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True Health Diagnostics Files for Chapter 11 Bankruptcy

NEW YORK — True Health Diagnostics on Tuesday filed for Chapter 11 bankruptcy protection, citing the suspension of its Medicare reimbursement payments by the Centers for Medicare and Medicaid Services.

The firm filed its petition for Chapter 11 in the US Bankruptcy Court for the District of Delaware. The Frisco, Texas-based company also submitted a complaint seeking to prevent the US Department of Health and Human Services from withholding its Medicare payments as it pursues Chapter 11 reorganization.

True Health was founded in 2014 to develop tests that were easier for both patients and physicians to interpret. In early 2018, the company — which had just launched a laboratory-developed hereditary cancer test called and a respiratory pathogen panel test — said it was planning to more than double its test menu during the coming year.

In its court filing, True Health alleged that CMS wrongfully suspended all of its Medicare reimbursements in mid-2017. While CMS reduced the suspension to 35 percent a month later, the "initial suspension caused an immediate and severe financial strain on True Health from which it has not recovered," the firm said in its lawsuit. A 100 percent suspension of reimbursements was again imposed last month, according to the company.

True Health said it has continued to provide healthcare services to Medicare beneficiaries despite the suspensions, which have sent it into "a financial tailspin," prompting the bankruptcy filing and lawsuit. 

True Health added that CMS recently issued a determination of Medicare overpayments to True Health, which it was unable to successfully appeal. A court order forcing a stay on CMS' suspension of Medicare payments is necessary if the company can restructure under Chapter 11 in order to remain a going concern, it added.