Erin Masin, the Patient Care Ombudsman: Taking Cost Out of Patient Care Considerations

• Jurisdiction: United States,Federal
• Publication year: 2011
• Citation: Vol. 26 No. 1

THE PATIENT CARE OMBUDSMAN: TAKING COST OUT OF PATIENT CARE CONSIDERATIONS

INTRODUCTION

One topic sure to get a reaction from Americans is health care. Whether they are having problems with their health, with their health care provider, or think that there is a problem with the American health care system, Americans have something to say. Of particular concern to many is ensuring that they and their loved ones are protected from negligence or mistake while in the care of a health care professional. Stories of sponges left inside body cavities during surgery or of the abuse of elderly patients in nursing homes have sensitized the public to their own vulnerabilities at the hands of health care businesses ("HCBs"). Ideally, HCBs have the interests of the patient as their highest priority, but HCBs themselves are vulnerable to poor business practices and the vagaries of the market, sometimes becoming financially distressed and falling into bankruptcy.

Concern about the connection between health care costs and bankruptcy has been growing in recent years. So-called "medical bankruptcy" was even mentioned by both candidates during the 2008 presidential campaign.¹

Medical bankruptcy, however, has been gaining interest since at least 1998, when the Senate held hearings on the relationship between bankruptcy and HCBs.²Most notably, certain resolutions that were passed as a result of those Senate hearings became codified into the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA") Amendments.³

HEALTH CARE BUSINESSES UNDER BAPCPA

When an HCB becomes insolvent and declares bankruptcy, it is subject to certain sections of BAPCPA. The 2005 amendments added several provisions concerning HCBs, including a unique provision protecting patients.⁴One of the more controversial sections states:

If the debtor in a case under chapter 7, 9, or 11 is a health care business, the court shall order, not later than 30 days after the commencement of the case, the appointment of an ombudsman to monitor the quality of patient care and to represent the interests of the patients of the health care business unless the court finds that the appointment of such ombudsman is not necessary for the protection of patients under the specific facts of the case.⁵

Despite the fact that the statute requires appointment of a patient care ombudsman ("PCO") in order to protect patients and makes no mention of the associated cost, some courts have held that cost considerations may justify ignoring the statute's mandate.

Bankruptcy Courts have set out nine main criteria that may be used to evaluate whether the appointment of a PCO is unnecessary for the protection of patients: 1) the cause of the bankruptcy, 2) the presence and role of licensing or supervising entities, 3) the debtor's history of patient care, 4) the ability of the patients to protect their rights, 5) the level of dependency of the patients on the facility, 6) the likelihood of tension between the interests of the patients and the debtor, 7) the potential injury to the patients if the debtor drastically reduced its level of patient care, 8) the presence and sufficiency of internal safeguards to ensure appropriate levels of care, and 9) the impact of the cost of a PCO on the likelihood of a successful reorganization.⁶While there might be an indirect benefit to the patient in the event that the HCB successfully reorganizes and continues operation, the relationship between patient care and successful reorganization in the absence of a PCO is indirect and tenuous at best.

This Comment argues that cost should never be a factor when evaluating the necessity for appointment of a PCO because the PCO is appointed for the sole purpose of protecting patients. When analyzing the necessity of a PCO, the courts should abide by the language of the statute. Courts should confine their examinations exclusively to factors that relate to the past quality of patient care provided by the debtor HCB and the likelihood that a similar or improved level of care will continue throughout the bankruptcy proceedings.

This Comment presents its argument in four Parts. Part I discusses the genesis of the patient care ombudsman provision, the problems which prompted it, and the remaining issues. Part II examines the PCO statute. Part II.A presents a hypothetical situation involving an HCB in bankruptcy. Part II.B evaluates the statutory language creating the position, while Part II.C discusses the application of the statute in the courts and the judicial tension between the duty to protect the patient and to protect the estate for the benefit of creditors. Part III addresses cost concerns with the PCO. Part III.A discusses statutory mechanisms and common sense solutions to control PCO cost. Part III.B examines the actual cost of a PCO in a bankruptcy case. Part IV compares the loss-bearing capacities of patients and creditors in connection with the appointment of the PCO. The Conclusion provides a summary and a possible outcome to the hypothetical presented in Part I. Ultimately, this Comment concludes that a cost criterion should not be considered by courts when evaluating whether to appoint a PCO.

I. THE PATIENT CARE OMBUDSMAN: CONCEPTION

Financial stress of a health care business presents a special danger for patients. HCBs in dire financial straits often reduce trade with suppliers, such as medical supply companies and linens cleaners,⁷or fail to pay staff.⁸

Problems such as these can give rise to crises if an HCB is caught without crucial supplies or is understaffed when dealing with a patient emergency. It is easy to imagine a bankrupt HCB reducing the number of night nurses from three to two, or even one, per shift-a cause for concern if multiple patients have critical problems simultaneously. From the HCB's point of view, budget cuts are necessary to keep the business open to serve its patients. However, from the patient's point of view the HCB puts the patient's health in jeopardy when it lacks requisite staff or facilities as a result of the HCB's desire to save a relatively small amount of money.

While even under normal circumstances patients have problems with their health care facilities, when an HCB goes into bankruptcy, a special set of problems develops for patients. Patients are probably unaware of the HCB's bankruptcy, and they lack the knowledge to effectively deal with any problems that result.⁹Patients are likely unfamiliar with bankruptcy law, nor do they have the resources to litigate should any concerns arise.

The role of the PCO was conceived to address these concerns. The idea of the PCO had its genesis in the late-nineties in Senate hearings. During debate over amendments to the Bankruptcy Code, Senators Chuck Grassley (R-Ia.) and Robert Torricelli (D-N.J.) raised the question of a bankrupt HCB's responsibilities to patients.¹⁰The Senators were concerned because of a then- recent scandal involving a bankrupt Reseda, California nursing home found to have been endangering the lives of its patients.¹¹The Reseda nursing home filed for bankruptcy and a trustee took possession. At the time the trustee took over, the home was in bad shape: it was low on food; there were no clean linens other than what the staff themselves, who had not been recently paid, brought; and the equipment had been repossessed.¹²After financially struggling for a period in bankruptcy, the Reseda home suddenly, without notice, transferred its occupants to new nursing homes in the middle of the night, resulting in stress and trauma for those residents. One local editorial stated:

Everyone but the residents and their families, it seems, [was] notified of the impending crisis and closure. Everyone with a financial stake was given ample consideration-the bankruptcy lawyers, lender and trustees. . . . Meanwhile, no one apparently was aware of the situation at the Health Facilities Division of the Los Angeles County

Department of Health Services or the state Department of Health.¹³

Among those evacuated were a blind 85-year-old woman with diabetes, a

92-year-old woman who had broken her hip, and a 64-year-old man who had recently undergone heart surgery.¹⁴Senator Torricelli proposed a bill "for the appointment of an ombudsman to monitor and assure continued quality of the care being provided to patients. . . . [T]he bill would require a bankruptcy trustee to use best efforts to transfer patients to alternative providers when a health care business fails."¹⁵Senator Grassley commented that "[t]he bill will also make sure the health care businesses that liquidate under Chapter 7 don't just throw patients by the wayside in a rush to sell assets and pay creditors."¹⁶

Several arguments made before a Senate Judiciary subcommittee in 1998 described the need for a PCO and its benefits, both for the patients and for the debtor-in-possession ("DIP").¹⁷For the patients, a PCO would promote patients' rights and encourage estate administrators to consider the patients when proceeding with the bankruptcy case.¹⁸The appointment of the PCO would restore confidence to both the debtor and the public that the HCB is in compliance with the law and has a minimum quality of care for its patients.¹⁹

Lastly, the presence of a PCO would place evaluation of patient problems under the aegis of someone familiar with health care concerns. It is unlikely that a judge has enough expertise in the area of health care to assess the validity and seriousness of patient complaints.

These considerations were validated when the legislation introduced by Senator Grassley was codified in the 2005 BAPCPA Amendments.²⁰The role of the PCO is twofold: to monitor the quality of patient care²¹and to advocate for the patients in bankruptcy proceedings.²²In order to accomplish these goals, the PCO is required to interview patients and physicians, to submit a report every sixty days, and to report any serious matters to the bankruptcy court immediately.²³

Some might...