Brotman Medical Center: A Successful Partnership Between a Debtor and a Patient Care Ombudsman

Articles, SAK in the News

By David N. Crapo, Gibbons P.C., Newark, NJ

The addition of § 333 to the Bankruptcy Code in 2005 as part of BAPCPA generated significant controversy. Section 333 mandates the appointment of a patient care ombudsman (“PCO”) if the debtor is a “health care business,” unless the court finds that “the appointment of such ombudsman is not necessary for the protection of patients under the specific facts of the case.” The major criticisms of § 333 have been: (i) the ambiguity surrounding the requirements of section 333; (ii) how to define and measure quality during bankruptcy; and (iii) the potential for substantially increasing the expense of an already financially-strapped health care provider’s reorganization, perhaps scuttling any chance at reorganization at all. The Brotman Medical Center case, however, demonstrates how the patient care ombudsman and a debtor-health care provider can work together towards a successful reorganization of the debtor.

Brotman Medical Center, Inc. (“Brotman”) filed its Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Central District of California (“Bankruptcy Court”) on October 25, 2007. Initially, Brotman moved to be excused from the appointment of a PCO. The United States Trustee objected to Brotman’s motion, contending that the appointment of a PCO was necessary.

Like many officers of financially strapped health care providers, Brotman’s Chief Restructuring Officer (“CRO”) (who also served as Brotman’s interim CEO)1 was concerned about the expense the appointment of a PCO could generate. He was also concerned that a PCO might have an agenda that went beyond the congressionally mandated responsibility of monitoring the quality of patient care and ensuring patient safety. Specifically, the CRO was concerned that a PCO might expand his or her role into a referendum on patient satisfaction with matters other than patient care and safety. He also feared that a PCO might feel obliged to take on the role of financial advisor, becoming involved in cost control as it relates to the allocation of financial resources for clinical and non-clinical issues, which was unnecessary because the debtor and the Creditors’ Committee had each retained accountants and financial advisors.

Initially, the US Trustee recommended three attorneys as PCO candidates. Although the attorneys may have had healthcare legal experience, they almost certainly lacked any health care operational or clinical experience. Lacking such experience, they would need to retain consultants with such experience to perform their obligations as PCO’s, and, by doing so, another layer of expense to Brotman’s reorganization. The CRO was also concerned that the attorneys might hire consultants with health care finance experience, but no operational or clinical experience who would have to hire professionals with the operational experience, thereby adding still yet another layer of expense in what was already going to be an expensive reorganization.

Once it became clear that a PCO would be appointed, the CRO recommended the appointment of a licensed clinical social worker with health care-related operational and clinical experience (the proposed PCO owns and operates several skilled nursing facilities), who had been appointed as a PCO in other healthcare bankruptcy cases.2 He believed that his nominee had the operational experience to perform the Congressionally-mandated duty of ensuring patient safety and the quality of patient care without having to hire outside consultants with operational experience. The U.S. Trustee concurred with the CRO’s recommendation and appointed the candidate he recommended as PCO.

Upon her appointment, the PCO focused on patient care and safety issues. The clinical and operational experience and expertise of the PCO and her staff allowed her to zero in on important patient care and safety issues. During several visits to Brotman, the PCO met with management, department heads, staff, physicians, as well as patients who had consented in writing to be interviewed. She also collaborated closely with the chief of the medical staff.

On their part, Brotman’s staff cooperated with the PCO and her staff throughout the bankruptcy case. They produced necessary documents and information as quickly as possible and made appropriate staff available for interviews. In the three reports the PCO filed in the Brotman bankruptcy case, she acknowledged the cooperation of Brotman personnel.

As a result of their visits to Brotman, the PCO and her staff identified various operational and clinical issues of concern related to patient care that needed to be addressed. Among those issues were: (i) Brotman’s pharmacy department, particularly the procedures for distributing medications and the need for a permanent pharmacy manager; (ii) food preparation and distribution procedures and facilities; (iii) administrative and professional staffing needs; (iv) coordination and communication between Brotman’s departments; and (vi) certain discrete and specific safety concerns. The PCO and her staff made observations concerning those issues. Those issues had been considered but had not previously been fully addressed by Brotman because of the frenetic activity that preceded and accompanied the bankruptcy filing. Brotman implemented changes based on the PCO’s observations. It is important to note, however, that, in her reports, the PCO made it clear that neither she nor her staff discovered any immediate dangers to patient safety.

The PCO also acted as a conduit between staff and management, and vice versa, patient care issues. For example, the PCO brought concerns concerning patient care and staffing raised by the nursing staff to the attention of Brotman’s CEO.

The PCO and her staff made themselves available to Brotman’s staff throughout the engagement. The PCO kept Brotman’s management informed of the findings she and her staff made. For that reason, therefore no surprises to Brotman’s management in the reports the PCO filed with the Bankruptcy Court. The PCO’s reports contained no issues or facts that had not addressed previously with and explained to Brotman’s management.

Brotman’s reorganization appears to be headed for success. A plan of reorganization was confirmed on January 21, 2009. The plan became effective on April 14, 2009. Even more important, the record of the Brotman bankruptcy case does not reflect any concern expressed by either the U.S. Trustee or the Bankruptcy Court about the quality of patient care or patient safety at Brotman.

  1. Brotman’s CRO was Michael Lane, who is now Managing Director, Navigant Capital Advisors, 30 S. Wacker, Suite 3100, Chicago, Illinois 60606.
  2. The PCO was Suzanne Koenig, President, SAK Management Services, LLC, 4055 West Peterson Ave., Suite 101, Chicago, Illinois 60646. Ms. Koenig serves as co-chair of ABI’s Health Care Committee.