# La Familia Primary Care, P.C., a New Mexico Professional Corporation

> United States Bankruptcy Court, D. New Mexico · August 17, 2023

URL: https://www.frixlaw.com/law-library/cases/10460008

## Case

- **Court:** United States Bankruptcy Court, D. New Mexico
- **Decided:** August 17, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW MEXICO

In re:

LA FAMILIA PRIMARY CARE, P.C., Case No. 23-10566-t11

Debtor.

OPINION

Before the Court is Debtor’s motion for a ruling that no patient care ombudsman need be
appointed in this bankruptcy case. The United States Trustee (“UST”) objects and contends that
an ombudsman is necessary. The Court took evidence and heard arguments of counsel at a final
hearing. It now rules that appointment of an ombudsman is not necessary for the protection of
patients.
A. Facts.1
The Court finds:2
La Familia Primary Care, P.C. (“La Familia” or “Debtor”) is a professional corporation
formed in 2006. It provides primary medical care to patients in and around Raton, New Mexico.
Dr. Misbah Zmily owns Debtor and is its only medical doctor. Dr. Zmily graduated from the
University of Jordan in 1991. He did a residency in internal medicine at the University of Illinois
and was awarded a medical license in 1996. He began his medical practice in Raton, a town of
about 6,000 residents in northern New Mexico. Dr. Zmily has practiced in and around Raton ever
since.

1 The Court takes judicial notice of its docket See St. Louis Baptist Temple, Inc. v. Fed. Deposit
Ins. Corp., 605 F.2d 1169, 1172 (10th Cir. 1979) (a court may sua sponte take judicial notice of
its docket and of facts that are part of public records).
2 Some of the Court’s findings are in the discussion section of the opinion. They are incorporated
by this reference.
Dr. Zmily testified that five years ago there were eight doctors in the Raton area, but that
now he is the only one left.
Dr. Zmily is board certified in internal medicine and, through Debtor, provides office-based
primary medical care for adults. In addition to Dr. Zmily, Debtor employs a physician’s assistant

and a registered nurse practitioner. Debtor also provides medical care to a nursing home in
Springer, New Mexico (population 1,300) and a Raton nursing home. Finally, Debtor has a
contract with a local high school to visit once a week and provide medical care to the students. A
large percentage of Debtor’s patients are on Medicare3 or Medicaid.
In 2020, pharmaceutical company BioLab Sciences approached Dr. Zmily about its
amniotic fluid-based injections for the treatment of osteoarthritis. BioLab provided Dr. Zmily with
literature detailing FDA approval of the fluid and Medicare’s conditional approval of the treatment
for certain patients. Dr. Zmily was persuaded that the injections might help some of his patients,
especially those who were not good candidates for surgery. He began offering the procedure to
these patients. If Dr. Zmily determined that a patient might benefit from the amniotic fluid-based

injections and the patient was interested, Dr. Zmily would submit his patient notes to BioLab for
pre-approval. If BioLab approved, it would ship the medication to Debtor. BioLab charged Debtor
about $4,000 for each treatment. Dr. Zmily would administer the treatment and bill Medicare for
the approved cost, about $4,400. Medicare paid the bills as submitted. La Familia made about
$300-500 per injection.

3 Medicare is a governmental national health insurance program administered by the Centers for
Medicare and Medicaid Services, an agency of the Department of Health and Human Services.
For ease of reference, it and the administering agency will be called “Medicare.”
Some of Dr. Zmily’s patients showed marked improvement from the BioLab treatments.
Dr. Zmily believed and still believes that the injections provided a substantial benefit to his elderly
osteoarthritic patients. Dr. Zmily also testified that the patients suffered few or no side effects.
Medicare, however, came to the opposite conclusion. In January 2022, Medicare notified

Debtor that it would no longer pay for BioLab’s amniotic-fluid treatment. Debtor promptly stopped
administering it. That was not the end of the story, however. Under Medicare’s reimbursement
policies and procedures, Medicare asserted the right to “claw back” all the payments it had ever
made to Debtor for the BioLab treatments, including the money Debtor had paid to Biolab. The
claimed clawback totaled about $3.6 Million, plus interest. To collect the money, Medicare began
setting off what it owed Debtor for treating Medicare patients. The setoff caused Debtor to lose
most of its cash flow, prompting the filing of this bankruptcy case on July 19, 2023.
To date, there have been no patient complaints about the BioLab injection treatments, nor
any reason to think that any of Debtor’s patients might have claims against Debtor because of the
injections.

Debtor enjoys a good reputation in the community. Neither Dr. Zmily, its other
practitioners, nor Debtor have had any malpractice complaints against them since Debtor’s
inception. There is no evidence of substandard patient care, improper record-keeping, or privacy
violations. There is no evidence that the bankruptcy filing has interrupted or adversely affected
Debtor’s patient care.
Based on the budget submitted with its cash collateral motion, Debtor operates on a very
thin margin and does not have regular excess cash with which to pay for additional professional
services. Additional administrative expense could jeopardize Debtor’s reorganization and could
cause it to shut down. Loss of “the last doctor in town” would be a severe blow to Raton’s residents,
as well as the nursing home residents in Springer and Raton who depend on Dr. Zmily and Debtor’s
services.
B. Patient Care Ombudsman.
Section 333(a)(1)4 provides:

If the debtor in a case under chapter 7, 9, or 11 is a health care business, the court
shall order, not later than 30 days after the commencement of the case, the
appointment of an ombudsman to monitor the quality of patient care and to
represent the interests of the patients of the health care business unless the court
finds that the appointment of such ombudsman is not necessary for the protection
of patients under the specific facts of the case.

The Court must determine whether Debtor is a health care business and, if so, whether it is
necessary to appoint a patient care ombudsman to protect Debtor’s patients.
C. Debtor is not a “health care business.”
“[H]ealth care business” is defined in § 101(27A):
The term “health care business”--
(A) means 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--
(i) the diagnosis or treatment of injury, deformity, or disease; and
(ii) surgical, drug treatment, psychiatric, or obstetric care; and
(B) includes--
(i) any--
(I) general or specialized hospital;
(II) ancillary ambulatory, emergency, or surgical treatment
facility;
(III) hospice;
(IV) home health agency; and
(V) other health care institution that is similar to an entity
referred to in subclause (I), (II), (III), or (IV); and
(ii) any long-term care facility, including any--
(I) skilled nursing facility;
(II) intermediate care facility;
(III) assisted living facility;
(IV) home for the aged;
(V) domiciliary care facility; and

4 Unless otherwise indicated, statutory references are to 11 U.S.C.
(VI) health care institution that is related to a facility referred to in
subclause (I), (II), (III), (IV), or (V), if that institution is primarily
engaged in offering room, board, laundry, or personal assistance
with activities of daily living and incidentals to activities of daily
living.

The definition of health care business was added as part of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Section 101(27A) is not easy to
parse. In particular, courts applying the definition have particularly with two questions: first, must
a debtor come within both subsections (A) and (B) to be a health care business, or is it enough to
come within either subsection; and second, if it is enough to come within either subsection (A) or
(B) and a debtor seems to qualify under subsection (A), must the debtor’s business be similar to
the businesses listed in subsection (B)?
As a preliminary matter, it is useful to know that the Bankruptcy Code’s drafters, when
listing nonexclusive examples of a defined term, sometimes write “includes A, B, C, and D” rather
than “includes A, B, C, or D.” For example, § 1112(b)(4) contains a nonexclusive list of “causes”
for dismissal or conversion of a chapter 11 case. After the penultimate example, the drafters used
“and” rather than “or.” For other examples of this drafting style, see §§ 101(31(E), 101(49),
330(a)(3), 362(c)(3)(C), 503(b)(1), 557(d), 707(a), 741(4)(A), 761(10)(A), 783(b), 1208(c),
1521(a), and 1527. While this usage has been criticized, see, e.g., In re TCR of Denver, LLC, 338
B.R. 494, 498 (Bankr. D. Colo. 2006), it makes as much sense to end a nonexclusive list of
examples with “and” as with “or.” In this context, “and” means “and also includes,” while “or”
means “or, as another example.” Both are intelligible.
1. A debtor coming within subsection (A) or (B) is a health care business. Case law
is split on whether a debtor must satisfy both subsections (A) and (B) to qualify as a health care
business. In In re Banes, D.D.S., 355 B.R. 532, 534 (Bankr. N.D.N.C. 2006), the court found that
[“[b]ecause every section of this statute is connected by the conjunctive, a health care business
must meet the requirements of every subsection to require the appointment of an ombudsman.”
Similarly, the court in In re William L. Saber, M.D., P.C., 369 B.R. 631, 636 (Bankr. D. Colo.
2007) held that “it is important to note the subsection of § 101(27)(A) and of subsubsection (B)

are connected by the conjunctive. Thus, a debtor who is a “health care business” must meet every
requirement under both subsections for a patient care ombudsman to be appointed.”
In contrast, in court in In re Aknouk, 648 B.R. 755 760 (Bankr. S.D.N.Y. 2023) held that
“there is nothing in the text to indicate that the statute should be read conjunctively.” Likewise, in
In re Smiley Dental Arlington, PLLC, 503 B.R. 680, 685 (Bankr. N.D. Tex. 2013), the court held
that “[t]he language in section 101(27A) (B) is inclusive of the specific entities listed and other
similar entities, but not exclusive of other business entities meeting the test under section
101(27A)(A).”
The Court agrees with Aknouk and Smiley Dental that an entity is a health care business if
it comes within either subsection (A) or (B). If all the “ands” in § 101(27A) are construed as

conjunctions, very few entities would qualify as health care businesses. For example, homes for
the aged, hospices, and home health agencies do not provide facilities and services for the
treatment of injury, deformity, or disease. They would not be health care businesses under this
construction. More to the point, the strictly “conjunctive” reading would require that hospitals also
be long-term care facilities, and vice versa, as well as qualifying under subsection (A). The number
of health care businesses under the conjunctive interpretation approaches zero.
Because, as noted above, the Code drafters sometimes used “and” to mean “and also
includes” when listing examples of things that are “included” in a defined term, the better
construction of § 101(27A) is:
The term “health care business”--
(A) means 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--
(i) the diagnosis or treatment of injury, deformity, or disease; and5
(ii) surgical, drug treatment, psychiatric, or obstetric care; and
(B) also includes--
(i) any--
(I) general or specialized hospital;
(II) ancillary ambulatory, emergency, or surgical treatment
facility;
(III) hospice;
(IV) home health agency; and also includes
(V) other health care institution that is similar to an entity
referred to in subclause (I), (II), (III), or (IV); and also includes
(ii) any long-term care facility, including any--
(I) skilled nursing facility;
(II) intermediate care facility;
(III) assisted living facility;
(IV) home for the aged;
(V) domiciliary care facility; and also includes
(VI) health care institution that is related to a facility referred
to in subclause (I), (II), (III), (IV), or (V), if that institution is primarily engaged in
offering room, board, laundry, or personal assistance with activities of daily living
and incidentals to activities of daily living.

Under this construction, the word “includes” at the beginning of subsection (B) applies to
“health care business,” rather than to subsection (A). Thus, the section should be read: “health care
business” means [the definition in subsection (A)] and also includes [the examples of hospitals
and long-term care facilities in subsection (B)]. That is the construction that makes the most sense.
The drafters apparently wanted § 331 to apply to hospitals, long-term care facilities, and also to
debtors coming within the subsection (A) definition.

5 The Court considered whether Congress intended this particular “and” to be an “or.” Because it
is not at the end of a nonexclusive list, however, and because it restricts the scope of health care
businesses subject to the appointment of a patient care ombudsman, the Court concludes that
Congress intended the conjunctive here, not the disjunctive. The case law, discussed below,
uniformly agrees.
2. Debtors coming within subsection (A) need not be similar to hospitals or long-term
care facilities. The case law also is split on whether debtors that come within subsection (A) must
be similar to the businesses listed in subsection (B). In Banes, for example, the court held that “the
types of businesses listed [in subsection B] are all of such a similar nature in that they provide both

housing and treatment ... that it is difficult to imagine that the legislature would have intended a
business that is so fundamentally different, such as an outpatient dental practice, to be read into
the statute.” 355 B.R. at 535. Similarly, in In re 7-Hills Radiology, LLC, 350 B.R. 902, 905 (Bankr.
D. Nev. 2006), the court held that “subparagraph (B) of Section 101(27A) would seem to indicate
a restrictive range for health care businesses.” Finally, the court in In re Medical Associates of
Pinellas, L.L.C., 360 B.R. 356, 361 (Bankr. M.D. Fla. 2007)), held that “the examples included in
subparagraph (B) appear to contemplate something more than a doctor’s office . . . .” for an entity
that qualifies under subsection (A).
Disagreeing with this interpretation, the Smiley Dental court held:
At the Hearing, Debtors and the U.S. Trustee advocated that the court should follow
the second line of cases applying section 101(27A) and read into the statute an
element of direct and ongoing contact with patients while providing shelter and
sustenance. By comparing the similarities of the entities listed in subparagraph (B)
of section 101(27A), this second line of cases has created an inpatient treatment
requirement for health care businesses.
. . . .
Requiring this judicially created element, which does not appear in section
101(27A), misconstrues the statute. The language in section 101(27A)(B) is
inclusive of the specific entities listed and other similar entities, but not exclusive
of other business entities meeting the test under section 101(27A)(A). See 11 U.S.C.
§ 102(3) (“In this title ... ‘includes’ and ‘including’ are not limiting.”) . . . .

503 B.R. at 687-88. See also Aknouk, 648 B.R. at 763 (“the court declines to read an inpatient
services requirement into the definition of a health care business in section 101(27A)”).
Again agreeing with Aknouk and Smiley Dental, the Court does not construe subsection
(A)’s application to be limited to businesses “like” those enumerated in subsection (B). For one
thing, it is hard to know what the subsection (B) business are “like.” Some are in-patient care
facilities (hospitals and homes for the aged), but others, e.g., [home] hospice, home health

agencies, and ambulatory surgical treatment facilities, are not. Furthermore, if Congress intended
to limit the definition of health care business to entities like the ones in subsection (B) (whatever
that might be), it could have omitted subsection (A) entirely; the “catch-all” subclauses (B)(i)(V)
and (B)(ii)(VI) would have been sufficient. The noscitur a sociis6 interpretation of 7-Hills
Radiology is interesting but ultimately unpersuasive because the businesses listed in subsection
(B) are not all similar to each other.
3. Applying subsection (A) to Debtor. The UST does not contend that Debtor comes
within subsection (B), and the Court agrees. The UST does argue, however, that Debtor comes
within subsection (A).
As stated in Pinellas:

subsection (A) of the definition of health care business in section 101(27A) requires
the existence of the following four elements in order for a debtor to qualify as a
“health care business”:
1. The debtor must be a public or private entity;
2. The debtor must be primarily engaged in offering to the general public facilities
and services;
3. The facilities and services must be offered to the public for the diagnosis or
treatment of injury, deformity or disease; and
4. The facilities and services must be offered to the public for surgical care, drug
treatment, psychiatric care or obstetric care.

6 “Roughly,” [noscitur a sociis means] ‘it is known from its associates.’ . . . . Under this canon,
courts look to the language surrounding—or associated with—the language in question to
determine the meaning of a disputed word or phrase.” 350 B.R. at 904.
360 B.R. at 359; see also Saber, 369 B.R. at 636-37 (citing and following Pinellas); In re Alternate
Family Care, 377 B.R. 754,757 (Bankr. S.D. Fla. 2007) (same); Smiley Dental, 503 B.R. at 687
(same); Aknouk, 648 B.R. at 763 (same).
Debtor clearly satisfies the first three elements. The question is whether Debtor provides

facilities and services to the general public for surgical care, drug treatment, psychiatric care, or
obstetric care. That is more doubtful. Debtor does not provide surgical care, drug treatment,7 or
obstetric care, which leaves only psychiatric care. Dr. Zmily testified that he sometimes prescribes
antidepressants to patients. While the UST argued that prescribing antidepressants is providing
psychiatric care, that seems a slender reed. Dr. Zmily is not a psychiatrist or psychologist. Debtor
does not provide counseling services. Most people do not view primary care physicians as
providing psychiatric care. It is a close question, but the Court rules that prescribing
antidepressants, without more, is not tantamount to providing psychiatric care. Debtor, therefore,
is not a health care business.
D. Appointing a Patient Care Ombudsman is Not Necessary to Protect Patients.

Even if Debtor were a health care business, the Court would have the discretion not to
appoint a patient care ombudsman if the appointment was “not necessary for the protection of
patients under the specific facts of the case.” § 333(a)(1).
To determine the necessity of an ombudsman, courts weigh the following factors:
1. The cause of the bankruptcy;
2. The presence and role of licensing or supervising entities;
3. Debtor’s past history of patient care;
4. The ability of the patients to protect their rights;

7 “The Court views Congress’ reference to “drug treatment” as applying to facilities that treat drug
addiction or abuse. The interpretation suggested by the U.S. Trustee [the writing or dispensing of
prescriptions] would render meaningless the balance of section 101(27A)(A)(ii) because virtually
all areas of medical treatment involve the prescription of drugs . . . .” Pinellas, 360 B.R. at 360
n.3; Smiley Dental, 503 B.R. at 686 (quoting Pinellas with approval).
5. The level of dependency of the patients on the facility;
6. The likelihood of tension between the interests of the patients and
the debtor;
7. The potential injury to the patients if the debtor drastically reduced
its level of patient care;
8. The presence and sufficiency of internal safeguards to ensure
appropriate level of care; and
9. The impact of the cost of an ombudsman on the likelihood of a
successful reorganization.

Alternate Family Care, 377 B.R. at 758; see also In re Valley Health Sys., 381 B.R. 756, 761
(Bankr. C.D. Cal. 2008) (citing and following Alternate Family Care); Aknouk, 648 B.R. at 761
(citing Alternate Family Care and Valley Health). “The weight to be accorded to each of the
Alternate Family Care factors in making a determination whether to appoint a patient care
ombudsman is left to the sound discretion of the court.” Valley Health, 381 B.R. at 761.
Courts also considers these additional factors:
1. The high quality of debtor’s existing patient care;
2. The debtor’s financial ability to maintain high quality patient care;
3. The existence of an internal ombudsman program to protect the
rights of patients, and/or
4. The level of monitoring and oversight by federal, state, local, or
professional association programs which renders the services of an ombudsman
redundant.

Valley Health at 761, citing 3 Collier on Bankruptcy ¶ 333.02, at 333–4 (15th ed. 2007).
“Debtors found to be health care businesses bear the burden of establishing that the
appointment of a Patient Care Ombudsman is not necessary.” Aknouk, 648 B.R. at 761, citing In
re Starmark Clinics, LP, 388 B.R. 729, 734 (Bankr. S.D. Tex. 2008).
Assuming for the sake of argument that Debtor is a health care business, the Court will

weigh each of the 13 factors to determine whether the appointment of a patient care ombudsman
is necessary:
Factor Discussion
The cause of the bankruptcy. Debtor filed this case because Medicare
changed its position on amniotic fluid-based
injections and now claims that Debtor owes it
$3.6 Million, an amount Debtor clearly cannot
pay. There is no evidence of a patient care-
related cause for the filing.
The presence and role of licensing or Debtor is supervised by the New Mexico
supervising entities. Medical Board, Medicare, the U.S.
Department of Health and Human Services,
and other state and federal agencies. There is
no evidence that Debtor’s patient care has been
questioned by any board or regulatory agency.
Debtor’s history of patient care. Debtor’s patient care history is good; no
malpractice claims have ever been asserted
against Debtor or its professions since Debtor
began business in 2006.
The ability of the patients to protect their Patients in New Mexico can and do protect
rights. their rights by bringing medical malpractice
claims; there is no evidence that Debtors’
patients are particularly vulnerable or unable to
so hold Debtor accountable.
The level of dependency of the patients on the Patients depend on Debtor remaining open
facility. because Dr. Zmily is the only practicing non-
hospital physician in Raton; care of patients in
and around the Raton area would suffer if the
Debtor shut its doors.
The likelihood of tension between the interests There is no evidence of any tension between
of the patients and the debtor. Debtor’s patients and Debtor. Rather, Debtor
needs its patients, and its patients need Debtor.
The potential injury to the patients if the debtor Patients would be harmed if Debtor reduced its
drastically reduced its level of patient care. level of patient care because they would have
to travel long distances to find other providers.
The presence and sufficiency of internal Dr. Zmily testified that internal safeguards are
safeguards to ensure appropriate level of care. in place to ensure an appropriate level of
patient care. Debtor uses FDA approved
software.
The impact of the cost of an ombudsman on the The Court has no evidence about what an
likelihood of a successful reorganization. ombudsman would charge or do. In the Court’s
only other experience with a patient care
ombudsman, the charge was substantial. See In
re Santa Fe Medical Group, LLC, 557 B.R.
223, 225 (Bankr. D.N.M. 2016).
The high quality of debtor’s existing patient The current level of patient care seems to be at
care. an acceptably high level. The UST argues that
Debtor’s decision to treat patients with
BioLab’s amniotic fluid-based injections casts
doubt on Debtor’s patient care. The Court
disagrees. It is beyond the scope of this
contested matter to determine whether the
injection provided a medical benefit, but the
uncontradicted evidence is that Dr. Zmily
observed a substantial benefit to his patients.
Because of that, and because there have been
no claims of harm or adverse side effects,
administering the injections does not reflect
adversely on Debtor’s patient care.
The debtor’s financial ability to maintain high If the Debtor is not undone by excessive
quality patient care. administrative expenses, it should have enough
money to reorganize and maintain high quality
patient care.
The existence of an internal ombudsman There is no such program. Debtor’s size does
program to protect the rights of patients. not warrant it.
The level of monitoring and oversight by Medical practice in the United States is heavily
federal, state, local, or professional association regulated at the state and federal level.
programs which renders the services of an
ombudsman redundant.

The factors weigh heavily against appointing a patient care ombudsman. Debtor provides
no inpatient treatment, like a hospital or long-term care facility. Unlike hospital patients or nursing
home residents, Debtor’s patients do not face the prospect of being turned out on the street if
Debtor fails to reorganize. Patient care is good. Debtor will be squeezed for cash until Medicare
starts paying post-petition bills. Even then, the practice will not be particularly profitable. The cost
of a patient care ombudsman is unknown but could be substantial. Debtor can ill afford any
additional administrative expenses.
While bankruptcy courts have no hesitation appointing patient care ombudsmen in hospital
and nursing home cases, they are reluctant to do so with small businesses like Debtor. See, e.g.,
Smiley Dental, 503 B.R. at 688 (dentist); Saber, 369 B.R. at 638 (plastic surgeon); Aknouk, 648
B.R. at 764 (dentist); Pinellas, 360 B.R. at 361-62 (administrative support for doctors); Banes, 355
B.R. at 535 (dentist). It is not an issue of statutory construction, but rather the conclusion that, with
a typical small doctor’s or dentist’s office, the benefit of an ombudsman (if any), is substantially
outweighed by the attendant expense and disruption.
CONCLUSION
The Court finds and concludes that Debtor is not a health care business. Alternatively, the
Court finds and concludes that the appointment of a patient care ombudsman 1s not necessary for
the protection of Debtor’s patients. By a separate order, the Court will grant Debtor’s motion to
dispense with the appointment of a patient care ombudsman.

Lhth.,
Hon. David T. Thuma
United States Bankruptcy Judge
Entered: August 17, 2023
Copies to: electronic notice recipients

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10460008. Public record. Not legal advice.