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American Medical Technologies Files Chapter 11 Due to Medicare Dispute

March 2012

Gordian Medical, Inc., which does business nationwide as American Medical Technologies, filed for chapter 11 protection on February 24, 2012, in the US Bankruptcy Court in Santa Ana, California.  Gordian, which provides wound-care dressings and supplies to more than 4,000 nursing homes, hospices, and other facilities in 49 states, was compelled to file for bankruptcy protection after Medicare stopped reimbursing it for its products.  Medicare took this action because it disputes Gordian’s right to bill separately for dressings related to gastronomy tubes.  Medicare provides more than 90% of Gordian’s reimbursements and approximately 40% of Medicare payments relate to the disputed category of dressings.  Gordian strongly disputes Medicare’s decision with regard to the disputed dressings and has previously litigated similar issues with success. 

On Friday, March 9, 2012, Bankruptcy Judge Mark S. Wallace signed an order approving a “standstill” stipulation between Medicare and Gordian, which provides that Medicare will (a) pay over $3 million owed to Gordian but previously withheld because of the ongoing dispute, (b) process approximately $20 million in prepetition invoices still unbilled by Gordian and only withhold payments related to the disputed gastronomy tube dressings, and (c) process all ongoing postpetition invoices and only withhold payments related to the disputed gastronomy tubes.  Gordian and the Centers for Medicaid and Medicare Services, which administers the Medicare program, will attempt to resolve the underlying issues within the one month provided by the standstill agreement.