Does the Patient Care Ombudsman Statute Apply to Outpatient Facilities

One of the less-advertised changes made to the Bankruptcy Code by the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is the patient
care ombudsman statute, 11 U.S.C. §333, which requires the bankruptcy court
to order the appointment of an ombudsman to protect patients' interests in certain
health care bankruptcies. On its face, the statute appears clear and unambiguous.
It states that "if the debtor in a case under chapter 7, 9 or 11 is a<i>
health care business</i>, 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." 11 U.S.C. §333(a)(1) (emphasis added).
</p><p>While the role of the ombudsman appears straightforward from the statute, the
type of health care entity for which an ombudsman is to be appointed (hospital,
nursing home, physician practice, etc.) is anything but straightforward. The
starting point for that analysis is the threshold question: "What constitutes
a 'health care business'?" The answer provides the key to understanding
the scope of §333.
</p><p><b>Health Care Business Defined</b>
</p><p> "Health care business" is a newly defined term in the Bankruptcy
Code that refers to "any public or private entity (without regard to whether
that entity is organized for-profit or nonprofit) that is primarily engaged
in offering to the general public facilities and services for (1) the diagnosis
or treatment of injury, deformity or disease and (2) surgical, drug treatment,
psychiatric or obstetric care." 11 U.S.C. §101(27A)(A).

</p><p>Per the language of subsection (A), it is plausible to argue that a health
care business includes outpatient facilities such as physician's offices, "doc-in-a-box"
neighborhood care centers, dental and chiropractic offices and even pharmacies.
Indeed, §333 already has been applied in some post-BAPCPA cases involving
exclusively outpatient facilities, such as physician and dentist offices. However,
is that what Congress intended?
</p><p>Thankfully, this new definition includes additional helpful language. Subsection
(B)(i) clarifies that the definition in subsection (A) "includes any (I)
general or specialized hospital; (II) ancillary ambulatory, emergency or surgical
treatment facility; (III) hospice; (IV) home health agency; and (V) other health
care institution that is similar to an entity referred to in subclause (I),
(II), (III) or (IV)." Subsection (B)(ii) encompasses "any long-term
care facility, including any (I) skilled-nursing facility, (II) intermediate-care
facility, (III) assisted-living facility, (IV) home for the aged; (V) domiciliary
care facility and (VI) health care institution that is related to a facility
referred to in subclause (I), (II), (III), (IV) or (V) if that institution is
primarily engaged in offering room, board, laundry or personal assistance with
activities of daily living and incidentals to activities of daily living."
11 U.S.C. §101(27A).
</p><p>From this definition, it would appear that Congress did not intend for §333
to apply to outpatient facilities but rather to hospitals, long-term care facilities
and similar institutions that provide inpatient care, particularly if the extensive
list of facilities is viewed as all-inclusive. Yet as bankruptcy practitioners
know, use of the word "including" within the Code is noninclusive
per §102(3). So did Congress consider the Code's unique definition of "including"
when using it in the definition of health care business? Given the paucity of
legislative history accompanying BAPCPA, one can only wonder. However, a look
at the legislative history from earlier versions of BAPCPA sheds some light
on the issue and tends to support the conclusion that the use of "including"
in §101(27A) is intended to be restrictive.
</p><p><b> Legislative History </b>
</p><p>Sens. Grassley (R-Iowa) and Torricelli (D-N.J.) were the chief architects of
the health care-related amendments that appeared in earlier bankruptcy reform
bills and are now part of BAPCPA. Accordingly, their remarks during congressional
debate are insightful. Specifically, in Senate discussions on the original version
of the health care amendments that appeared in the Bankruptcy Reform Act of
1999 (and which are virtually the same as the BAPCPA amendments), Sen. Grassley
stated:
</p><blockquote>
<p>One business-related provision I want to highlight relates to protecting
patients when hospitals and health care businesses declare bankruptcy. I chaired
a hearing on this topic last year and I was shocked to realize that the Bankruptcy
Code doesn't require bankruptcy trustees and creditor committees to consider
the welfare of patients when closing down or reorganizing a hospital or nursing
home. So, under the Grassley-Torricelli bill, whenever a hospital or nursing
home declares bankruptcy, a patient ombudsman will be appointed to represent
the interests of patients during bankruptcy proceedings. </p>
</blockquote>
<p>145 Cong. Rec. S2739. Sen. Grassley later stated:
</p><blockquote>
<p>The bill will also make sure the health care businesses which liquidate under
chapter 7 don't just throw patients by the wayside in a rush to sell assets
and pay creditors... Specifically, the bill addresses the disposal of patient
records, the costs associated with closing a health care business, the duty
to transfer patients upon the closing of a health care facility and the appointment
of an ombudsman to protect patient rights.</p>
<p> ... <br>

[The bill] requires a trustee to use reasonable and best efforts to transfer
patients in the face of a health care business closing. This provision is
both useful and necessary in that it outlines a trustee's duty with respect
to a transfer of vulnerable patients. </p>
</blockquote>
<p>145 Cong. Rec. S3930.
</p><p>If the health care business were merely an outpatient facility, then why would
it need someone to transfer "vulnerable patients" at closing? Who
would those patients be, and where would they be located? It is difficult to
reconcile these comments in an outpatient context, but much easier to do so
in the context of a long-term care facility. Thus, Sen. Grassley's remarks appear
to be directed at inpatient facilities only.
</p><p>During the following year's congressional debate, Sen. Grassley's comments
again appear to be restricted to the inpatient context. Here is Sen. Grassley
on H.R. 2415: "This title amends the Code to deal with the problems presented
when a health care business, such as a hospital or nursing home, files for bankruptcy
under chapters 7, 9 or 11." 146 Cong. Rec. S11720 (emphasis added).
</p><p>Sen. Torricelli's comments are not as detailed as Sen. Grassley's, but they
echo those of his co-sponsor:
</p><blockquote>
<p>Our bill...would provide for the appointment of an ombudsman to monitor and
assure continued quality of the care being provided to patients. The bill
would set up procedures to ensure that the confidentiality of patient records
is strictly maintained as a health care provider closes its operation...the
bill would require a bankruptcy trustee to use best efforts to transfer patients
to alternative providers when a health care business fails." </p>
</blockquote>
<p>145 Cong. Rec. S4064. Accordingly, the references to hospitals and nursing
homes and the transfer of patients appear to show an intent that the legislation
apply to traditional inpatient facilities only, rather than to all providers
of medical services. Indeed, the sparse legislative history on this discrete
issue (the bulk of which is quoted above) provides no debate to the contrary.
</p><p><b>Ombudsman's Duties </b>
</p><p>Moreover, the duties of the ombudsman, as enumerated in §333(b) of the
Code, provide additional support for the argument that the scope of appointment
is intended for inpatient facilities only. That subsection states:

</p><blockquote>
<p>An ombudsman appointed under subsection (a) shall (1) monitor the quality
of patient care provided to patients of the debtor, to the extent necessary
under the circumstances, including interviewing patients and physicians; (2)
not later than 60 days after the date of appointment, and not less frequently
than at 60-day intervals thereafter, report to the court after notice to the
parties in interest, at a hearing or in writing, regarding the quality of
patient care provided to patients of the debtor; and (3) if such ombudsman
determines that the quality of patient care provided to patients of the debtor
is declining significantly or is otherwise being materially compromised, file
with the court a motion or a written report, with notice to the parties in
interest immediately upon making such determination. </p>
</blockquote>
<p>Notably, subsection (b)(1) contemplates that the ombudsman will interview physicians.
How and why would an ombudsman appointed to a neighborhood dental office or
similar outpatient facility interview physicians of the office's outpatients?
Simply, it would make no sense. In contrast, if the facility were a nursing
home, the ombudsman's role in interviewing physicians of the inpatients to determine
whether the facility is providing the requisite continuum of care is easily
applied and understood.
</p><p>Based on these points, it would appear that the statute was intended for, and
should apply only to, traditional inpatient facilities. Yet the debate does
not end there without considering the importance of patient records.
</p><p><b>Patient Records </b>
</p><p>The above-quoted legislative history references the need to protect and preserve
confidential patient records, and the ombudsman's role in that process. Indeed,
one could argue that protecting the confidentiality of patient records is a
primary concern of the statute. With respect to patient records, the distinction
between inpatient and outpatient facilities is irrelevant, as the duty of confidentiality
is equally important in both contexts. Yet §333 of the Code does not provide
specifically for the protection of patient records as one of the duties or goals
of the ombudsman (although one could argue that it falls within the scope of
"the interests of the patients of the health care business" standard
identified in §333(a)(1)). To the contrary, §333(c)(1) reiterates
that the ombudsman is prohibited from accessing patient records absent express
permission from the bankruptcy court or existing nonbankruptcy law: "Such
ombudsman may not review confidential patient records unless the court approves
such review in advance and imposes restrictions on such ombudsman to protect
the confidentiality of such records."
</p><p>Further, BAPCPA added Code §351, which provides a procedure for disposing
of the patient records of a health care business where "the trustee does
not have a sufficient amount of funds to pay for the storage of patient records
in the manner required by applicable federal or state law." Noticeably
absent from that section is any reference to a patient care ombudsman.
</p><blockquote>
<blockquote>
<blockquote>
<h3 align="center"><i>Section 332 makes explicit reference to the protection
of "personally identifiable information," which is a newly defined
term appearing at §101(41A) of the Code.</i></h3>
</blockquote>

</blockquote>
</blockquote>
<p> Likewise, additional light may be shed on the issue of patient records by
considering §332 of the Code. That new section authorizes the appointment
of a "consumer privacy ombudsman" where necessary to protect confidential
consumer information in connection with asset transfers under §363(b) of
the Code. Section 332 makes explicit reference to the protection of "personally
identifiable information," which is a newly defined term appearing at §101(41A)
of the Code. Thus, an inference can be drawn from §332 that Congress knew
how to include the protection of confidential records within the scope of an
ombudsman's duties, but chose deliberately to exclude it from the duties of
the patient care ombudsman when it omitted any such reference from §333
of the Code.²
</p><p>For these reasons, a persuasive argument can be made that concerns about protecting
patient records, in and of themselves, do not create grounds for appointing
a patient care ombudsman under §333 of the Code, no matter how justified
such concerns may be. Perhaps that is why §333 of the Code refers to this
newly created appointee as a "patient <i>care</i> ombudsman," rather
than as a "patient <i>records</i> ombudsman." If only the title were
"<i>in</i>patient care ombudsman," it would make the statutory analysis
much easier.
</p><blockquote>&nbsp;</blockquote>

<hr>
<h3>Footnotes</h3>
<p> 1 The opinions expressed in this article are those of the author and not of
the firm or its clients. </p>
<p>2 See a related article on §332, "Keeping up with Technology: §332
and the Consumer Privacy Ombudsman," on p. 28.</p>