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As we close 2015 with more hospital bankruptcies being filed around the country, the ABI Health Care Committee is expecting an interesting year ahead in 2016.

There is much in the booming health care industry to entice an acquisition or integration. The boom has been accompanied by vast amounts of data digitized as electronic health records and myriad other formats. This data adds great value to health care organizations. Because of its value, data merits exacting protection from loss of any kind. The person keeping a finger on this particular pulse is the organization’s CIO.

Vulnerability Has Increased Along with Data   

There has been a significant wave of health care provider consolidation driven by the desire to achieve scale in response to declining patient volumes and reimbursement, increasing costs, health care reform and the need for capital to implement improvements in the delivery of care, development/expansion of their physician networks and to make needed upgrades in IT, especially electronic medical records.

In his 2009 State of the Union Address, President Barack Obama urged Congress to confront the “crushing cost of health care,” claiming that “[t]his is a cost that now causes a bankruptcy in America every thirty seconds.”[1] Like-minded lawmakers subsequently introduced legislation to provide certain bankruptcy protections for medically distressed debtors.[2] Most recently, on June 12, 2014, Sens.

Hospitals and other healthcare providers are facing significant financial and fiscal pressures. The recession and the sluggish recovery reduced personal incomes and, therefore, the demand (if not the actual need) for healthcare services. Pharmaceutical therapies and ambulatory surgical centers had previously reduced hospital admissions and revenues. Reduced reimbursements by Medicare, Medicaid, and private insurers have further suppressed revenues.

The following hypothetical demonstrates the scope and application of §327(a) to competing neighboring urban hospitals: Two nonprofit hospitals are separated by three miles in a densely populated low-income urban community. Holy Mackerel sits at one end of Main Street while Baruch Gefilte is at the other. Both are suffering financial difficulties.

For more than 150 years, those living in Manhattan’s Greenwich Village relied on the health care services of St. Vincent’s Catholic Medical Center. In April 2010, after years of financial struggles, the hospital’s board of directors made the difficult decision to file for chapter 11. [1] Due to St. Vincent’s cozy former location in the heart of the Big Apple, the hospital’s bankruptcy filing has become one of the more notable cases among a wave of hospital filings in recent years.

Is medical debt the primary cause for most consumer bankruptcy cases, and if so, can the current push for medical bankruptcy reform really reduce the number of consumer bankruptcies? No, say Amy Y. Landry and Robert J. Landry, III, authors of a recently published article addressing this topic, printed in the Spring 2011 issue of the ABI Law Review.