Preferred Care Looks to Settle Lawsuits to Speed Up Bankruptcy

Embattled skilled nursing provider Preferred Care has asked a federal bankruptcy judge to approve a settlement regarding allegedly falsified Medicare and Medicaid claims.

Settling the pair of federal whistleblower lawsuits, filed in 2016 and 2017, would help accelerate Preferred Care’s Chapter 11 bankruptcy process, the provider argued in a filing submitted last week.

Westlaw Practitioner Insights, a Thomson Reuters publication, first reported on the existence of the documents.


The suits both allege that various Preferred properties provided “materially substandard care,” while also artificially inflating reimbursement claims under the Resource Utilization Group (RUG) system.

The Plano, Texas-based Preferred, which filed for Chapter 11 bankruptcy protection in November, was first made aware of both suits that same month, according to the filing with the U.S. Bankruptcy Court for the Northern District of Texas — Fort Worth division.

“Since that time, the debtors have been in constant communication with the United States and have cooperated with the investigations,” Preferred asserted.


While Preferred denies the allegations, the company said its executives have been working toward a settlement solution that would allow the provider to expedite its bankruptcy process.

“In an effort to (a) avoid costly and protracted litigation and (b) work toward a resolution that would enable the debtors to emerge from Chapter 11 in a timely manner and transfer the debtor facilities to new operators, the debtors, the United States, and Kentucky engaged in arms’-length settlement discussions involving the treatment of such claims,” Preferred said in the filing.

Under the terms of the settlement submitted for approval, Preferred would pay a total of $540,000, which the provider characterizes as “a substantial concession by the United States and Kentucky.” Preferred would also be on the hook for an additional $125,000 in legal fees for the plaintiffs.

“The proposed settlement offers a number of benefits to the debtors’ estates and is in the best interests of the debtors’ estates,” Preferred concluded, adding that it will prevent an expensive and protracted fight with the government over fraud.

The bankruptcy court will hold a hearing on the settlements on June 26.

The chain — which numbered 107 facilities across 12 states as of June 2016 — was forced into bankruptcy over 163 personal injury lawsuits, including one that resulted in a $28 million judgment in Kentucky. Preferred recently asked the bankruptcy court for an extension to the deadline for its restructuring plan from June 11 to September 10.

Written by Alex Spanko

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