Recoupment

140.6.4 - Recoupment (Rev. 13825; Issued: 06-11-26; Effective: 07-13-26; Implementation: 07-13-26) Generally, bankruptcy law prohibits recovery of pre-petition debt (debt arising prior to the filing of the bankruptcy petition) from post-petition payments. However, Medicare Part A payments require adjustments of ongoing payments to a provider to account for overpayments previously made to that provider. 42 U.S.C. §1395g(a); §1395x(v)(1)(A). Most courts recognize this method of adjusting payments as recoupment, which is permitted in bankruptcy, and is not subject to the automatic stay. Alternatively, they recognize that bankruptcy law does not alter the adjustment of payments that the Medicare statute requires. Thus, in most jurisdictions’ recoupment is appropriate. Nevertheless, the Contractor always consult the CMS Office/CMS Counsel's Office about the adjustment (or recoupment) of any payments to a bankrupt provider before taking, omitting, continuing or discontinuing any action. (See also, discussion of Recoupment in §140.2.5). Some courts do not agree that Medicare can recoup overpayments (without first obtaining relief from the automatic stay) unless the provider incurred the overpayments in the current fiscal year. For instance, in bankruptcy cases filed in Pennsylvania, New Jersey, Delaware and the Virgin Islands, Medicare cannot recoup overpayments across fiscal years unless the debtor assumes the Medicare provider agreement or CMS Counsel obtains permission from the court. The servicing CMS Office or CMS Counsel will advise the Contractor whether it can recoup overpayments in these jurisdictions. Again, the Contractor consults the servicing CMS Office and the CMS Counsel before adjusting or recouping payments to a bankrupt provider.