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ABI’s Health Care Triage: 2009 conference on June 26, 2009, in Chicago was a great success. Co-sponsored by the Beazley Institute for Health Law and Policy at the Loyola University Chicago Law School, the conference was the first stand-alone health care conference sponsored by ABI. The partnership between Loyola and ABI for the conference proved very fruitful. Indeed, in his welcoming remarks, Larry Springer, the director of the Beazley Institute, welcomed a continued collaboration between ABI and the Beazley Institute.

Employers are now realizing that unfunded post-retirement medical liabilities can “break the bank.” The magnitude of unfunded retiree medical liabilities has increased dramatically and has become a significant item on the corporate balance sheets of many employers. In recent years, medical breakthroughs, new cures for diseases, more advanced state-of-the-art diagnostic equipment and medical advancing prescription drugs have all contributed to the significant increases in the cost associated with providing medical coverage to retirees.

In In re Lane,( George Lane, et. Al v. Western Interstate Bancorp), 280 F.3d 663 (6th Cir. 2002), the Sixth Circuit Court of Appeals, following the direction of the U.S. Supreme Court’s decision in Nobleman v. American Savings Bank, 508 U.S. 324, 113 S.Ct. 2106 (1993), held that §1322(b)(2), or what is commonly known as the anti-modification clause, did not protect an unsecured mortgage-holder from modification of its lien through the chapter 13 plan process.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) added a new provision regarding personal property leases, §365(p), which provides:

(1) If a lease of personal property is rejected or not timely assumed by the trustee under subsection (d), the leased property is no longer property of the estate and the stay under §362(a) is automatically terminated.

The US Court of Appeals for the Ninth Circuit recently affirmed a bankruptcy court’s decision to dismiss a chapter 7 case pursuant to §707(b)(3) in In re Egebjerg.[1] The bankruptcy court concluded that the debtor’s loan from his §401(k) plan was a secured loan, repayment of which can be expensed pursuant to §707(b)(2)(A)(iii). Nevertheless, the court found that the debtor could pay a significant portion of his debts after the loan was repaid, finding the case abusive under §707(b)(3).

About the author: Peter Hartheimer serves as the lead principal in General Capital Partners LLC in its New York office.

How the world has changed. There was a time when, if a nursing home was experiencing financial difficulty, they went to their current lender and asked for an extension or additional capital. If they had to file for chapter 11 protection, they would secure debtor-in-possession (DIP) financing from the current lender or choose from a bevy of alternative lenders and factors.

With state and local governments facing daunting financial challenges, chapter 9 for "government units" is becoming a more likely option. In California, state law permits communities to form "health care districts" that are authorized to issue bonds through public offerings and use the proceeds to establish health care facilities within the district. When a health care district files a chapter 9 case, the intersection between public finance, health care law and bankruptcy creates its own set of novel problems.

There is no question that the nursing home industry has been battered by bankruptcies and receiverships in recent years, sometimes resulting in the closing of the home. Many factors have impacted the financial viability of nursing homes, not the least of which is the fact that nursing homes depend on Medicare and Medicaid for most of their revenues. Another factor has been the inability of many nursing homes to fill beds because of overbedding. The excess capacity is problematic because it further reduces a nursing home's revenues when its financial stability is already teetering.

Bankruptcy Code §363 asset sales are becoming an increasingly attractive method employed by companies in the health care industry to monetize assets. My firm has seen the impact in our own caseload with three diagnostic imaging facilities (DIFs) we are advising recently utilizing 363 sales.

Health Care Committee Members Paul Rundell and Bobby Guy advise of 10 jointly administered cases before the U.S. Bankruptcy Court for the Middle District of Tennessee (Middle District) in which the debtors prevailed over arguments by the U.S. Trustee for Region 8 (UST) to the effect that BAPCPA effectively eliminated national health care cases. In those 10 cases, Nashville Senior Living LLC and nine other senior living affiliates of a large national senior living company filed chapter 11 petitions.