A Patient Care Ombudsman for a CCRC: Takeaways


The Business Advisor

December 2016

The Great Recession was particularly unkind to continuing care retirement communities (CCRCs). Many who had hoped to retire to CCRCs were unable to do so as the value of their homes and investments plummeted. The result was CCRCs with nonviable censuses. Hebrew Hospital Senior Housing, Inc. (“HHSH”) operated Westchester Meadows, a CCRC in Valhalla, New York, and was one of the CCRC victims of the Great Recession. HHSH filed its voluntary chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”) on December 9, 2015. HHSH was one of three related debtors, each of which entered bankruptcy on a different date.

As a CCRC, Westchester Meadows included an independent living facility, an assisted living (or enriched housing) facility, and a skilled nursing facility. The latter two facilities were collectively called Fieldstone. Consistent with the CCRC concept, Westchester Meadows residents initially acquired rights to an independent living unit and entered into a life care agreement with HHSH. As and when a Westchester Meadows resident needed a level of care beyond that which could be provided in an independent living unit, the resident could transfer to Fieldstone on a temporary, indefinite, or permanent basis. Consistent with the situation at most CCRCs, the vast majority of Westchester Meadows’ residents live in independent living units. Fieldstone was licensed for ten assisted living residents and 20 skilled nursing residents.

As a residential assisted living and skilled nursing facility, Fieldstone indisputably constituted a “healthcare business” for purposes of the Bankruptcy Code. See 11 U.S.C. § 101(27A) (definition of “healthcare business”). For that reason, HHSH’s bankruptcy filing triggered the requirement that a Patient Care Ombudsman (PCO) be appointed for Fieldstone, unless the Bankruptcy Court, considering the “specific facts of the case,” excused appointment. 11 U.S.C. § 333(a). Although Fieldstone constituted a very small part of HHSH’s business, by order dated January 14, 2016, the Bankruptcy Court directed the appointment of a PCO for Fieldstone. On January 15, 2016, pursuant to 11 U.S.C. § 333(a)(2)(A), the United States Trustee appointed me as PCO for Fieldstone. What follows are some takeaways from my service as PCO for Fieldstone, keeping in mind that those takeaways reflect my experience as the PCO of small skilled nursing and assisted living facilities.

Takeaways to Address the Concerns of the Bankruptcy Judge
The first set of takeaways addresses the need to anticipate the concerns of the bankruptcy judge.

    • The PCO should be prepared to demonstrate to the judge an understanding of the limited role a PCO is supposed to play – particularly, an understanding that the PCO does not function as a trustee.
    • The PCO must demonstrate an understanding that the PCO’s role is limited to monitoring the quality of patient or resident care (including safety issues), representing the interests of the patients or residents, qua patient or resident, and ensuring the proper treatment and disposition of protected health information (PHI).
    • The PCO must be prepared to convince the bankruptcy judge that there will not be any unnecessary court appearances by or on behalf of the PCO.
    • The non-clinician seeking appointment as a PCO (e.g., an attorney or accountant) must be prepared to demonstrate to the court training and experience (e.g., academic training and work in healthcare-related disciplines, an LLM in Health Law, significant representation of healthcare businesses) that adequately prepared the PCO for his or her role.
  • In the affidavit in support of appointment, the non-clinician PCO should also highlight his or her access to clinicians or health administration professionals in his or her firm.

A PCO may not review medical records absent prior court approval. 11 U.S.C. § 303(c)(1). Media reports concerning medical information may cause a bankruptcy judge to question whether the PCO’s review of confidential medical records is necessary. At the very least, the PCO must be prepared for careful scrutiny by the bankruptcy judge of the PCO’s request for authority to review medical records.

    • The PCO must demonstrate to the bankruptcy judge competence in HIPAA, other applicable laws protecting medial information (e.g., mental illness and substance abuse), and applicable state law concerning the privacy and security of medical records.
    • The PCO should limit the scope of the medical information to which he or she seeks access to that which is actually necessary to perform the duties of a PCO.
  • The PCO should also be ready to include provisions allowing patients/residents (or their families) to challenge the PCO’s access to medical information.

There is no reason for the PCO (or the PCO’s counsel) to reinvent the wheel with each document. However, the PCO (and the PCO’s counsel) must avoid form slavery.

    • Do not simply recycle pleadings, forms of order, or reports from other cases.
    • Instead, draft reports, proposed orders, and pleadings to fit the facts of the case for which the PCO is appointed.
  • Do not assume that a bankruptcy judge will approve the form of a pleading, proposed order, or report merely because other judges in the same district have done so.

Takeaways Concerning Methodology
The Bankruptcy Code provides minimal guidance to the PCO on how to monitor patient/resident care or to represent residents’/patients’ interests. The Bankruptcy Code merely imposes on the PCO the duty to “monitor the quality of patient care provided to patients of the debtor, to the extent necessary, including interviewing patients and physicians.” 11 U.S.C. § 333(b)(1). It is up to the PCO to determine the methodology appropriate under the facts of the case for performing the duties of a PCO.

Sources of guidance to the PCO for establishing the appropriate methodology include:

    • federal and state statutes and regulations addressing patient/resident quality of care at long-term care facilities, as well as any published guidance concerning the application and interpretation of those statutes or regulations;
    • guidance (including standards and checklists) published by professional organizations;
    • the extensive literature on healthcare quality and healthcare reform;
    • the PCO’s prior representation of healthcare businesses;
    • the PCO’s prior academic study; and
  • other PCO reports (with the caveat that one must apply a methodology appropriate to the case in which the PCO has been appointed).

A survey of materials from relevant sources will allow the PCO to determine:

    • who to talk to (e.g., the Administrator, the Medical Director, the Director of Nursing, the Director of Social Services, the Director of Food Services, the Director of Environmental Services, the Director of Information Technology; employees, residents, and residents’ families);
    • questions to ask (which can be reduced to questionnaires, provided that the PCO does not become over-reliant on the questionnaires);
    • documents the PCO must review (e.g., medical, employment, and safety records) and the information the PCO needs to obtain from them;
    • how often the debtor’s facilities should be inspected (i.e., how often the PCO should be onsite);
    • what to look for when inspecting the debtor’s facilities and where to look for it;
    • information the debtor should provide to the PCO between inspections and how often that information should be provided; and
  • the pleadings or other filings in the bankruptcy case the PCO (or PCO counsel) must review, and the information in those pleadings that is necessary for the PCO’s proper performance of the duties of the PCO (in other words, the information contained in those filings relevant to a determination of the quality of the care of patients or residents).

Takeaways Concerning Relationships
As with other professional endeavors, relationships are crucial for the PCO. The major principle is balance.

    • The PCO must endeavor to maintain a good relationship with the debtor’s management and employees, who can either facilitate or hamstring the PCO in performing his or her duties.
    •  Good relations with the debtor’s employees can be particularly useful to the PCO in obtaining timely information on patient or resident care and safety issues, but the PCO must be able to distinguish real information from employee griping.
    • Obtaining cooperation from the healthcare debtor’s management and employees is generally not difficult because, like most debtors, healthcare businesses often “reorganize” through a § 363 sale, and poor patient or resident care quality (particularly if there are safety issues) will not facilitate the sale process.
    • The PCO must be able to stand up to the debtor (particularly management), a creditors’ committee, or a potential purchaser when necessary, even to the point of filing motions or reports with the bankruptcy court if the quality of patient or resident care is declining, particularly if patient or resident safety issues are involved. See 11 U.S.C. § 333(b)(3).
    • A good relationship with the U.S. Trustee is also important because bankruptcy courts often look to the U.S. Trustee for guidance when PCOs seek approval of their appointments, authorization to retain professionals, authorization to access medical information, and approval of fee applications.
    • With the exception of the PCO report, the PCO should provide the trial attorney from the U.S. Trustee’s office who has been assigned to the case with advance review of pleadings, because U.S. Trustee concurrence can be helpful in obtaining relief if the bankruptcy judge has concerns about the relief requested.
    • In the context of skilled nursing and assisted living facilities, the PCO must maintain good relationships with residents and their families. Like the canary in the mine, they can be valuable sources of timely information concerning resident care and safety issues.
  • Cordial and productive relationships with governmental agencies can be important, especially if there are issues with patient or resident care or safety.

Takeaways Concerning PCO Reports
The PCO must file an initial report concerning the quality of patient or resident care within 60 days of appointment and every 60 days thereafter. 11 U.S.C. § 333(b)(2).

    • The report must be the PCO’s own work; it may not be the work of the PCO’s counsel, although counsel may review the report to ensure that it complies with applicable law.
    • The PCO’s report must be thorough and accurate, reflecting the PCO’s competence and, most importantly, independence.
    • The report should not be circulated among any of the parties of interest in the debtor’s bankruptcy case before filing.
    • The PCO’s report must contain all relevant information, but may not disclose medical information subject to privacy protection.
    • Patient and resident names or other identifying information should not be used in the report; refer to the residents or patients in groups as much as possible.
  • Because preparing the PCO report underscores a tension between the Bankruptcy Code’s emphasis on the disclosure of information (see 11 U.S.C. § 107(a) [presumption is that papers filed in a bankruptcy case “are public records and open to examination by an entity at reasonable times without charge]) and the requirement under HIPAA and other laws that protected health information be kept private and secure. See, e.g., 45 CFR § 164.502 (prohibiting the disclosure of protected health information except as permitted by the HIPAA Privacy Rule), a thorough understanding by the PCO (or PCO’s counsel) of the healthcare privacy laws is necessary in crafting a PCO report.

Takeaways Concerning Medical Records
The PCO must maintain any records concerning patients or residents as confidential information. 11 U.S.C. § 333(c)(1). Therefore, the PCO must comply with various laws governing the privacy and security of identifiable health-related information, notably HIPAA. Recommendations and takeaways for maintaining the confidentiality and privacy of such information include the following:

    • The PCO should not take original medical records from the debtor’s premises, because there is no need for a PCO to ever remove original medical records from the debtor’s premises.
    • The PCO and the debtor should not transmit identifiable health-related information to each other except when absolutely necessary.
    • The debtor and the PCO should transmit identifiable health-related information only via secure methods of communication, encrypting the information to the extent possible.
    • At the end of the PCO’s tenure, any medical information concerning a patient or resident of the debtor should be returned to the debtor (if it is an original record) or destroyed by a HIPAA-approved method.
  • If applicable law prohibits the destruction of the record and return is not feasible, the PCO must comply with applicable law in maintaining the privacy, confidentiality, and security of the information.

Takeaways Concerning PCO as PCO Counsel
The final takeaways I address involve situations in which the PCO retains his or her own firm as counsel. As with the case of a trustee, such a situation may be very cost-effective by minimizing the respective learning curves of the PCO and the attorney (or eliminating the learning curve if the PCO serves as his or her own counsel).

    • Where the PCO is an attorney and retains his or her firm as counsel, the roles must remain separate, as is true when a court-appointed trustee retains his or her own firm as counsel.
    • If a task involves a court appearance, it will be a “counsel” task, unless the PCO must appear in connection with a material decline in the quality of care.
    • If the task involves presence at the debtor’s premises, it will be a “PCO” task.
    • Preparation and filing of pleadings is primarily a “counsel” task, although the PCO will likely have to provide information to counsel to prepare the pleading.
    • As noted above, preparation of the PCO report is a “PCO” task, although the filing of the report is a “counsel” task.
    • Review of pleadings and other papers filed in the bankruptcy case is a “counsel” task.
  • Legal research is generally a “counsel” task, although review of regulations and guidance may be a “PCO” task.

To conclude, service as a PCO can be interesting and rewarding. However, appointment as a PCO should not be sought or accepted lightly. Even in small cases, the PCO’s obligations can be quite complicated.

If you have questions concerning this article, please contact me at (973) 596-4523 or dcrapo@gibbonslaw.com.