IHN Podiatry Services PLLC

UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
www.flmb.uscourts.gov
In re:
Case No. 8:26-bk-00384-LER
IHN PODIATRY SERVICES,
PLLC,
Chapter 11
Debtor.
/
MEMORANDUM OPINION AND ORDER
GRANTING IN PART AND DENYING IN PART
EMERGENCY MOTION TO ENFORCE THE AUTOMATIC STAY
Before the Court is the Emergency Motion to Enforce the Automatic Stay
(the “Motion”)1 filed by IHN Podiatry Services, PLLC (the “Debtor”). The
Motion 	asks 	the 	Court to 	direct the 	Department 	of Health and Human
Services, the Centers for Medicare and Medicaid Services, First Coast Service
Options, 	Inc., 	and 	other 	Medicare 	administrative 	contractors 	collectively,
“CMS”),2 	the 	Department 	of 	Treasury’s 	Bureau 	of 	Fiscal 	Service 	(the
1 Doc. No. 10.
2 The Centers for Medicare & Medicaid Services is an agency in the United States
Department of Health and Human Services that provides health coverage to more than 160
ORDERED.
Dated: April 06, 2026
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“Treasury”), and CBE Group, Inc. (“CBE Group”) to “cease offsetting their
disputed 	overpayment 	claims 	against 	the 	Debtor’s 	post-petition 	revenues
arising from services rendered after the petition date to Medicare beneficiaries,
as well as any other amounts owed to the Debtor by the federal government.”3
The Court held an emergency hearing on the Motion on January 21,
2026, and entered an interim order directing First Coast and CBE Group to
immediately stop all efforts to collect pre-petition obligations owed by the
Debtor to First Coast or CBE Group. The Court also directed First Coast and
CBE Group to immediately stop all efforts to obtain possession of or exercise
control over property of the estate, including the Debtor’s tax refunds.4
The Court scheduled another hearing for February 4, 2026, and directed
the Debtor and any parties in interest to file memoranda addressing the
Court’s jurisdiction to grant the relief requested given the Eleventh Circuit’s
million through Medicare, Medicaid, the Children’s Health Insurance Program, and the
Health Insurance Marketplace. 	About Us, CMS.gov, https://www.cms.gov/about-cms (last
visited Apr. 6, 2026). First Coast Service Options, Inc. is a Medicare administrative
contractor who performs some day-to-day administrative duties on behalf of CMS as provided
in 42 U.S.C. § 1395kk-1. Doc. No. 40, at 2. A “medicare administrative contractor” is an
organization with a contract to perform administrative duties on behalf of CMS. 42 U.S.C.
§ 1395kk-1(a)(3)(A). The Motion seeks relief against the Department of Health and Human
Services, the Centers for Medicare & Medicaid Services, First Coast Service Options, Inc.,
and “any other Medicare Administrative Contractor who may become obligated to reimburse
the Debtor during the pendency of the case.” Doc. No. 10, at 1. But CMS is “the real party of
interest in any litigation involving the administration of the Medicare program.” 42 C.F.R.
§ 421.5(b).
3 Doc. No. 10, at 1.
4 Interim Order Granting, In Part, Debtor’s Emergency Motion to Enforce the Automatic Stay
and Continuing Hearing on Motion (Doc. No. 31).
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decision in In re Bayou Shores SNF, LLC.5 At the conclusion of the hearing on
February 4, 	2026, 	the 	Court 	authorized 	the 	Debtor 	and 	CMS 	to 	file
declarations, following which the Court would consider the matter.6
For the following reasons, the Court concludes the automatic stay does
not apply to CMS’s past or future exercise of its right of recoupment. Still, the
automatic stay enjoins CMS, the Treasury, and CBE Group from any act to
collect 	the 	alleged 	Medicare 	overpayments 	from 	property 	of 	the 	estate,
including any non-Medicare debt owed to the Debtor. 	These are the Court’s
findings of fact and conclusions of law under Federal Rule of Bankruptcy
Procedure 7052, made applicable to this contested matter by Federal Rules of
Bankruptcy Procedure 4001 and 9014.
I. Jurisdiction
Despite 42 U.S.C. § 405(h), the Court has jurisdiction to hear this
contested matter under 28 U.S.C. §§ 1334 and 157. Section 405(h) of Title 42,
made 	applicable 	to 	Medicare 	claims 	by 	42 	U.S.C. 	§ 1395ii, 	“bars 	§ 1334
5 In re Bayou Shores SNF, LLC, 828 F.3d 1297 (11th Cir. 2016). In response to the Court’s
request, on January 30, 2026, the Debtor filed its Supplemental Memorandum of Law in
Support of Emergency Motion to Enforce the Automatic Stay (Doc. No. 37). And on February
2, 2026, CMS filed its Opposition Response to Debtor’s Emergency Motion to Enforce the
Automatic Stay (Doc. No. 40).
6 The Debtor filed the Declaration of John Ebsworth in Support of Debtor’s Emergency Motion
to Enforce the Automatic Stay (Doc. No. 52) on February 13, 2026, and Debtor’s Second
Supplemental Memorandum of Law in Support of Emergency Motion to Enforce the
Automatic 	Stay (Doc. No. 63) on February 25, 2026. CMS filed 	the United States’
Supplemental Response in Opposition to the Debtor’s Emergency Motion to Enforce the
Automatic Stay (Doc. No. 66) on February 25, 2026.
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jurisdiction over claims that ‘arise under [the Medicare Act].”7 However, the
dispute before this Court does not arise under the Medicare Act.8 Instead, the
Debtor’s claim that collection of Medicare overpayments from the Debtor
violates 	the 	automatic 	stay 	arises 	under 	the 	Bankruptcy 	Code.9 	And 	a
determination of the extent of the automatic stay is a core proceeding under
28 U.S.C. § 157(b)(2)(A) & (G).
II. Background
These facts are undisputed. The Debtor runs a mobile medical clinic that
provides wound care and podiatry services.10 It is enrolled as a participating
supplier in the Medicare program11 and supplies most of its services to
Medicare beneficiaries under Medicare Part B.12
Medicare is the federal health insurance program for the elderly and the
disabled.13 Medicare is “a massive, complex program embodied in hundreds of
7 In re Bayou Shores SNF, LLC, 828 F.3d at 1314.
8 The Respondents do not dispute this conclusion.
9 See Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1073 (3d Cir. 1992)
(holding the issue of whether the Secretary’s attempts to recover pre-petition overpayments
through post-petition withholding violates the automatic stay arises under the Bankruptcy
Code and not under the Medicare statute); Fischbach v. Ctrs. For Medicare & Medicaid Servs.
(In re Fischbach), No. 1:12-cv-00513-JMC, 2013 WL 1194850, at *2 (D.S.C. Mar. 22, 2013)
(concluding determinations as to whether recoupment is available to a Medicare contractor
arise under the Bankruptcy Code, rather than the Medicare Act).
10 Doc. No. 10, at 1; Doc. No. 52, at 1.
11 Doc. No. 10 at 5 (noting “The Debtor is an enrolled Medicare Part B provider”); Doc. No. 52,
at 3.
12 Doc. No. 40, at 3 (“The Debtor provides services under Part B of the Medicare program”);
Doc. No. 52, at 2 (“Approximately 92% of the Debtor’s revenues are generated from services
rendered to Medicare beneficiaries”).
13 Doc. No. 40, at 2.
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pages of statutes and thousands of pages of often interrelated regulations.”14
CMS administers the Medicare program.15
Before the petition date,16 CMS rendered three Medicare Part B claim
overpayment determinations as to the Debtor, 	asserting 	the Debtor was
overpaid almost $3.7 million for services rendered to six beneficiaries between
December 2022 and July 2024.17 The Debtor took administrative appeals of
these decisions.18 And the appeals remain unresolved as of the petition.19
In April 2025, while the administrative appeals were pending, CMS
began to recover the alleged Medicare overpayments using the mechanisms
provided by the Medicare regulations.20 Among other things, CMS adjusted
payments on the Debtor’s Medicare reimbursement claims for wound care and
podiatry services provided to other Medicare beneficiaries.21 Additionally, the
Treasury and CBE Group may have intercepted a federal tax refund owed to
the Debtor of $28,346.00.22 The Debtor estimates CMS owes the Debtor about
$2,000,000.00 on account of the intercepted federal tax refund and Medicare
14 Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 13, 120 S. Ct. 1084, 146 L.
Ed. 2d 1 (2000) (cleaned up).
15 Supra note 2; Doc. No. 10, at 4; Doc. No. 40, at 2.
16 Debtor filed its voluntary petition under chapter 11 of the Bankruptcy Code on January 19,
2026. The Debtor, which is a small business debtor, elected to proceed under Subchapter V
of Chapter 11.
17 Doc. No. 10, at 6-12.
18 Id. at 6.
19 Id.
20 Id. at 12.
21 Id.
22 Id. at 12-13.
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reimbursement claims for services provided to other Medicare beneficiaries.23
And this is where the parties’ positions diverge.
The Debtor contends any Medicare reimbursement claims for post-
petition services provided to other Medicare beneficiaries are property of the
estate and any post-petition adjustment of payment for post-petition services
unrelated to CMS’s disputed overpayment claims violates the automatic stay.24
CMS contends its adjustment of the Debtor’s Medicare payments on account
of, and in the amount of, the previous Medicare overpayments is recoupment,
which does not implicate the automatic stay.25
III. Analysis
The filing of a bankruptcy petition triggers the automatic stay under
Section 362(a) of the Bankruptcy Code,26 which suspends a broad range of
collection activity against a debtor and property of the estate.27 In Congress’
own words,
The 	automatic 	stay 	is 	one 	of 	the 	fundamental 	debtor 	protections
provided by bankruptcy laws. It gives the debtor a breathing spell from
his creditors. It stops all collection efforts, all harassment, and all
foreclosure actions. It permits the debtor to attempt a repayment or
23 Id. at 13.
24 Doc. No. 10, at 2.
25 Doc. No. 40, at 13.
26 11 U.S.C. § 101 - 1532 (the “Bankruptcy Code” or the “Code”). Unless otherwise
indicated, all statutory references are to the Bankruptcy Code.
27 See Carver v. Carver, 954 F.2d 1573, 1576 (11th Cir. 1992) (“The automatic stay provisions
of the Bankruptcy Code are quite broad”).
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reorganization plan, or simply to be relieved of the financial pressures
that drove him into bankruptcy.28
Here, the Debtor asserts CMS and the Treasury’s post-petition recovery
of the alleged Medicare overpayments violates the automatic stay because
“(A) the postpetition Medicare reimbursements to which the Debtor is or will
be entitled are property of the estate, (B) the police power exception under
§ 362(b)(4) is inapplicable, and (C) CMS’s conduct constitutes set off, not
recoupment.”29 CMS responds that “[t]he withholding of a supplier’s Medicare
payments 	on 	account 	of, 	and 	in 	the 	amount 	of, 	a 	previous 	Medicare
overpayment received by the supplier is well-recognized as recoupment” and
“the filing of a bankruptcy case does not affect the right of recoupment.”30
Thus, the key issue is whether CMS’ efforts to recover the alleged Medicare
overpayments it made to the Debtor by adjusting payment on the Debtor’s post-
petition Medicare claims are setoff, which is barred by the automatic stay,31 or
whether CMS’ actions are in the nature of recoupment, 	which does not
implicate the automatic stay.32
28 B.F. Goodrich Emps. Fed. Credit Union v. Patterson (In re Patterson), 967 F.2d 505, 512
n.9 (11th Cir. 1992) (quoting S. REP. 95-989, 54–55, 1978 U.S.C.C.A.N. 5787, 5840-41).
29 Doc. No. 10, at 14.
30 Doc. No. 40, at 13. CMS concedes that the Treasury’s collection efforts to offset the Debtor’s
tax refund do not qualify as recoupment. Doc. No. 40, at 1 n.1.
31 See 11 U.S.C. § 362(a)(7) (staying “the setoff of any debt owing to the debtor that arose
before the commencement of the case under this title against any claim against the debtor”).
32 3 COLLIER ON BANKRUPTCY ¶ 362.03 [9][b] (16th ed. 2026) (“Although setoff is clearly
stayed by section 362(a)(7), courts have held that recoupment is not stayed automatically”).
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1. Setoff and Recoupment
Setoff 	and 	recoupment 	are 	remedies 	seeking 	to 	resolve 	mutual
indebtedness. 	“Setoff 	involves 	mutual 	debts 	arising 	from 	unrelated
transactions and recoupment covers reciprocal obligations arising out of the
same transaction.”33
Setoff rights are generally preserved in bankruptcy but are subject to the
Bankruptcy Code’s requirements. Section 553, with some exceptions, allows a
creditor to setoff mutual debts where both the creditor’s obligation to the debtor
and the debtor’s obligation to the creditor arose before bankruptcy.34 But a
creditor must obtain relief from the automatic stay before exercising a right of
setoff.35 Application of the stay allows the court to determine the rights of the
parties before a debtor or the estate is deprived of its interest in the funds.36
Recoupment is the right to reduce the amount of a claim based on the
33 United Structures of Am., Inc. v. G.R.G. Eng'g, S.E., 9 F.3d 996, 998 (1st Cir. 1993) (quoting
1 David G. Epstein et al., Bankruptcy § 6–45, at 703 (1992)).
34 See 11 U.S.C. § 553 (providing, generally, that “this title does not affect any right of a
creditor to offset a mutual debt owing by such creditor to the debtor that arose before the
commencement of the case under this title against a claim of such creditor against the debtor
that arose before the commencement of the case”); In re Dillard Ford, Inc., 940 F.2d 1507,
1512 (11th Cir. 1991) (“A pre-petition setoff is valid as long as it complies with the state law
governing a creditor's right to setoff and with the requirements of section 553”).
35 B.F. Goodrich Emps. Fed. Credit Union v. Patterson (In re Patterson), 967 F.2d 505, 509
(11th Cir. 1992) (“In order to exercise a valid right of setoff, a creditor must move the court
for relief from the stay pursuant to the provisions in Section 362(d)”).
36 3 COLLIER ON BANKRUPTCY ¶ 362.03 (16th ed. 2026).
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claimant’s debt arising out of the same transaction.37 It is often applied when
the claims arise out of a contract or agreement that provides for estimated
payments subject to later adjustment.38 Recoupment is a “defensive matter
springing from the same transaction as the plaintiffs’ cause of action, which is
available only to reduce or satisfy plaintiffs’ claim.”39
While the Bankruptcy Code does not explicitly reference recoupment,
courts 	have 	long 	recognized 	recoupment 	in 	bankruptcy.40 	Unlike 	setoff,
recoupment is available post-petition even if the initial obligation and the later
right to reduce that obligation arise before the bankruptcy case is filed.41
Because recoupment is a defense to a debtor’s claim rather than a creditor’s
claim for payment, it does not violate the automatic stay.42 It calculates the
37 See generally Anes v. Dehart (In re Anes), 195 F.3d 177, 182 (3d Cir. 1999); Univ. Med. Ctr.
v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1079–80 (3d Cir. 1992); 5 COLLIER ON
BANKRUPTCY ¶ 553.10 (16th 2026).
38 See, e.g., Ashland Petroleum Co. v. Appel (In re B & L Oil Co.), 782 F.2d 155, 157 (10th Cir.
1986); Lee v. Schweiker, 739 F.2d 870, 875 (3d Cir. 1984).
39In re Sundale, Ltd., 499 F. App'x 887, 892 (11th Cir. 2012) (quoting Kellogg v. Fowler, White,
Burnett, Hurley, Banick & Strickroot, P.A., 807 So. 2d 669, 670 n.2 (Fla. 4th DCA. 2001))
(cleaned up). See also Beach v. Great W. Bank, 692 So. 2d 146, 150 (Fla. 1997) (noting that
recoupment may be asserted defensively where underlying claim is barred by statute of
limitations).
40 See, e.g., Reiter v. Cooper, 507 U.S. 258, 265 n.2, 113 S. Ct. 1213, 122 L. Ed. 2d 604 (1993);
In re B & L Oil Co., 782 F.2d at 157; Lee, 739 F.2d at 875 (“The justification for the
recoupment doctrine is that where the creditor's claim against the debtor arises from the
same transaction as the debtor's claim, it is essentially a defense to the debtor's claim against
the creditor rather than a mutual obligation, and application of the limitations on setoff in
bankruptcy would be inequitable”); 5 COLLIER ON BANKRUPTCY ¶ 553.10 (16th ed. 2026).
41 In re Anes, 195 F.3d at 182 (“The right of recoupment is not subject to the § 553 requirement
that both debts arise prior to the debtor's entry into bankruptcy”).
42 United States v. Consumer Health Servs. of Am., Inc., 108 F.3d 390, 395 (D.C. Cir. 1997);
3 COLLIER ON BANKRUPTCY ¶ 362.03 [8][a] (16th ed. 2026).
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correct obligation.43 The automatic stay does not apply “because, properly
construed, recoupment applies to define the obligation in question, rather than
establish or enforce a separate debt.”44 Put another way, a debtor has no right
to funds properly subject to recoupment, and the funds are not property of the
debtor’s estate protected by the automatic stay.45
The critical distinction between setoff and recoupment is whether the
mutual debts arise out of the same transaction.46 By example, setoff occurs
when A reduces the amount to be paid B for the purchase of a car by the
amount B owes A for the purchase of a bike. Because the mutual debts arise
from different transactions, setoff would be stayed by Section 362(a)(7) but
could be asserted in bankruptcy as authorized by Section 553.47 Recoupment
occurs when A reduces the amount to be paid B for the purchase of a car by the
amount A spent to bring the car into working condition. Because the mutual
debts arise from the same transaction, the pre-petition debt could be recouped
in bankruptcy without violating the automatic stay because it would be
43 Reiter, 507 U.S. at 265 n.2 (“Recoupment permits a determination of the ‘just and proper
liability on the main issue”); In re B & L Oil Co., 782 F.2d at 157 (typical recoupment in
bankruptcy allows calculation to “reduce the balance due”).
44 5 COLLIER ON BANKRUPTCY ¶ 553.10 (16th ed. 2026).
45 Matter of Kosadnar, 157 F.3d 1011, 1016 (5th Cir. 1998) (stay is not violated because debtor
has no interest in funds subject to recoupment).
46 See In re TLC Hosps., Inc., 224 F.3d 1008, 1011 (9th Cir. 2000) (noting the distinction
between setoff and recoupment is that “the claims or rights giving rise to recoupment must
arise from the same transaction or occurrence that gave rise to the liability sought to be
enforced by the bankruptcy estate”).
47 In re Holyoke Nursing Home, Inc., 372 F.3d 1, 3–4 (1st Cir. 2004) (citing United Structures
of America, Inc., 9 F.3d 996, 999–1001(1st Cir. 1993)).
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inequitable for B “to enjoy the benefits of that transaction without also meeting
its obligations.”48
2. The Medicare System
CMS’s actions, here, must be evaluated in the context of Medicare, the
complex federal health insurance system for the elderly and the disabled.
Medicare Part B is a voluntary program established under the Social Security
Amendments 	of 	196549 	that 	provides 	supplementary 	medical 	insurance
covering medical and health services.50 Medicare Part B beneficiaries are
financially responsible for health services covered by the program, and Part B
payment can be made directly to them.51 A health care practice, however, may
enroll in the Medicare program as a participating Medicare Part B supplier.52
(And the Debtor here did so.53)
48 Id. at 3 (citing Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1081 (3d
Cir. 1992). See also Matter of U.S. Abatement Corp., 79 F.3d 393, 399–400 (5th Cir. 1996)
(cost of subcontractor liens recouped from contract price as recoupment is designed to
equitably determine liability on claim).
49 Pub. L. No. 89-97, 79 Stat. 286 (1965), codified at 42 U.S.C. § 1395 - 1395mmm (the
“Medicare Act”).
50 See 42 U.S.C. § 1395j (establishing “a voluntary insurance program to provide medical
insurance benefits in accordance with the provisions of this part for aged and disabled
individuals who elect to enroll under such program”).
51 See generally 42 U.S.C. § 1395u(b)(6) & 1395u(h).
52 42 U.S.C. §§ 1395u(h), 1395x(d), & 1395cc. See United States v. Hagen, 60 F.4th 932, 937
(5th Cir. 2023) (supplier must be enrolled in Medicare to submit eligible claim). See also
United States v. Anderson, No. 24-10059, 2025 WL 26147, at *1 (11th Cir. Jan. 3, 2025) (per
curiam) (“To serve Medicare patients, a health care provider must enroll as a Medicare
provider”).
53 Doc. No. 52, ¶ 9.
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Enrollment gives a participating supplier the right to bill Medicare
directly54 and receive prompt payment for services rendered to Medicare
beneficiaries.55 In doing so, the supplier agrees to accept Medicare payments
as payment in full and not charge more amounts apart from applicable
deductibles and copayments.56 The amount to be paid under Part B for any
service is based on fee schedules issued by the Secretary of Health and Human
Services.57
When a Medicare claim is filed, the applicable contractor is required to
“[d]etermine if the items and services furnished are covered or otherwise
reimbursable under [Medicare]” and, if so, “[d]etermine any amounts payable
and make payment accordingly.”58 But Part B payments remain subject to
review, reopening, and recoupment of overpayments to ensure the integrity of
the Medicare program.59
54 42 U.S.C. §§ 1395u(b)(3)(B)(ii), 1395u(b)(6), & 1395u(h).
55 See 42 U.S.C. § 1395u(c) (requiring “clean claims” generally be paid within thirty days after
receipt of the claim).
56 See generally 42 U.S.C. §§ 1395u(b)(3)(B)(ii), 1395u(b)(6), & 1395u(h).
57 See 42 U.S.C. § 1395hh(a) (requiring the Secretary to prescribe regulations to carry out the
administration of the Medicare system); 42 C.F.R. § 405.501 (establishing that Medicare
Part B pays on the basis of “reasonable charge” and “reasonable costs,” as the case may be,
for covered services); 42 C.F.R. §§ 414.1 – 414.700 (establishing various schedules for
Medicare Part B payments).
58 42 C.F.R. § 405.920.
59 See, e.g., 42 U.S.C. § 1395ff(b)(1)(G) (“The Secretary may reopen or revise any initial
determination or reconsidered determination described in this subsection under guidelines
established by the Secretary in regulations”); 42 U.S.C. § 1395ddd (establishing Medicare
Integrity 	Program 	charged 	with 	determining 	and 	recovering 	overpayments);
42 C.F.R. § 405.371 (authorizing CMS to suspend, offset, or recoup Medicare payments after
overpayment decision is made); 42 C.F.R. § 405.980 (establishing procedures for reopening
initial determinations, redeterminations, reconsiderations, decisions, and reviews).
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An initial determination may be reopened by the contractor within four
years for good cause or within one year for any reason.60 “A reopening is a
remedial action taken to change a binding determination or decision that
resulted in either an overpayment or underpayment, even though the binding
determination or decision may have been correct at the time it was made based
on the evidence of record.”61 “The contractor’s [ ] decision on whether to reopen
is binding and not subject to appeal.”62
After reopening of an initial determination, the contractor may conduct
a post-payment review that can result in “either no change to the initial
determination or a revised determination.”63 When the reopening results in a
revised determination, the contractor must give the supplier notice of its
revised determination.64 Unless a written request for a redetermination is
accepted and processed under Medicare regulations, a revised determination
binds all parties.65
3. Medicare Overpayments
The recovery of Medicare overpayments is central to the integrity of the
Medicare system. Overpayments are “funds that a person receives or retains
60 42 C.F.R. § 405.980(b)(1) & (2).
61 42 C.F.R. § 405.980(a)(1).
62 42 C.F.R. § 405.980(a)(5).
63 42 C.F.R. § 405.929(d).
64 42 C.F.R. § 405.982(a).
65 42 C.F.R. § 405.984(a).
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under [Medicare] to which the person, after applicable reconciliation, is not
entitled.”66 	CMS 	must 	recover 	overpayments.67 	When 	determined 	that 	a
Medicare 	supplier 	received 	an 	overpayment, 	the 	contractor 	starts 	the
overpayment 	recovery 	process 	by 	sending 	a 	demand 	letter 	requiring
repayment.68 	If 	a 	supplier 	disagrees 	with 	an 	overpayment 	decision, 	the
supplier can request an appeal. 69
Unless a supplier voluntarily repays an overpayment, the contractor
may recover the overpayment by recouping the payment against present or
future Medicare payments.70 A contractor may begin recoupment on the forty-
66 42 U.S.C. §§ 1320a-7k(d)(4)(B).
67 See generally 42 U.S.C. § 1320a-7k(d)(1). See also Ctrs. for Medicare & Medicaid Servs.,
Medicare Overpayments, MLN006379 (July 2025),
https://www.cms.gov/files/document/medicare-overpayments.pdf (“Laws and regulations
require [CMS] to recover overpayments”).
68 Id.
69 Medicare Part A and Part B have five appeal levels:
1. 	Redetermination occurs after the initial Part 	A and 	Part 	B claims
determination. A MAC reexamines the claim and supporting documentation.
A MAC employee not involved in the initial determination makes the
redetermination.
2. Reconsideration by a qualified independent contractor.
3. Hearing by an administrative law judge or review by an attorney adjudicator
at the Office of Medicare Hearings and Appeals.
4. Review by the Medicare Appeals Council.
5. Judicial Review in U.S. District Court.
Ctrs. for Medicare & Medicaid Servs., Medicare Overpayments, MLN006379 (July 2025),
https://www.cms.gov/files/document/medicare-overpayments.pdf.
70 42 C.F.R. § 405.371(a)(3). Medicare regulations define “recoupment” as “[t]he recovery by
Medicare of any outstanding Medicare debt by reducing present or future Medicare payments
and applying the amount withheld to the indebtedness.” 42 C.F.R. § 405.370(a) (emphasis
supplied). In contrast, for purposes of Medicare, “offset” is defined as “The recovery by
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first 	day 	after 	the 	initial 	overpayment 	demand, 	except 	that 	“Congress
prohibited [contractors] from recouping payments during the first two stages
of administrative review.”71 But if a provider is still found to have been
overpaid after these two appeals, recoupment may be reinitiated or resumed
after action on the second level appeal.72
And 	suppliers 	know 	Medicare 	Part 	B 	payments 	may 	be 	reviewed,
reopened, and recouped. A supplier enrolling in Medicare certifies that the
supplier is aware of, and agrees to abide by, all applicable laws, regulations,
and program instructions.73 This is in the Medicare Enrollment Application,
Form CMS-855B.74 In submitting an application, a supplier certifies that
payment of a claim is conditioned on compliance with Medicare.75 More
important, a supplier acknowledges “that any existing or future overpayment
Medicare of a non-Medicare debt by reducing present or future Medicare payments and
applying the amount withheld to the indebtedness.” Id. (emphasis supplied).
71 Sahara Health Care, Inc. v. Azar, 975 F.3d 523, 527 (5th Cir. 2020) (citing 42 U.S.C.
§ 1395ff(f)(2)(A). See also 42 C.F.R. § 405.379(d)(1) (requiring that a Medicare contractor
cease recoupment “upon receipt of a timely and valid request for a redetermination of an
overpayment”).
72 See 42 C.F.R. § 405.379(d)(4)-(d)(5) (providing that “[t]he contractor may initiate or resume
recoupment following action [on the second level appeal]” and recoupment remains in effect
even if “the provider or supplier subsequently appeals the overpayment to the ALJ, the
Medicare Appeals Council, or Federal court”).
73 See 42 C.F.R. § 424.510(d)(3) (“The certification statement found on the enrollment
application . . . attests that the information submitted is accurate and that the provider or
supplier is aware of, and abides by, all applicable statutes, regulations, and program
instructions” (emphasis supplied). See also United States v. Hagen, 60 F.4th 932, 937 (5th
Cir. 2023) (“To enroll in Medicare, a supplier must agree to comply with pertinent laws and
regulations”).
74 Doc. No. 40, Ex. A (Medicare Enrollment Application).
75 Id. at Section 15A, Certification Statement, ¶¶ 3, 5. See also 42 U.S.C. § 1395gg(b)(1); 42
U.S.C. § 1395ddd(b)(3).
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made to the supplier by the Medicare program may be recouped by Medicare
through the withholding of future payments.”76 The certification therefore
requires the participating supplier to acknowledge the provisional nature of
Medicare Part B payments.
Under the Medicare payment system, participating Medicare Part B
suppliers are promptly paid for their services, but the prompt payment is made
in reliance on accurate claim submissions.77 And the size and complexity of the
Medicare program requires subsequent review and adjustments of payments
to ensure the integrity of the system.78 Thus, the Medicare payment system
anticipates 	estimated 	payment 	subject 	to 	later 	adjustment 	such 	that
recoupment of overpayments is central to its operations.79
76 See Doc. No. 40, Ex. A (Medicare Enrollment Application).
77 See United States v. Moss, 34 F.4th 1176, 1181 (11th Cir. 2022) (recognizing Medicare’s
reliance on accurate claim submission).
78 MedEnvios Healthcare, Inc. v. Becerra, 725 F. Supp. 3d 1343, 1346 (S.D. Fla. 2024) (“The
Department through CMS and its contractors relies on post-payment audits to identify
problems with Medicare claims made by healthcare providers and suppliers because
prepayment review of the over 1 billion claims received annually would be untenable”). See
42 U.S.C. § 1395ddd(b)(3).
79 See Gulfcoast Med. Supply, Inc. v. Sec'y, Dep't of Health & Hum. Servs., 468 F.3d 1347,
1349 (11th Cir. 2006) (noting that payments are typically authorized on receipt absent
glaring irregularities and that payment may be suspended or recouped when overpayment is
discovered); Guidry v. Centers for Medicare & Medicaid Servs., No. 2:21-CV-769-SPC-NPM,
2022 WL 992248, at *2 (M.D. Fla. Apr. 1, 2022) (“Recoupment is how the federal government
accounts for overpayments of Medicare funds”). See also Alpha Home Health Sols., LLC v.
Sec'y of United States Dep't of Health & Hum. Servs., 340 F. Supp. 3d 1291, 1303 (M.D. Fla.
2018) (“The statute defines the entitlement to payment; that is, the property interest, and
here the statute clearly states that payments shall be made ‘with necessary adjustments on
account of previously made overpayments.’ Thus, the health care provider understands that
payments are made “‘prior to audit,’ meaning a subsequent audit may result in recoupment
by the Secretary”).
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4. Recoupment of Medicare Overpayments in Bankruptcy
Here, CMS asserts the Medicare laws require that the overpayment be
“withheld from future Medicare claim payments to the supplier.”80 CMS argues
“[t]his adjustment process is expressly designated as ‘recoupment’ in the
Medicare statute, see, e.g., 42 U.S.C. § 1395gg, 42 U.S.C. § 1395ddd(f)(2), and
in the Medicare regulations, see 42 C.F.R. § 405.370.”81 CMS also claims it has
a common law right to recoup overpayments.82
CMS 	is 	correct 	that 	it 	generally 	has 	a 	right 	to 	recoup 	Medicare
overpayments. 	The 	Medicare 	Act 	lets 	CMS 	recoup 	Medicare 	Part B
overpayments against present or future Medicare payments.83 CMS also can
recoup under the doctrine of equitable recoupment, which applies when both
CMS’s claims and the debtor’s claims arise out of the same transaction.84 But
80 Doc. No. 40, at 7.
81 Id.
82 Id. at 8.
83 See 42 U.S.C. § 1395ddd(b)(3) (authorizing contractors in the Medicare Integrity to
Program to recover “payments that should not have been made” by setoff or recoupment); 42
U.S.C. § 1395hh(a) (requiring the Secretary to prescribe regulations to carry out the
administration of the Medicare system); 42 C.F.R. § 405.371(a)(3) (providing that Medicare
payments to providers and suppliers may be “offset or recouped, in whole or in part, by a
Medicare contractor if the Medicare contractor or CMS has determined that the provider or
supplier to whom payments are to be made has been overpaid”). See also Mount Sinai Hosp.
of Greater Miami, Inc. v. Weinberger, 517 F.2d 329, 338–39 (5th Cir. 1975) (noting that the
Medicare Act recognizes the Secretary’s right to recoupment); Szekely v. Fla. Med. Ass'n, 517
F.2d 345, 348–49 (5th Cir. 1975) (“In Mount Sinai we hold that the Act not only does not
abrogate the common law recoupment right with regard to coverage overpayments but that
it specifically recognizes such recoupment in § 1395gg”). Decisions rendered by the former
Fifth Circuit before the close of business on September 30, 1981, are binding in the Eleventh
Circuit. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. 1981).
84 See Fla. Med. Ctr. of Clearwater, Inc. v. Sebelius, 614 F.3d 1276, 1280 (11th Cir. 2010) (“The
Secretary has a common law right to recoup overpayments from Medicare Part B providers”).
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focusing on whether both debts “arise out of a single integrated transaction,”
courts are divided as to the circumstances in which CMS may recoup in
bankruptcy.85
The Third Circuit does not allow Medicare recoupment in bankruptcy.86
In University Medical Center v. Sullivan, the Court rejected the idea that “a
mere logical relationship” is enough to conclude two claims arise from the same
transaction 	for 	equitable 	recoupment.87 	It 	applied 	a 	strict 	“integrated
transaction” test requiring that both debts “arise out of a single integrated
transaction so that it would be inequitable for the debtor to enjoy the benefits
of that transaction without also meeting its obligations.”88 Applying this test,
the Third Circuit decided, as the Debtor advocates here, that each audit year
is discernible from the next for recoupment and that the debtor’s post-petition
services in 1988 were not the same transaction that began in 1985.89
See also United States v. Consumer Health Servs. of Am., Inc., 108 F.3d 390, 395 (D.C. Cir.
1997) (noting the doctrine of equitable recoupment “exempts a debt from the automatic stay
when the debt is inextricably tied up in the post-petition claim”); Ashland Petroleum Co. v.
Appel (In re B & L Oil Co.), 782 F.2d 155, 158-59 (10th Cir. 1986) (stating where unjust
enrichment occurs, bankruptcy courts apply recoupment as an equitable doctrine).
85 See, e.g., In re Holyoke Nursing Home, Inc., 372 F.3d 1, 3–4 (1st Cir. 2004); In re TLC
Hosps., Inc., 224 F.3d 1008, 1011 (9th Cir. 2000); Consumer Health Services of America, Inc.,
108 F.3d at 395; Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1081 (3d
Cir. 1992). See also 5 COLLIER ON BANKRUPTCY ¶ 553.10 (16th 2026).
86 In re University Medical Center, 973 F.2d at 1081 (“we find that the ongoing relationship
that exists between a Medicare provider and HHS is not sufficient to support the conclusion
that Medicare overpayments . . . arise from the same transaction, for the purposes of
equitable recoupment”).
87 Id. at 1081.
88 Id. at 1081.
89 Id. at 1081–82.
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But other circuits allow Medicare recoupment in bankruptcy. In U.S. v.
Consumer Health Services of America, Inc., the United States sought authority
to 	recoup 	Medicare 	Part 	A 	overpayments 	from 	a 	Medicare 	provider 	in
bankruptcy. 	The 	bankruptcy 	court 	denied 	recoupment 	relying 	on 	In 	re
University Medical Center.90 But the D.C. Circuit reversed, applying the same
“integrated transaction” test used by the Third Circuit to come to the opposite
conclusion.91 There, the Court disagreed that Medicare’s audit procedure
should be used to distinguish transactions.92 Instead, the Court focused on the
language of the Medicare Act itself—
Since [the Medicare Act] requires the Secretary to take into account pre-
petition overpayments in order to calculate a post-petition claim . . .
Congress rather clearly indicated that it wanted a provider’s stream of
services to be considered one transaction for purposes of any claim the
government would have against the provider.93
The D.C. Circuit concluded that the Medicare payment system represents a
single transaction supporting the government’s recoupment claim whether
analyzed as statutory or equitable recoupment.94 And the First and the Ninth
Circuits have reached the same conclusion.95
90 Consumer Health Services of America, Inc., 108 F.3d at 393.
91 Id. at 395 (noting that Consumer's claim for post-petition services and the pre-petition
overpayments qualify as a single transaction “[e]ven under the Third Circuit’s stricter
standard”).
92 Id.
93 Id.
94 Id. at 394-395.
95 See, e.g., In re Holyoke Nursing Home, Inc., 372 F.3d 1, 4 (1st Cir. 2004); In re Slater Health
Ctr., Inc., 398 F.3d 98, 103 (1st Cir. 2005); In re TLC Hosps., Inc., 224 F.3d 1008, 1013-14
(9th Cir. 2000).
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In In re TLC Hospitals, the Ninth Circuit considered whether Medicare
Part 	A 	overpayments 	could 	be 	recouped 	from 	a 	debtor’s 	post-petition
underpayments.96 There, the bankruptcy court determined Section 553 did not
permit setoffs “across the petition” and did not allow Medicare to set-off its pre-
petition overpayments against post-petition underpayments.97 But the district
court reversed, concluding Medicare overpayments could be recouped both on
the equitable doctrine of recoupment and on a statutory construction of the
Medicare 	Act.98 Following 	circuit 	precedent, 	the 	Ninth 	Circuit applied a
“logical relationship test,” where “‘transaction” is a word of flexible meaning.99
It may comprehend many occurrences, depending not so much upon the
immediateness of their connection as upon their logical relationship.”100 After
concluding that the Medicare reimbursement adjustment process is a single
transaction, the Court allowed CMS to recoup prior years’ overpayments by
withholding current reimbursements from the debtor.101
In In re Holyoke Nursing Home, Inc.,102 the First Circuit followed the
Ninth 	and 	D.C. 	Circuits. 	There, 	the 	debtor 	sought 	to 	avoid 	a 	Medicare
96 In re TLC Hosps., Inc., 224 F.3d at 1010.
97 Id.
98 Id.
99 Id. at 1014 (citing Newbery Corp. v. Fireman’s Fund Ins. Co., 95 F.3d 1392, 1402 (9th Cir.
1996).
100 Id. at 1014 (quoting Moore v. New York Cotton Exch., 270 U.S. 593, 610, 46 S. Ct. 367, 371,
70 L. Ed. 750 (1926)).
101 Id. at 1013–14 (“holding that HHS’s overpayments 	and subsequent post-petition
underpayments were part of the same transaction”).
102 In re Holyoke Nursing Home, Inc., 372 F.3d 1 (1st Cir. 2004).
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contractor’s pre-petition deductions as voidable preferential transfers, and the
contractor’s 	post-petition 	deductions 	as 	unauthorized 	offsets.103 	But 	the
bankruptcy court allowed the government to recoup the alleged Medicare
Part A 	overpayments, 	finding 	the 	government’s 	recoupment 	of 	Medicare
Part A 	overpayments 	were 	not 	preferential 	transfers 	or 	unauthorized
offsets.104 The Holyoke court affirmed the bankruptcy court’s grant of summary
judgment for the government, concluding that the contractual relationship
between 	Medicare 	and 	the 	provider 	was 	“one, 	ongoing, 	integrated
transaction.”105
The 	Eleventh 	Circuit 	has 	not 	ruled 	on 	recoupment 	of 	Medicare
overpayments in bankruptcy or adopted either theory. Still, this Court agrees
with CMS and the First, Ninth, and D.C. Circuits that CMS’s efforts to recover
the alleged Medicare overpayment by adjusting payments on post-petition
Medicare claims is recoupment that does not implicate the automatic stay.
Whether statutory or equitable recoupment, the Medicare payment system is
a single integrated transaction where suppliers and contractors are “constantly
balancing payments made and readjustments for over and underpayments.”106
103 Id. at 3.
104 Id.
105 Id. at 4.
106 In re Fischbach, No. 1:12-cv-00513-JMC, 2013 WL 1194850, at *5 (D.S.C. Mar. 22, 2013)
(same).
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The Medicare laws expressly and implicitly give CMS the right to recoup
overpayments from future Medicare claims. The Medicare Act establishes the
Medicare Integrity Program to, among other things, “recover [] payments that
should not have been made”107 and designates recoupment as one of the
available means of recovery.108 Likewise, the Medicare regulations expressly
authorize 	Medicare 	Part 	B 	payments 	to 	providers 	and 	suppliers 	to 	be
“recouped, in whole or in part, by a Medicare contractor if the Medicare
contractor or CMS has determined that the provider or supplier to whom
payments 	are 	to 	be 	made 	has 	been 	overpaid.”109 	And 	the 	regulations
specifically 	distinguish 	recoupment 	from 	setoff, 	limiting 	“recoupment” 	to
recovery of Medicare debts from present or future Medicare payments.110
These statutes and regulations clarify that the amount payable on post-
petition claims owing to the Debtor must be adjusted for the alleged prior
overpayments.
And 	the 	pre-petition 	overpayments 	by 	Medicare 	and 	post-petition
services provided by the Debtor are parts of a single transaction. Whether
evaluating statutory recoupment under the Medicare Act or common law or
107 42 U.S.C. § 1395ddd(b)(3).
108 See, e.g., 42 U.S.C. § 1395gg, & 42 U.S.C. § 1395ddd(f)(2). See also Microsoft Corp. v. i4i
Ltd. P'ship, 564 U.S. 91, 101, 131 S. Ct. 2238, 2245, 180 L. Ed. 2d 131 (2011) (reaffirming
that where Congress uses a common-law term in a statute, the court must assume the term
comes with a common law meaning, absent anything pointing another way).
109 42 C.F.R. § 405.371(a)(3).
110 42 C.F.R. § 405.370(a).
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equitable recoupment, the Court must consider how best to determine and
define a “single transaction,” an issue on which the circuit courts are split.111
The 	Debtor 	here 	argues 	that 	the 	withholding 	by 	CMS 	cannot 	be
recoupment because the reimbursements withheld do not correspond with the
services provided and do not arise from the “same transaction or occurrence.”112
But that the Debtor provides services to different patients at different times
does not destroy their logical relationship or indicate that they relate to
separate transactions. Instead, the “transaction” is the reimbursement system
established by Medicare laws.
Enrollment as a participating Part B supplier confers the right to bill
Medicare directly and receive prompt payment. But enrollment also requires a
supplier to abide by Medicare laws and accept provisional reimbursements. A
Medicare Part B supplier’s claim that has no glaring irregularities is typically
paid immediately on its receipt.113 Post-payment audits are then conducted to
verify that payment was proper, and claims are adjusted if an overpayment is
identified.114 Once an overpayment is identified, it may be recouped from
111 Compare, e.g., United States v. Consumer Health Servs. of Am., Inc., 108 F.3d 390, 395
(D.C. Cir. 1997), with Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065,
1080–81 (3d Cir. 1992).
112 Doc. No. 63 at 5-7.
113 Fla. Med. Ctr. of Clearwater, Inc. v. Sebelius, 614 F.3d 1276, 1279 n.4 (11th Cir. 2010)
(noting payment on claims are typically authorized immediately on receipt of claims for
reasons 	of 	administrative 	efficiency, 	“so 	long 	as 	the 	claims 	do 	not 	contain 	glaring
irregularities”).
114 42 U.S.C. § 1395u; 42 C.F.R. § 421.200(d). See also MedEnvios Healthcare, Inc. v. Becerra,
725 F. Supp. 3d 1343, 1346 (S.D. Fla. 2024) (noting the Medicare program “relies on post-
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future payment.115 Whether applying the logical relationship test or the single
integrated 	transaction 	standard 	used 	by 	the 	Third 	Circuit, 	the 	Court’s
conclusion is the same – this ongoing payment and reconciliation system is one
“transaction” for recoupment.
The reality of the Medicare payment system is that patients and doctors
come and go. And overpayments are rarely discovered until long after the
services were rendered. Adopting the Debtor’s interpretation of “transaction”
– that the creditor’s claim must arise of the identical transaction as the debtor’s
– upends the structure relied on by all Medicare providers. Instead, the Court
agrees with the decision in In re Advanced Tissue, LLC that recoupment is
“woven into the very fabric of the Medicare payment system.”116 Thus, this
system of payments and later adjustments must be viewed as 	a single,
integrated transaction for recoupment in bankruptcy.
Likewise, equitable considerations support CMS’s right to recoup here.
It would be 	inequitable to allow the 	Debtor, here, to 	accrue 	more than
$3.7 Million in alleged Medicare overpayments, file for bankruptcy, and then
payment audits to identify problems with Medicare claims made by healthcare providers and
suppliers because prepayment review of the over 1 billion claims received annually would be
untenable”).
115 42 C.F.R. § 405.371(a). See also In re Advanced Tissue, LLC, 649 B.R. 326, 330 (Bankr.
E.D. Ark. 2023) (observing “the automatic stay does not bar a creditor from exercising its
right of recoupment because ‘recoupment is in the nature of a right to reduce the amount of
a claim’”).
116 In re Advanced Tissue, LLC, 649 B.R. at 332-34.
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continue to receive full reimbursement for new claims.117 The Debtor received
from Medicare the benefit of prompt payment on its claims, and did so knowing
the claims might be reviewed, reopened, and payment readjusted if the claims
were improperly paid. It would be unfair for the Debtor to enjoy the benefits of
prompt payment under the Medicare system without meeting its obligations,
that is, being subject to recoupment in the event of overpayment.
IV. 	Conclusion
Congress 	intended 	the 	Medicare 	payment 	system 	to 	operate 	as 	a
continuous 	stream 	that 	includes 	adjustments 	for 	overpayments.118 	And
recoupment is imbedded in the system as the method of determining the actual
amounts owed.119 The Court thus finds that CMS’s overpayment claim against
the Debtor arise arises from the same integrated transaction as the Debtor’s
present and future claims against CMS as a participating Medicare Part B
supplier.
117 See In re Fischbach, 2013 WL 1194850, at *6 (concluding “[i]t would be inequitable to allow
Fischbach to accrue more than $400,000 in Medicare reimbursement overpayments, file for
bankruptcy, and then continue to receive full Medicare reimbursement for the new
reimbursement claims he submits”).
118 See In re Holyoke Nursing Home, Inc., 372 F.3d 1, 5 (5th Cir. 2004) (“Both the Medicare
statute and the provider agreement—by contemplating HCFA's payment of estimated costs,
corrective audits, and retroactive adjustments or partial adjustments for overpayments and
underpayments in determining HCFA's net liability for current cost-year services—strongly
indicate that the contractual relationship between HCFA and Holyoke constitutes one,
ongoing, integrated transaction”); United States v. Consumer Health Servs. of Am., Inc., 108
F.3d 390, 395 (D.C. Cir. 1997) (“Congress rather clearly indicated that it wanted a provider's
stream of services to be considered one transaction for purposes of any claim the government
would have against the provider”).
119 Supra notes 94, 101 & 105.
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The automatic stay does not apply to CMS’s past or future exercise of its
right of recoupment. The Medicare overpayments made to the Debtor may be
recouped by CMS from Medicare payments owing to the Debtor by adjusting
on account of previously made overpayments. And CMS may continue to
recoup against the Debtor’s Medicare reimbursements so much as is necessary
to recover the overpayments made to the Debtor.
Accordingly, it is
ORDERED that
1. 	The Debtor’s Emergency Motion to Enforce the Automatic Stay is
GRANTED IN PART and DENIED IN PART.
2. 	The automatic stay imposed by 11 U.S.C. § 362(a) enjoins CMS,
the 	Treasury, 	and 	CBE 	Group 	from 	collection 	of 	the 	Debtor’s 	Medicare
overpayments from property of the estate, including federal tax refunds and
any other non-Medicare debt owed to the Debtor.
3. 	The automatic stay imposed by 11 U.S.C. § 362(a) does not enjoin
the Department of Health and Human Service, the Centers for Medicare and
Medicaid Services, First Coast Service Options, Inc., or any other Medicare
administrative 	contractor 	required 	to 	reimburse 	the 	Debtor 	during 	the
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pendency of the case from recouping the Debtor’s Medicare overpayments from
the Debtor’s Medicare reimbursements.
Assistant United States Attorney Christopher Emden is directed to serve a
copy of this Order on interested parties who do not receive service by CM/ECF
and to file a proof of service within three days of entry of this Order.
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