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Bankruptcy has opened a new front in a legal dispute between True Health Group LLC and the U.S. government, putting federal lawyers on alert to protect a whistleblower lawsuit accusing the defunct laboratory diagnostics company of paying kickbacks to get business, WSJ Pro Bankruptcy reported. In new court papers, lawyers for the U.S. Department of Health and Human Services warn that True Health is trying to use chapter 11 unfairly to thwart the government’s pursuit of fraud. Lawyers for True Health yesterday responded with a court filing that said that grants of legal immunity in its chapter 11 plan don’t apply to any fraud prosecution by the government, and so won’t impede federal actions. True Health is slated to go before a bankruptcy judge today to seek approval of a chapter 11 plan that pays very little to creditors owed more than $177 million. According to federal lawyers, True Health’s plan goes too far in shielding the company from the legal consequences of operating its business. The government shut off or limited True Health’s stream of Medicare payments due to unspecified fraud allegations, which the company has consistently denied. In June 2019, the government cited “recent credible allegations of fraud” in a new suspension that pushed True Health into bankruptcy. True Health was already operating under a partial suspension dating back to 2017 that is related to a whistleblower suit. The lawsuit is still under seal, but government attorneys sketched out the contents in bankruptcy court papers that challenged True Health’s bid for court approval of its chapter 11 plan.

Federal prosecutors charged former executives of Outcome Health with allegedly falsifying data in a nearly $1 billion scheme to defraud the company’s clients and investors, including Goldman Sachs Group Inc., Alphabet Inc. and an investment firm founded by Illinois Gov. J.B. Pritzker (D), the Wall Street Journal reported. The criminal indictments of the startup’s former chief executive, Rishi Shah, as well as ex-president Shradha Agarwal and previous finance chief Brad Purdy, conclude a two-year investigation by the Justice Department. In the indictment unsealed yesterday, the three executives were each charged with multiple counts of mail and wire fraud and two counts of bank fraud. Shah also faces two counts of money laundering and Purdy faces one count of making a false statement to a bank. On the most serious charges, the three each face a maximum prison sentence of 30 years if convicted. The Securities and Exchange Commission yesterday also sued the three former executives, alleging they committed civil securities fraud.

After Hahnemann University Hospital went into bankruptcy and closed this summer, a group of state senators urged the Wolf administration to redistribute the Center City institution’s subsidies for the poor and uninsured to other hospitals that serve North Philadelphia, the Philadelphia Inquirer reported. Moving the Hahnemann money to Einstein, Jefferson, and Temple — the shift sought by Philadelphia’s State Sen. Tina Tartaglione and others to prevent cascading losses at other hospitals as they picked up indigent Hahnemann patients — sounds simple, but there are challenges. Hahnemann’s $51 million in subsidies represented a slice of the $1.15 billion in state and federal Medicaid money paid to Pennsylvania hospitals last year through 37 obscure programs negotiated in Harrisburg to help pay for treating the poor. Philadelphia hospitals’ share was $535 million. The labyrinthine funding system pits hospitals across Pennsylvania against one another and forces them into backroom deals to get the funding they need to keep treating poor patients. And, it forces hospitals in the city, with a 24.5 percent poverty rate, to play politics in Harrisburg to fill the gap left by Philadelphia General Hospital’s closure more than 40 years ago.

The Walker County Hospital Corp. announced yesterday that it has filed for chapter 11 protection, KBTX.com reported. Huntsville Memorial Hospital in Texas has been facing financial struggles and searching for a health system partner for more than a year. In September, the Walker County District Board signed a letter of intent with Community Hospital Corp. Because of their financial instability, Huntsville Memorial has been forced to make several expense cuts, including employee layoffs. Hospital administration hopes that by filing for bankruptcy, it will help address some of those issues and restructure finances. The process is expected to take three to five months.

San Antonio’s Southcross Hospital, which permanently closed its doors last month, and three health care-related companies each have filed for bankruptcy protection over the weekend, the San Antonio Express-News reported. The other entities filing for bankruptcy protection are Arete Healthcare LLC, Schertz-Cibolo Emergency Center LLC and The Emergency Clinic of Floresville LLC. Arete manages the two clinics, which do business as Schertz-Cibolo Emergency Clinic and Emergency Care of Floresville. The bankruptcy petitions filed on Sunday offer little detail on the events that led to the companies seeking chapter 11 reorganization. The companies borrowed an undisclosed amount from Frost Bank that is secured by the debtors’ receivables. The companies want their bankruptcy cases jointly administered and designated as “complex” by the U.S. Bankruptcy Court. Combined, the four companies have more than $10 million in debt. Among the largest unsecured creditors and the amount of their claims in Southcross’ bankruptcy petition are: New York’s Green Capital Funding LLC, nearly $1.1 million; San Antonio’s Search Construction LLC, $171,777; and Southcross Physician Group $137,000.

Hahnemann University Hospital’s license has been terminated, the Pennsylvania Department of Health notified the judge overseeing the bankruptcy of the Philadelphia facility, last week, the Philadelphia Inquirer reported. “I am bringing the current situation at Hahnemann to your attention because I am deeply concerned about the state and security of the building and the supplies and equipment it is housing,” Secretary of Health Rachel L. Levine said on Friday in a letter. The hospital discharged its last inpatient in late July after Hahnemann and St. Christopher’s Hospital for Children filed for bankruptcy protection in late June. A joint venture of Tower Health and Drexel University has agreed to buy St. Christopher’s out of bankruptcy for $50 million. It was not immediately clear what the license revocation means for the proposed sale of Hahnemann’s medical residency programs to Thomas Jefferson University Hospitals Inc. for $55 million. Federal Medicare regulators, which oversees such residency programs, have appealed to the U.S. District Court to block the sale.