Due to risks surrounding the vulnerability of patients, healthcare bankruptcies present federal, state and municipal agencies with a unique set of challenges and responsibilities, according to a December ABI Journal article.
“Healthcare bankruptcies are more than financial disputes; they impose life-and-death consequences on the public at large, whose interests are frequently not otherwise represented before the bankruptcy court,” writes Bradley D. Jones of Odin, Feldman & Pittleman in his article “The Government’s Perspective on Healthcare Bankruptcies.” “The U.S. Trustee and other state and federal entities typically take a more active posture in order to fill this void.”
Section 333 of the Bankruptcy Code requires the court to appoint a patient care ombudsman within 30 days of the commencement of the bankruptcy case unless the court determines that the appointment is not necessary for the protection of patients, according to Jones. The bankruptcy court still typically looks to the U.S. Trustee to provide its recommendations on whether the appointment is necessary.
“To aid its assessment, the U.S. Trustee typically will seek early information from the debtor regarding its healthcare facility,” Jones writes. “This information will include the services they provide, the history of their care, and any existing framework for supervising and protecting patient care.”
The U.S. Trustee will often also contact state regulatory agencies to gain their perspectives on the debtor’s facilities to gain an understanding of the findings in the public record, according to Jones. “While it can be difficult for U.S. Trustees, as non-healthcare professionals, to determine the seriousness of these issues, these records still provide a history of care issues,” Jones writes.
In exchange, state regulators may also benefit from the U.S. Trustee’s knowledge of bankruptcy law and procedure. “Particularly, if the facility is large or the community underserved, the state might have an interest in appearing in the case and presenting the bankruptcy court with its concerns regarding the bankruptcy and the facility’s future,” Jones writes.
Regarding the appointment of a patient care ombudsman, Jones thinks that it can be beneficial for debtors. “Not only does the ombudsman provide assurance to the court that a professional is monitoring patient care and representing an otherwise-unrepresented constituency in the bankruptcy case, but the ombudsman helps move the case forward by allowing the parties to move past potential care issues in order to focus on the substantive business problems that need to be addressed by the bankruptcy.”
He said that if the case is moving toward an asset sale, the existence of an ombudsman can give the buyer or secured lenders comfort and avoid or reduce due-diligence expenses.
“Ultimately, while there might be costs and burdens in ensuring that patient care is addressed, the sooner patient care issues are removed, the more the bankruptcy case will look like a typical one from both the government’s and practitioners’ perspectives,” according to Jones.
The American Bankruptcy Institute will be holding a special one-day program on January 17, 2019, at Georgetown University Law Center to examine how current challenges facing the healthcare industry will lead to future opportunities.
