The addition of §333 to the Bankruptcy Code as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)generated significant controversy because it mandates the appointment of a patient care ombudsman (PCO) if the debtor is a 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.” The major criticisms of §333 have been (1) the ambiguity surrounding the requirements of §333, (2) how to define and measure quality during bankruptcy and (3) the potential for substantially increasing the expense of an already financially-strapped health care provider’s reorganization, perhaps scuttling any chance at reorganization at all. The Brotman Medical Center case demonstrates how the PCO and a debtor health care provider can work together toward a successful reorganization.
Brotman Medical Center Inc. filed for chapter 11 in the U.S. Bankruptcy Court for the Central District of California on Oct. 25, 2007. Brotman initially moved to be excused from the appointment of a PCO, but the U.S. Trustee objected, contending that the appointment of a PCO was necessary.
Like many officers of financially-strapped health care providers, Michael Lane, Brotman’s chief restructuring officer (CRO) and interim CEO, was concerned about the expense that the appointment of a PCO could generate. He was also concerned that a PCO might have an agenda that went beyond the congressionally-mandated responsibility of monitoring the quality of patient care and ensuring patient safety. Specifically, the CRO was concerned that a PCO might expand his or her role into a referendum on patient satisfaction with matters other than patient care and safety. He also feared that a PCO might feel obliged to take on the role of a financial advisor, becoming involved in cost control as it relates to the allocation of financial resources for clinical and nonclinical issues, which was unnecessary because the debtor and the creditors’ committee had each retained accountants and financial advisors.
Initially, the U.S. Trustee recommended three attorneys as PCO candidates. Although the attorneys may have had health care legal experience, they lacked health care operational or clinical experience. Lacking such experience, they would need to retain consultants with such experience to perform their obligations as PCOs. The CRO was also concerned that these consultants with health care finance experience, but no operational or clinical experience, would have to hire professionals with the operational experience, thereby adding another expense.
Once it became clear that a PCO would be appointed, the CRO recommended the appointment of a licensed clinical social worker with health care-related operational and clinical experience (the proposed PCO owns and operates several skilled nursing facilities), who had been appointed as a PCO in other health care bankruptcy cases.[1] He believed that his nominee had the operational experience to perform the congressionally-mandated duty of ensuring patient safety and patient care without having to hire outside consultants with operational experience. The U.S. Trustee concurred with the CRO’s recommendation and appointed the candidate he recommended as PCO.
Upon her appointment, the PCO focused on patient care and safety issues. The clinical and operational expertise of the PCO and her staff allowed her to zero in on important patient care and safety issues. During several visits to Brotman, the PCO met with management, department heads, staff and physicians, as well as patients who had consented in writing to be interviewed. She also collaborated closely with the chief of the medical staff.
For their part, Brotman’s staff cooperated with the PCO and her staff throughout the bankruptcy case. They produced necessary documents and information as quickly as possible and made appropriate staff available for interviews. In the three reports the PCO filed in the Brotman bankruptcy case, she acknowledged the cooperation of its personnel.
Through these visits, the PCO and her staff identified various operational and clinical concerns related to patient care that needed to be addressed. Among those issues were: (1) Brotman’s pharmacy department, particularly the procedures for distributing medications and the need for a permanent pharmacy manager; (2) food preparation and distribution procedures and facilities; (3) administrative and professional staffing needs; (4) coordination and communication among Brotman’s departments; and (5) certain discrete and specific safety concerns. The PCO and her staff made observations concerning those issues. Those issues had been considered but had not previously been fully addressed by Brotman because of the frenetic activity that preceded and accompanied the bankruptcy filing. Brotman implemented changes based on the PCO's observations. In her reports, the PCO made it clear that neither she nor her staff discovered any immediate dangers to patient safety.
The PCO also acted as a conduit between staff and management, and vice versa, on patient care issues. For example, the PCO brought concerns about patient care and staffing raised by the nursing staff to the attention of Brotman’s CEO.
The PCO and her staff made themselves available to Brotman’s staff throughout the engagement and kept Brotman’s management informed of any findings. For that reason, there were no surprises to Brotman’s management in the reports that the PCO filed with the bankruptcy court. The PCO’s reports contained no issues or facts that had not been addressed or explained to Brotman’s management.
Brotman’s reorganization appears to be headed for success. A plan of reorganization was confirmed on Jan. 21, 2009, and became effective on April 14, 2009. Even more important, the record of the Brotman bankruptcy case does not reflect any concern expressed by either the U.S. Trustee or the bankruptcy court about the quality of patient care or patient safety at Brotman.
1. The PCO was Suzanne Koenig, president of SAK Management Services LLC in Chicago. Ms. Koenig serves as co-chair of ABI’s Health Care Committee.