Kevin A. Spainhour, Statutory Quixotics: Tilting Against the Health Care Business Amendments to the Bankruptcy Code

• Jurisdiction: United States,Federal
• Publication year: 2011
• Citation: Vol. 24 No. 1

STATUTORY QUIXOTICS: TILTING AGAINST THE HEALTH CARE BUSINESS AMENDMENTS TO THE BANKRUPTCY CODE

INTRODUCTION

[B]ehold . . . there appears thirty or forty monstrous giants, with whom I mean to fight . . . .

What giants? [T]hose which appear there are no giants, but windmills . . . .

They are giants . . . I enter into cruel and unequal battle with them.¹

Ms. Smith fell outside her home injuring her leg. Her health care providers have filed for bankruptcy, affecting, to varying degrees, their ability to provide services to their patients. Ms. Smith's family decided to take her to a private care provider, Big Box Managed Care. At Big Box, Dr. Jones examined her and sent her to Exclusive Radiology, a referral-only provider of diagnostic radiology services. Exclusive performed routine X-rays on Ms. Smith. However, staffing reductions and failures to maintain its equipment, delayed Exclusive's diagnosis of the fracture in Ms. Smith's leg.

Ms. Smith returned to Dr. Jones at Big Box to have her leg cast. Due to its own staffing reductions, Big Box assigned an inexperienced orthopedic technician to apply Ms. Smith's cast. The technician misapplied the cast. Ms. Smith suffered a serious complication from a fractured femur and was admitted to Regional Health Public Hospital for surgery. Prior to her surgery, Regional's steam autoclave, which is used for sterilizing surgical instruments, malfunctioned due to poor maintenance, and this malfunction remained unnoticed until after Ms. Smith's procedure. Ms. Smith developed an infection in her leg, and it was subsequently amputated. Regional Health Hospital employed a Quality Assurance Nurse who reported the incident, under the terms of a mandatory reporting statute, to the State Department of Health and Human Services. The important question for Ms. Smith is: how will bankruptcy courts approach the problems she experienced in light of the recent

"health care business" changes to the Bankruptcy Code ("Code")?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") made, in part, changes to how courts approach bankruptcies involving health care businesses.²The Code defines a "health care business" as a public or private entity primarily engaged in providing facilities and services for "the diagnosis or treatment of injury, deformity, or disease and surgical, drug treatment, psychiatric, or obstetric care."³The definition itself gives rise to interesting questions for the courts,⁴as traditional notions of a health care business may not apply.⁵While the Code defines the term at some length, not all businesses that deliver health care to patients fit neatly within the Code's terms.⁶In the Ms. Smith hypothetical, Exclusive and Big Box may not fall within BAPCPA's health care business amendments to the Code⁷ because neither provides all of the services⁸within the Code's definition of a health care business. Therefore, bankruptcy courts would deny Ms. Smith the Code's protections in the cases pending against Exclusive and Big Box. However, Regional Health Hospital would fit within the Code's definition.⁹

Perhaps BAPCPA's most important health care related amendment, Sec. 333 made possible "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."¹⁰The appointment requires the ombudsman to monitor the quality of patient care and to report any findings to the court.¹¹Debate exists about what Congress intended when it sought to monitor the "quality of patient care."¹²The provision allows courts the discretion to forego the appointment of an ombudsman only where there is a finding that the appointment "is not necessary for the protection of patients under the specific facts of the case."¹³

However, Congress did not clearly indicate the degree of patient care hazard that triggers appointment.¹⁴Thus, the poor, and perhaps even negligent, quality of Ms. Smith's care may not rise to the level that would motivate a court to appoint an ombudsman.¹⁵

The patient care ombudsman provision, as well as its sister amendments,¹⁶diametrically oppose traditional bankruptcy foci.¹⁷Bankruptcy law traditionally seeks to convert and distribute a debtor's assets,¹⁸which the patient care ombudsman provision ignores.¹⁹Nevertheless, in recent cases involving the ombudsman provision and related amendments, courts found financial strain on the debtor's resources caused by the patient care ombudsman as a reason to decide against appointment.²⁰The legislative history from the 1998 act indicates that Congress knew of the conflict between the health care business bankruptcy reform provisions and traditional bankruptcy law.²¹With that knowledge, Congress did not mention the debtor's financial status in the patient care ombudsman provision.²²Despite Congress's lack of concern for the financial impact of the ombudsman, bankruptcy courts consider the debtor's financial status in making the ombudsman appointment.²³

Thus, Ms. Smith's health care providers would likely assert such an argument in opposition to an appointment of an ombudsman in their bankruptcy cases.

Congress also did not address with the BAPCPA Amendments the effect other regulatory measures should have on implementing the health care business amendments.²⁴These measures include internal mechanisms particular to the health care industry. Many health care businesses have their own quality assurance personnel who monitor the quality of patient care.²⁵

However, courts should consider whether these persons can serve as the ombudsman.²⁶State agencies also operate to regulate health care businesses. Courts should consider whether agencies can adequately monitor a bankrupt health care business and respond to patient issues.²⁷Because of the existence of both state and private regulatory measures, Ms. Smith's health care providers may argue that there are sufficient protections in place for patients.

Additionally, the Code requires that the ombudsman "represent the interests of the patients."²⁸Because neither the patients nor the ombudsman have a financial interest in the debtor, there is a question as to whether the ombudsman provision creates a right in patients "affected by the proceeding to appear and be heard."²⁹In this situation, courts should consider the possibility that patients, and not the debtor or the trustee, are in the better position to state the facts of the businesses' quality of care and whether their interests require representation.³⁰For Ms. Smith, intervention may allow her or her family to argue that the interests of patients are in danger.

Don Quixote's adventure of the windmills notably parallels attempts at interpreting and implementing statutes, including those of the Code. A starting point to avoid confusing giants from windmills comes from Judge Learned Hand, who "has vividly admonished us not to be caught in the trap of language which seems, literally, too broad or too narrow to accommodate the patent legislative purposes."³¹Given Judge Hand's admonishment, the giants in a statutory provision lie in between a construction that is overly-broad and a construction that is overly narrow. Confusion occurs when a construction is reached that fails to achieve the patent legislative purpose of a statute. Unfortunately, the failure to achieve the legislative purpose behind the "Health Care Business" Amendments to the Code results from both the language of the statutes and judicial misapplication or misapprehension.

Congress promulgated the patient care ombudsman provision to protect vulnerable patients from inequities that arise during the bankruptcy process. This Comment will, first, examine how courts have narrowly construed the relevant provisions to the detriment of the amendment's purpose. Second, the Comment will examine which factors courts consider when determining whether the ombudsman is necessary for the protection of patients under the specific facts of the case. Finally, the Comment will recommend an approach to the appointment of a patient care ombudsman that will honor Congress's patent legislative purpose. The analysis courts employ for the patient care ombudsman's appointment should begin with the premise that Congress intended the appointment as the default. Courts should forego the appointment only where the facts of the case ensure quality of care and protection of patient interests.

I. DEFINING "HEALTH CARE BUSINESS"

The Code's definition of "health care business" provides the first opportunity for inequality of protection among patients. The problem lies in the use of the term "general public" to define a "health care business".³²A health care business is one that "offer[s] to the general public facilities and services for" patient care.³³A narrow construction of "general public" would undermine patient protection.³⁴Congress could better serve patients and courts by providing a definition of "health care business" that specifically refers to patients or the class of patients Congress sought to protect.

Inequality may also occur when courts misunderstand the nature of a business.³⁵Congress provided, in Sec. 101(27A), qualifying factors for, and listed examples of, a "health care business."³⁶Courts who add factors not specifically stated within Sec. 101(27A), risk eliminating protections for patients of a business that would have otherwise qualified under the statute.³⁷One court's decision helps instruct on the problems presented in defining "general public."³⁸

A. General Public Defined

In re 7-Hills Radiology eliminates from the Code's protection patients of health care providers who take patients by way of referral, as the vast majority of health care providers do. The case illustrates how inequality can occur from defining a "health care business" too narrowly. The 7-Hills Radiology debtor recanted an earlier claim of being a health care business stating that: (1) it saw patients on a referral-only basis; (2)...