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New LifeCare directed to release $2.36 million to buyer LifeCare 2.0
By Sarah Lizee
Olympia, Wash., Jan. 8 – Hospital Acquisition LLC, which operates numerous New LifeCare and LifeCare medical facilities, has been directed to make a roughly $2.36 million payment to asset purchaser LifeCare 2.0, LLC, according to an order filed Friday with the U.S. Bankruptcy Court for the District of Delaware.
LifeCare 2.0 had filed a motion to enforce the terms of a sale order, seeking a ruling from the court that it is entitled to the payment, which was received by the debtors two days after the closing of a transaction whereby LifeCare purchased one of the debtors’ health care facilities.
The debtors argued that the amount relates to services that they provided in the first six months of 2019 and therefore constitutes a pre-closing receivable, which the sale agreement permits them to keep.
“The rub, however, is that in December of 2019, the Center for Medicare and Medicaid Services assessed overpayments relating to the sold facility in the amount of $2.322 million,” the court said in an opinion filed Dec. 21. “As the current owner of the health care facility, LifeCare is obligated to reimburse CMS in that amount.”
LifeCare 2.0 asserted that the payment received by the debtors was either an asset that was acquired by LifeCare 2.0 in the sale, and thus wrongly retained by the debtors, or an overpayment based upon the debtors’ flawed projections that should be remitted to LifeCare 2.0 to permit it to satisfy the Center for Medicare and Medicaid Services overpayment liability.
The debtors were directed to release and pay the amount within five business days of entry into the order.
LifeCare, a Plano, Tex.-based health care consulting and management services company, filed for bankruptcy on May 6, 2019. The Chapter 11 case number is 19-10998.
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