Does the Patient Care Ombudsman Statute Apply to Outpatient Facilities
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.
Health Care Business Defined
"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).
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?
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).
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.
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:
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.
145 Cong. Rec. S2739. Sen. Grassley later stated:
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.
[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.
145 Cong. Rec. S3930.
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.
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).
Sen. Torricelli's comments are not as detailed as Sen. Grassley's, but they echo those of his co-sponsor:
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."
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.
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:
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.
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.
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.
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."
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.
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.
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
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 care ombudsman," rather than as a "patient records ombudsman." If only the title were "inpatient care ombudsman," it would make the statutory analysis much easier.
1 The opinions expressed in this article are those of the author and not of the firm or its clients.
2 See a related article on §332, "Keeping up with Technology: §332 and the Consumer Privacy Ombudsman," on p. 28.