Sullivan

The Secretary of Health and Human Services appeals the judgment of the Bankruptcy Appellate Panel reversing the bankruptcy court’s decision in an adversary proceeding brought by debtor Town & Country Home Nursing Services, Inc. (“T & C”). Because we agree with the BAP that the government waived sovereign immunity under 11 U.S.C. § 106 (a) by offsetting against T & C’s assets after T & C had filed a Chapter 11 petition, we affirm.

FACTS AND PROCEEDINGS BELOW

A. Statutory and Regulatory Background

T & C is a provider of in-home nursing services under the Medicare Act, 42 U.S.C. §§ 1395 -1395ccc. Under the Act, health care providers such as T & C are reimbursed by the government, usually through fiscal intermediaries such as the Blue Cross Association or subcontractors such as Blue *1148 Cross of California (“B.C.C.”)- Congress authorizes the Secretary of Health and Human Services (“the Secretary”) to reimburse providers on an interim provisional basis so that any errors resulting in overpayment or underpayment may be corrected. See 42 U.S.C. § 1395g; 42 C.F.R. § 413.60 (1990).

The intermediary reviews cost reports submitted by the provider and conducts audits when necessary. 42…