Home Health & Hospice Week

New law requires you to protect patient privacy in bankruptcy.

The law on bankruptcies has changed drastically and the new rules could impact home care providers.

In anticipation of the law's implementation date last October, a number of health care providers rushed to declare bankruptcy beforehand, according to the Dallas Business Journal.

Why? There are a few reasons providers might have been in a hurry to declare bankruptcy before the new regime, according to Gary Marsh, a partner with McKenna Long & Aldridge in Atlanta, GA.

In general, the revised law places new burdens on businesses declaring bankruptcy. You'll find it "harder to file bankruptcy and come out of bankruptcy," says Marsh. The changes include provisions to address corporate misconduct, fraud and mismanagement.

You'll also have shorter deadlines to file your plan of reorganization and assume your office lease--and you may have to provide a cash deposit to utility companies to keep your phone and lights on. Your creditors may have an easier time asking to have the bankruptcy converted to a Chapter 7 (liquidation) bankruptcy. And any creditors that provided goods or services 20 days before bankruptcy filing will have a higher priority.

For health care providers in particular, there are also a few provisions aimed at protecting patients:

• The bankruptcy court must appoint a patient care ombudsman within 30 days after the commencement of bankruptcy to monitor patient care. Congress was concerned that patients would suffer or be exposed to unsafe situations while a health care provider was going through bankruptcy, Marsh explains.

• If the bankrupt entity is sold to someone else and tries to transfer patient records or private information to the buyer, the court will name a consumer ombudsman to ensure patient privacy, Marsh says. This change will make sure the bankruptcy law dovetails with the Health Insurance Portability and Accountability Act (HIPAA).

• If a provider shuts down, you can't simply throw patient records in the trash. You have to make a reasonable effort to give patients their own records, or else destroy them in a secure fashion, says Keith Shapiro, a managing partner with Greenberg Traurig in Chicago.

• For facilities, the trustee will have access to funds to move patients to another facility--that money gets priority over repaying creditors.

Perspective: "It's important that Congress respected the privacy of the patients," says Shapiro, who helped draft the health care provisions of the new bankruptcy law. In general, bankruptcy law is concerned only with financial issues, and patients' welfare can get lost in the shuffle, he explains.

Caution: Another new provision will make it harder for you to restructure in bankruptcy, according to Shapiro. The law now allows Medicare to recoup an overpayment by taking the money out of current reimbursement, which is something bankruptcy courts have prevented Medicare from doing in the past. Shapiro says he's surprised the health care industry didn't fight this provision, which will put a lot of providers out of business.