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Subchapter V Chapter 11 Bankruptcy for Health Care Practice

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Health care providers in the Tampa Bay area who own their private health care practices have essentially taken on the professional roles of both health care provider and small business owner. To be sure, health care practices are businesses that have many things in common with other types of businesses in Florida, including managing employee salaries, commercial rent or commercial mortgage payments, contracts with vendors including medical supply companies, insurance payments, and numerous other issues. Accordingly, there are situations in which health care practices, like other small businesses in the country, need to consider the possibility of filing for business bankruptcy. Health care practices might be concerned about the ways in which a business bankruptcy could affect their practice, and they could end up incurring more debt in the process, making it more difficult to get the business back on track.  Problems that could cause short term revenue loss include Medicare and Medicaid interruptions, employee embezzlement, and labor issues.

It is important for owners of health care practices to understand that businesses of all types face financial difficulties, and Chapter 11 bankruptcy can allow a business to reorganize debts while keeping the business doors open. If you own a health care practice and your business is struggling with debt, Chapter 11 bankruptcy could be a good option for your business. In particular, you may be able to file under Subchapter V, also known as the Small Business Reorganization Act (SBRA). We want to provide you with more information about this option, and to say more about health care practice bankruptcies.

Defining a Health Care Practice Under the Bankruptcy Code 

Is your health care practice considering bankruptcy? You will need to know if you have to meet any specific requirements as a “health care business” under U.S. bankruptcy law. Accordingly, before we talk specifically about Subchapter V bankruptcy for a health care practice, it is important to learn about how the U.S. Bankruptcy Code specifically treats health care practices in bankruptcy. Under the U.S. Bankruptcy Code, a health care business is defined as:

“[A]ny public or private entity (without regard to whether that entity is organized for profit or not for profit) that is primarily engaged in offering to the general public facilities and services for . . . the diagnosis or treatment of injury, deformity, or disease; and surgical, drug treatment, psychiatric, or obstetric care.”

The definition includes “any general or specialized hospital; ancillary ambulatory, emergency, or surgical treatment facility; hospice; home health agency,” and “any long-term care facility.” As you can see, the definition of a health care business is relatively broad. Why does it matter if your business is defined as a health care business under the U.S. Bankruptcy Code? You will need to work with a bankruptcy lawyer on specific considerations, including patient confidentiality and compliance with HIPAA regulations, payment for storage of patient medical records, and the appointment of a Patient Care Ombudsman (PCO). Non-profit health care businesses will also need to consider the business’s mission and its community relations during the bankruptcy case.

Subchapter V Bankruptcy Requirements 

Once a health care practice is prepared for bankruptcy and health care business requirements, you can determine whether you are eligible for Chapter 11 bankruptcy under Subchapter V. This specific type of Chapter 11 bankruptcy is designed to streamline the process for smaller businesses and makes it easier to obtain bankruptcy protection. To be eligible, the following must be true:

  • Must have secured and unsecured debt of less than $7,500,000 (if you file soon according to the CARES Act, otherwise the debt limit is $2,725,625);
  • Half of the debts must come from business activity; and
  • Principal business activity cannot be single-asset real estate.

A Subchapter V bankruptcy can move much more quickly than a traditional Chapter 11 bankruptcy, but it will be critical to work with a Florida bankruptcy lawyer to ensure that your health care business meets all requirements under the U.S. Bankruptcy Code.

Contact a Tampa Business Bankruptcy Lawyer 

Do you have questions about business bankruptcy for your health care practice? A Tampa bankruptcy attorney can speak with you today. Contact Tampa Law Advocates, P.A. for more information.

Resource:

law.cornell.edu/uscode/text/11/101

https://www.tampalawadvocates.com/filing-chapter-11-for-a-franchised-business/

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