[Congressional Record Volume 145, Number 54 (Tuesday, April 20, 1999)]
[Senate]
[Pages S3930-S3931]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Torricelli, and Mr. Leahy):
  S. 840. A bill to amend title 11, United States Code, to provide for 
health care and employee benefits, and for other purposes; to the 
Committee on the Judiciary.


                         bankruptcy legislation

  Mr. GRASSLEY. Mr. President, I rise today to introduce legislation 
that would modify our bankruptcy laws to deal with bankruptcies in the 
health care sector. According to testimony I received in the 
Subcommittee on Administrative Oversight and the Courts, almost one-
third of our hospitals could face foreclosure because they are not 
financially sound. And a number of nursing homes are in terrible 
financial trouble. I believe that chapter 11 and chapter 9 of the 
Bankruptcy Code could be vitally important in keeping troubled 
hospitals in business. The bill we are proposing will ensure that 
chapter 11 will work fairly and efficiently in the unfortunate event 
that we face a rash of health care bankruptcies. The bill will also 
make sure the health care businesses which liquidate under Chapter 7 
don't just throw patients by the wayside in a rush to sell assets and 
pay creditors.
  Currently, the Bankruptcy Code does an adequate job of helping 
debtors reorganize and helping creditors recover losses. However, the 
code does not provide protection for the interests of patients. This 
bill contains several important reforms to protect patients when health 
care providers declare bankruptcy. Specifically, the bill addresses the 
disposal of patient records, the costs associated with closing a health 
care business, the duty to transfer patients upon the closing of a 
health care facility and the appointment of an ombudsman to protect 
patient rights.
  Section 102 covers the disposal of patient records. The legislation 
provides clear and specific guidance to trustees who may not be aware 
of state law requirements for maintaining the patient records or the 
confidentiality issues associated with patient records. Section 102 is 
necessary given the patient's need for the records and the apparent 
lack of clear instruction, whether statutory or otherwise, describing a 
proper procedure in dealing with patient records when closing a 
facility.
  Section 103 brings the costs associated with closing a health care 
business, including any expenses incurred by disposing of patient 
records and transferring patients to another health care facility, 
within the administrative expense umbrella of the Bankruptcy Act.
  Section 104 provides for an ombudsman to act as an advocate for the 
patient. This change will ensure that judges are fully aware of all the 
facts when they guide a health care provider through bankruptcy. Prior 
to a chapter 11 filing or immediately thereafter, the debtor employs a 
health care crisis consultant to help it in its reorganization effort. 
The first step is usually cutting costs. Sometimes, this step may 
result in a lower quality of patient care. The appointment of an 
ombudsman should balance the interests between the creditor and the 
patient. These interests need balancing because the court appointed 
professionals owe fiduciary duties to creditors and the estate but not 
necessarily to the patients. There will be occasions which illustrate 
that what may be in the best interest of creditors may not always be 
consistent with the patients' best interest. The trustee's interest, 
for example, is to maximize the amount of the estate to pay off the 
creditors. The more assets the trustees disburses, the more his payment 
will be. On the other hand, the ombudsman is designed to insure 
continued quality of care at least above some minimum standard. Such 
quality of care standards currently exist throughout the health care 
environment, from the health care facility itself to State standards 
and Federal standards.
  Consider the following excerpt from the Los Angeles Times on 
September 28, 1997 which describes the unconscionable, pathetic, and 
traumatizing consequences of sudden nursing home closings:

       It could not be determined Saturday how many more elderly 
     and chronically ill patients may be affected by the health 
     care company's financial problems. Those at the Reseda Care 
     Center in the San Fernando Valley, including a 106-year-old 
     woman, were rolled into the street late Friday in wheelchairs 
     and on hospital beds, bundled in blankets as relatives 
     scurried to gather up clothes and other personal belongings.

  The presence of an ombudsman probably would result in fewer instances 
similar to what I just described, where trustees quickly close health 
care facilities without notifying appropriate state and federal 
agencies and without notifying the bankruptcy court.
  Section 1105 requires a trustee to use reasonable and best efforts to 
transfer patients in the face of a health care business closing. This 
provision is both useful and necessary in that it outlines a trustee's 
duty with respect to a transfer of vulnerable patients.
  For all these reasons, I urge you to join me and my colleagues in 
supporting this bill which will protect the interests of patients in 
health care bankruptcies.
  Mr. LEAHY. Mr. President, I am pleased to join Senator Grassley and 
Senator Torricelli in introducing legislation to protect patient 
privacy when a hospital, nursing home, HMO or other institution holding 
medical records is involved in a bankruptcy proceeding that leads to 
liquidation.
  Of course, in the best case scenario any institution holding patient 
health care records would continue to follow applicable state or 
federal law requiring proper storage and safeguards. The fact is, 
however, under current law during a business liquidation an individual 
would have to wait until there has been a serious breach of their 
privacy rights before anyone stepped in to ensure that patient privacy 
is protected. Under current law it is questionable what protection 
these most sensitive personal records would have during a liquidation.
  The reality of this situation and the practical questions of what 
recourse an individual would have if their personal medical records 
were not properly safeguarded against a business that is going out of 
business makes this provision essential. Our legislation would

[[Page S3931]]

set in law the procedure that an institution holding medical records 
would have to follow during a liquidation proceeding.
  The bottom line is that we do not want to have to wait until there 
has been a breach of privacy before steps are taken to protect patient 
privacy. Once privacy is breached--there is nothing one can really do 
to give that back to an individual.
  I have been working on the overall issue of medical privacy for many 
years. I look forward to working with Senator Grassley and Senator 
Torricelli on this issue to make sure that patient privacy rights are 
protected in bankruptcy.
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