In most chapter 11 bankruptcies, the primary goal of a business is to renegotiate debt and restructure operating costs so that the business can emerge a more profitable entity. In a healthcare bankruptcy reorganization, however, there is another issue at stake: the patients who are being treated by the healthcare facility. The fact that there are lives at stake and people depending on the healthcare provider introduces some significant complexities into a chapter 11 healthcare bankruptcy. Having an experienced Pasadena or Los Angeles bankruptcy lawyer is essential to handling these complexities successfully.
When entering into a chapter 11 healthcare restructuring, the good of the patients must be taken into account. This is especially true when the healthcare company is a not-for-profit entity with a duty of obedience to the healthcare mission.
Bankruptcy courts recognize the importance both of a healthcare provider’s duty of obedience and the importance of the opinion of the state health commission regarding the public health needs the debtor may be meeting. As such, these things are a consideration during the filing and may be given as much or more weight than the best interests of the creditors or best interests of the bankruptcy estate.
This is especially true when it comes to the sale of corporate assets under section 363 of the bankruptcy code. Because the sale of a healthcare facility can have a significant impact on public health, bankruptcy courts and boards do not make a decision on sales or transfers solely based on reasonable business judgment or on who will pay more for an asset. Instead, courts will consider what new operator would best provide for the patients and meet the public need and, based on these considerations, may choose to sell to someone who is offering less than another entity but who can better provide needed healthcare services.
Compliance with Regulations
A healthcare chapter 11 bankruptcy will also require close interaction with regulators, even when politicians or the government are not creditors directly affected by the filing. Government participants, for example, may contribute funds to help ensure smooth operation of the healthcare organization during the restructuring or to ensure the transfer of debtor assets to an operator who can continue to serve the health needs of the public.
All state and federal regulations for healthcare providers and not-for-profit entities must also be complied with. These laws may affect the ability to close or transfer an operating healthcare facility. Regulations on keeping patient records and storing them securely also impose significant complications on a debtor during a chapter 11 healthcare filing. Because records cannot simply be destroyed as patients may need access to them, the expense of properly maintaining and securing the records in compliance with HIPAA can be significant. These costs must be paid from the bankruptcy estate and must be factored into a restructuring plan.
Getting Legal Help
At DCDM Law Group, our Pasadena healthcare bankruptcy attorneys have experience dealing with these and other issues associated with a healthcare chapter 11 filing. Our Los Angeles bankruptcy lawyers can navigate through the complicated regulations and complexities of restructuring a healthcare facility to help create a plan for the healthcare provider to become financially solvent once again.