Another high-profile player, Glen “Big Baby” Davis, who won a championship with the Boston Celtics in 2008, was found guilty by a jury in New York last week.

Timber Pharmaceuticals filed for chapter 11 bankruptcy protection on a day when LEO Pharma terminated a merger agreement that didn’t receive a sufficient stockholder vote at a Friday meeting, WSJ Pro Bankruptcy reported. Timber signed a stalking-horse asset-sale agreement with LEO Pharma. Timber, which focuses on treatments for rare and orphan dermatologic diseases, previously warned that there was substantial doubt about its ability to continue as a going concern and said it would “likely need to seek the protection of the bankruptcy courts” if the merger wasn’t completed. The company adjourned its stockholder meeting on Oct. 16 and again on Oct. 30. Before a trading halt earlier on Friday, Timber shares were up 17%, to $1.46. On the day the LEO Pharma deal was announced in August, Timber shares closed at $2.99, up from $1.42 in the previous session.

At age 88, World War II veteran Robert Kroll moved to Friendship Village of Schaumburg, a retirement community where he would be taken care of until death, and so his children would get their inheritance after he died. He paid an entrance fee of $124,000, plus about $2,400 a month, to guarantee that he would always get housing and medical care even if he ran out of money, with the understanding that his family would get 90% of his remaining entrance fee after expenses upon his passing. Kroll died in 2019, but his family still hasn’t gotten their money back. In June, Friendship Village, citing problems caused by the COVID pandemic, filed for chapter 11 bankruptcy, in which officials say operations will continue as usual, but with some debts unpaid, the Chicago Tribune reported. A company has bid $115 million to buy the facility, but the bankruptcy proposal includes only $2 million to pay back families of former residents — about 10% of what is owed. The Kroll's dispute is over Friendship Village’s policy of only paying back entry fees upon the resale of a resident’s unit. The facility — the largest not-for-profit retirement community in Illinois, with 815 units — didn’t resell Kroll’s one-bedroom unit, so hadn’t paid his family back. Now that Friendship Village has entered bankruptcy, families of former residents are unlikely to ever receive full repayment, which Barnes and other families see as a betrayal of what they were promised. Friendship Village officials say that the contracts were clear about the arrangement, which had worked well for decades since the retirement community opened in 1977. “We never expected this to happen,” CEO Mike Flynn said.

After a federal law to curb surprise medical bills in the U.S. triggered a handful of the year’s biggest bankruptcies, investors are eyeing corporate-debt piles for potential pain ahead, Bloomberg News reported. KKR & Co.-backed ambulance company Global Medical Response is in talks to push out some $4 billion of maturing debt in 2025, Bloomberg reported last month. Blackstone Inc.-backed staffing firm TeamHealth Inc., meanwhile, could face as much as $2.5 billion of debt due next year, and Radiology Partners Inc. has roughly $2 billion due over the next two years. Those are hefty sums given investors’ concern that revenues may take a hit from the rollout of the No Surprises Act — a law that last year banned companies from unexpectedly billing insured patients for care from out-of-network providers at in-network facilities. Credit-rating assessors have been warning about a drag from the new rules, which stand to magnify other risks, like elevated interest rates and labor costs. TeamHealth, for one, was cut deeper into junk territory earlier this month by S&P Global Ratings as its upcoming maturities spotlight uncertainty. “The No Surprises Act certainly puts pressure on health-care companies that have that exposure,” said Clare Moylan, a co-founder of Gibbins Advisors, which consults health-care firms. “If you’re tight on margin already, and you lose that margin, then you have to find it elsewhere.” Read more.

Moylan will be the moderator of a special abiLIVE webinar on Dec. 11 titled "Predicting Distress and Opportunities in the Health Care Sector." Click here to register for free!