Synergy Hematology-Oncology Medical Associates, In

OCR transcription for search; preserved printed pages are authoritative

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AUTHENTI
U.S. GOVER
INFORMA

CLERK U.S. Bani
CENTRAL DISTR: we ve

ee! -

ii

In re:

SYNERGY HEMATOLOGY-ONCOLOGY
MEDICAL ASSOCIATES, INC.,

Debtor(s).

l. Introduction

R. Brent Martin, a patient care
ombudsman appointed in this chapter 11
case, brings this motion to authorize him to
employ legal counsel. The court finds that
the bankruptcy code’ authorizes the
appointment of legal counsel, where
appropriate, for a patient care ombudsman.
Thus the motion is granted.

" Unless otherwise indicated, all chapter,

section and rule references are to the
Bankruptey Code, 11 U.S.C.A. §§ 101-1532
(West 2009} and to the Federal Rules of
Bankruptcy Procedure, Rules 1001-9036.

TED
ENT
IDN
GPO

Case 2:08-bk-29315-PC Doc173 Filed 01/04/10 Entered 01/04/10 18:12:28 Desc
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Page 1 of

FILED

DEG 2 9 209

CLERA ES, BANKRUPTCY COURT
phn DASTRa | OF CRE ORR
CaP wa

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA

Case No.: LAOQ8-29315S5B
Chapter 11

OPINION AUTHORIZING PATIENT
CARE OMBUDSMAN TO HIRE

LEGAL COUNSEL
Date: October 7, 2009
Time: 2:00 p.m.
Ctrm: 1575

Floor: 15th

ll. Relevant Facts

Synergy Hematology-Oncology
Medical Associates (“Synergy”) is a provider
of medical services specializing in
hematology and oncology medical services

including cancer screening, AIDS-HIV
treatment infusions, and diagnosis of
oncological and _ infectious diseases.
Synergy’s financial problems arise
principally from delays in Medicare

payments resulting from California’s state
budget problems and from changes in the
Medicare accounting and billing systems.

After the chapter 11 filing, the U.S.
Trustee appointed Martin as a patient care
ombudsman in this case, to monitor

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synergy’s quality of patient care while the
bankruptcy case is pending.

Martin ig an experienced healthcare
professional specializing in the restructuring
and organization of healthcare businesses.
Over the last several years, he has served
as a patient care ombudsman in five other
bankruptcy cases.

Based on this experience, Martin
concludes that he requires legal counsel in
this case to answer questions about his
duties under bankruptcy law and to assist in
the filing and service of documents on his
behalf.

Martin proposes to limit the fees of his
legal counsel to $15,000 for the first two
months of employment, and to $8,000 per
month thereafter. In addition, he proposes
to limit counsel's expenses to $4,000 per
month for the first two months and to $3,000
per month thereafter.

lll. Discussion

Unlike a debtor or a_ creditors’
committee, the bankruptcy code does not
expressly authorize a _ patient care
ombudsman to employ a_ professional
person such as a lawyer at the expense of
the estate. However, a more careful
examination is required befere the court can
conclude that such employment is
unauthorized.

A. Relevant Statutory Provisions
lf a debtor under chapter 7, 9 or 11 is

a health care business,” § 333 requires the
court to order the appointment of a patient

? Section 101({27A) defines “health care
business” as “any 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... .”

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care ombudsman within 30 days of the
commencement of the case.” The purpose
of the ombudsman is “to monitor the quality
of patient care and to represent the interests
of the patients of the health care business.”
such an appointment may be waived by the
court if it finds that “the appointment of such
ombudsman is not necessary for the
protection of patients under the specific facts
of the case.” /d.

B. Appointment of Legal
Counsel for Oficers

Section 327{a)’ authorizes a
bankruptcy trustee to employ attorneys with
the court's approval. For a chapter 11 case,
§ 1107 gives the same power to a debtor in
possession and § 1103 gives the same
power to a committee of creditors.

There is no provision in the
bankruptcy code specifying that any other
bankruptcy officer has this same authority.
Thus, neither § 333 nor any other
bankruptcy code provision specifies that a
patient care ombudsman may appoint legal
counsel at estate expense. While courts
have authorized patient care ombudsmen to
appoint legal counsel in several cases, there
is no published caselaw on the subject.

Patient care ombudsmen are not the
only bankruptcy professionals whose legal
representation at estate expense is not
covered by the bankruptcy code. When
Congress added § 333 in 2005 to provide for
the appointment of a patient care
ombudsman, it also enacted § 332 to
provide for the appointment of a consumer

* See § 333.
* ted.

* Section 327(a) provides in relevant part:
[T]he trustee, with the court’s approval,
may employ one or more attorneys . . .
that do not hold or represent an interest
adverse to the estate, and that are
disinterested persons, to represent or
assist the trustee in carrying out the
trustee’s duties under this titie.

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Case 2:08-bk-29315-PC Doc173 Filed 01/04/10 Entered 01/04/10 18:12:28 Des
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privacy ombudsman in a different set of
cases. Congress similarly did not provide
for the appointment of legal counsel for a
consumer privacy ombudsman.

No reported decision has been found
on the appointment of legal counsel for a
consumer privacy ambudsman.

Cc. Examiner Analogy

However, a much older ancillary
bankruptcy official is the examiner, whose
appointment is authorized by § 1104 in
chapter 11 cases. Like patient care
ombudsmen and consumer privacy
ombudsmen, the bankruptcy code also lacks
any provision authorizing an examiner to
employ legal counsel.

Notwithstanding the lack of statutory
authority for an examiner to hire legal
counsel, courts have frequently authorized
such employment, pursuant to § 105(a).’
See, e.g., in re Southmark Corp., 113 B.R.
280 (Bankr. N.D. Tex. 1990); In re
Tarkowski, 104 B.R. 828, 829 (Bankr. E.D.
Mich. 1989); In re First Republic Bank Corp.,
95 B.R. 58, 60 (Bankr. N.D. Tex. 1988); In re
Tighe Mercantile, 62 B.R. 995, 999-1000
(Bankr. S.D. Cal. 1986) (holding that, in
appropriate circumstances, a bankruptcy
court may rely on § 105{a) to authorize
examiners to employ professional persons).

While the court may not invoke
§ 105(a} to create substantive rights that are
not provided in the Code, the court may use
§ 105(a) to fashion orders that are
necessary or appropriate to further a
substantive provision of the bankruptcy
code. See, e.g., Browning v. Navarro, 887
F.2d 553, 559 (5th Cir.1989): United States

5 The examiner is a bankruptcy official

inherited from the Bankruptcy Act of 1898,
§ 168, added by the Chandler Act in 1938.

” Section 105(a} provides in relevant part:
The court may issue any order, process,
or judgment that is necessary or
appropriate to carry out the provisions of
this title.

Page 3 of 5

v. Sutton, 786 F.2d 1305, 1308 (5th
Cir.1986).

In| Southmark, the court made a
detailed examination of the facts of the case
and the role of the examiner to determine
that the appointment cf counsel for the
examiner was appropriate. See 113 B.R. at
281-84. The court in Tighe Mercantile made
a similar examination. See 62 B.R. at 999-
1001.

The role of a patient care ombudsman
is quite different from the role of an
examiner in a chapter 11 case. Under §
333(b), the duties of a patient care
ombudsman include:

(1) monitoring the quality of patient care
provided to patients of the debtor, to the
extent necessary under the
circumstances, including interviewing
patients and physicians;

(2) not later than 60 days after the date
of appointment, and not fess frequently
than at 60-day intervals thereafter, report
to the court after notice to the parties in
interest, at a hearing or in writing,
regarding the quality of patient care
provided to patients of the debtor; and

{3) if such ombudsman determines that
the quality of patient care provided to
patients of the debtor is declining
significantly or is otherwise being
materially compromised, file with the
court a motion or a written report, with
notice to the parties in interest
immediately upon making such
determination.

In consequence of these statutory
duties, a patient care ombudsman is
typically a medical doctor or other medical
professional with firsthand knowledge of
quality medical care.

Given the foregoing duties, a patient
care ombudsman's duties may differ
substantially from the interests of any of the
parties in interest, such as the debtor or a
committee of creditors. Consequently, a
patient care ombudsman should not be
required to rely on counsel for the debtor or
a committee for legal advice or fegal

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services in carrying out the duties of
ombudsman.

Thus, in an appropriate case, it is
important that a patient care ombudsman
have separate legal counsel to advise on the
duties under § 333 and to assist in making
reports to the court pursuant to the statutory
requirements.

Based on the foregoing, the court
finds that this is an appropriate case, within
the statutory language of § 105(a), to
authorize the appointment of counsel for the
patient care ombudsman *

Dated: December 29, 2009

/ | DFC

f
/

Hon. Samuel L. Bufford
Unitéd States Bankruptcy Judge

/

® Because the court finds that the

empioyment of counsel for the ombudsman in
this case is appropriate under § 105, it need
not address also whether such employment
is necessary.

CF

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NOTE TO USERS OF THIS FORM:

1) Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.

2) The title of the judgment or order and all service information must be filled in by the party lodging the order.
3) Category I. below: The United States trustee and case trustee (if any) will always be in this category.

4) Category Il. below: List ONLY addresses for debtor {and attorney), movant {or attorney) and person/entity
(or attorney) who filed an opposition to the requested relief. DO NOT list an address if person/entity is listed in
category I.

NOTICE OF ENTERED ORDER AND SERVICE LIST

Notice is given by the court that a judgment or order entitled (specify) OPINION was entered on the
date indicated as “Entered” on the first page of this judgment or order and will be served in the
manner indicated below:

| SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF”) - Pursuant to
controlling General Order(s) and Local Bankruptcy Rule(s), the foregoing document was served
on the following person(s) by the court via NEF and hyperlink to the judgment or order. As of
December 29, 2009, the following person(s) are currently on the Electronic Mail Notice List for this
bankruptcy case or adversary proceeding to receive NEF transmission at the email address(es)
indicated below.

Thomas J. Polis, Esq. tom@polis-law.com
United States Trustee ustpregion16.la.ecf@usdoj.gov
Russell Clementson, Esq. russell. clementson@usdoj.gov
CJ Service information continued on attached page

Il. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment
or order was sent by United States Mail, first class, postage prepaid, to the following person(s) and/or
entity(ies) at the address(es) indicated below:

Synergy Hematology-Oncology Medical Associates, Inc.
5901 West Olympic Boulevard

Suite 420

Los Angeles, California 90036

im Service information continued on attached page

lll. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this
judgment or order which bears an “Entered” stamp, the party lodging the judgment or order will serve
a complete copy bearing an “Entered” stamp by U.S. Mail, overnight mail, facsimile transmission or
email and file a proof of service of the entered order on the following person(s) and/or entity(ies) at
the address(es), facsimile transmission number(s), and/or email address(es) indicated below:

LJ Service information continued on attached page

ADDITIONAL SERVICE INFORMATION (if needed):

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