Mike Markham on Chapter 11 – Part 3 of 10 – Healthcare Cases

Part 3 – Healthcare Cases


Another kind of Chapter 11 case that we are seeing a lot in recent years are health care cases. There are a lot of health care specific terms that are now in the Bankruptcy Code. One of the things unique about health care cases, is patient information, which is very confidential under HIPAA and other state and federal laws.  One of the particular provisions that applies to a health care case is that the court may appoint what is called a Health Care Ombudsman, who takes control over that confidential information. This Ombudsman makes sure that the debtor is keeping that information confidential, so if the debtor fails or goes through a sale process, then there is a third party that will maintain the confidentiality of those records. A debtor who is failing might not have much incentive to take care of the confidentiality obligation.


These days we have seen a lot of health care cases involving continuing care rehab-type facilities that are under the jurisdiction of the Office of Insurance Regulation. In continuing care, people pay a big lump sum up front, therefore it is deemed to be a type of insurance contract. There are a lot of disputes and discussions about whether continuing care health care cases are eligible for Chapter 11. The State often comes in and challenges those kind of cases, saying that they are not eligible for Chapter 11.  One type of entity that is not eligible for Chapter 11 is a domestic insurance company, which is a term of art in the Bankruptcy Code. I have been in cases where the state Office of Insurance Regulation came in and argued that an entity was an insurance company in essence, and therefore, it was not eligible for a Chapter 11.


Since starting with the Johnson Pope Bokor Ruppel & Burns firm in 1988, Michael’s practice has concentrated on bankruptcy and insolvency related Litigation.
Michael has represented corporate and individual debtors, secured creditors, equipment lenders, landlords, creditor’s committees, trustees and petitioning creditors in involuntary bankruptcies.
Michael also has substantial experience in receivership cases.