The Patient Care Ombudsman: Controlling Costs

The appointment of the PCO, which must occur within 30 days of a Chapter 7, 9 or 11 bankruptcy petition date, is mandatory in all cases involving health care facilities, 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.” 11 U.S.C. ' 333(a)(1) (emphasis added).

While the language of ' 333 is clearly indicative of Congress' presumption for appointment in most cases, the statute undeniably affords courts a degree of discretion regarding the employment of a PCO. In evaluating whether a PCO is necessary in a health care bankruptcy case, courts typically weigh the totality of the circumstances and analyze the facts of the particular case through the framework established in In re Alternate Family Care. See 377 B.R. 754 (Bankr. S.D. Fla. 2007). The bankruptcy court in that case articulated nine factors for consideration, including: 1) the cause of the bankruptcy; 2) the presence and role of licensing or supervising entities; 3) the debtor's history of patient care; 4) the patients' ability to protect their rights; 5) the patients' dependence on the facility; 6) the likelihood of tension between the interests of patients and of the debtor; 7) the potential injury to patients if the debtor were to reduce its level of patient care drastically; 8) the presence of sufficient internal safeguards to ensure appropriate levels of care; and 9) most controversially, the impact of the cost of a PCO on the likelihood of successful reorganization. See id. at 758. The inclusion of cost as an increasingly important factor in PCO appointment has become a hotly contested issue.