Abstract
Lost in the technical jargon of the Medicare Statute and Bankruptcy Code are the powers to shape the posterity of hospitals that serve the American public. Distressed health care providers are increasingly turning to Chapter 11 relief, and ultimately the deal market, to salvage their businesses and fully monetize their assets. In the frequent event of an unsuccessful reorganization, hospital failures tank the health and well-being of their surrounding communities.
Hospital buyers regularly acquire a debtor’s Medicare Provider Agreement (Provider Agreement), a one-page form which credentials providers to participate in Medicare. In re Steward Health Care System, LLC, the largest and most polarizing hospital failure in decades, demonstrates how estate valuation can depend on the treatment of this unsuspecting document. When providers transfer this agreement, courts are divided in their interpretations of what responsibilities the debtor assumes, which liabilities attach to the agreement, and if rights are retained by the government. Some view the Provider Agreement as an executory contract under 11 U.S.C. § 365, unleashing a cascade of unfavorable financial consequences for all parties except the government, who directly benefits. Others consider participating in Medicare a statutory entitlement, allowing the debtor to sell the Provider Agreement free and clear of all claims, liens, and encumbrances under 11 U.S.C. § 363. However, a third “trend” surged in Steward, where the government encouraged out-of-court negotiation surrounding Provider Agreement liability. Providers are now finding predictability at the bargaining table rather than in memoranda of decision.
This Comment advocates that the soundest legal rationale, consistent with non-bankruptcy law, and public policy support evaluating the Provider Agreement as a statutory entitlement and § 363 estate asset. However, despite the appalling facts of Steward’s demise, its resolution illuminates that it is entirely within the government’s prerogative to instead resolve this issue through dealmaking. Thus, this Comment proposes that Steward’s quiet solution creates a new path forward for financially stressed providers that promotes transaction certainty and the health of Medicare beneficiaries nationwide.
Recommended Citation
Mackie S. Garwood,
Silver Lining in a Soap Opera: A Boon for Hospital Debtors in the Midst of In re Steward's Madness,
75
Emory L. J.
469
(2026).
Available at:
https://scholarlycommons.law.emory.edu/elj/vol75/iss2/4