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As any bankruptcy practitioner knows, laws other than the provisions of the Bankruptcy Code can significantly impact a debtor’s reorganization. Indeed, bankruptcy trustees and debtors-in-possession must conduct the debtor’s operations in accordance with applicable nonbankruptcy law.[1] It should come as no surprise, therefore, that laws regulating health care providers and insurers can significantly impact the reorganization of health care debtors.
Many Americans lack health insurance.[1] Even people with health insurance may seek care from out-of-network hospitals that don’t participate in their health plans.[2] That is what happened with the debtor in In re Dietrich, because “his health insurance carrier would not pay the Hospital directly”[3] and instead paid the debtor the cost of his hospital bills.[4] After receiving the mone
Health care businesses are seeking bankruptcy relief in increasing numbers.[1] Often, company assets are sold pursuant to § 363 of the Bankruptcy Code.[2] Such sales benefit not only the debtor’s creditors, but also the community — providing for the continuation of medical care, especially in rural areas where health care options are limited. Beyond the normal bankruptcy sale issues, many federal and state regulatory issues arise.
[1]An asset sale is an important strategic option for hospitals and other health care facilities in financial distress. Whether pursuant to § 363 of the Bankruptcy Code or a confirmed reorganization plan under § 1123(b)(4), a sale in chapter 11 can offer great benefits, including the potential ability to sell assets free and clear of interests. When a hospital is faced with significant False Claims Act (FCA) liabilities, a sale to a new provider is often the only viable option to keep the hospital operating as a going concern.
