Sameh H. Aknouk, Dental Services, P.C.

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

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In re: FOR PUBLICATION

SAMEH H. AKNOUK, DENTAL SERVICES, P.C., Chapter 11

Debtor. Case No. 22-11651 (MG)

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MEMORANDUM OPINION AND ORDER DENYING THE UNITED STATES

TRUSTEE’S MOTION FOR APPOINTMENT OF A PATIENT CARE OMBUDSMAN

UNDER 11 U.S.C. §§ 101(27A) AND 333

A P P E A R A N C E S:

KIRBY AISNER & CURLEY LLP

Attorneys for the Debtor

700 Post Road, Suite 237

Scarsdale, New York 10583

By: Erica R. Aisner, Esq.

OFFICE OF THE UNITED STATES TRUSTEE

U.S. Federal Office Building

201 Varick Street, Room 1006

New York, NY 10014

By: Shannon Anne Scott, Esq.

MARTIN GLENN

CHIEF UNITED STATES BANKRUPTCY JUDGE

Pending before the Court is the motion of the United States Trustee (“US Trustee”) for

appointment of a patient care ombudsman in this Subchapter V, Chapter 11 case. (“Motion,”

ECF Doc. # 33.) The debtor, Sameh H. Aknouk Dental Services, P.C. (“Debtor”) filed an

objection to the Motion. (“Objection,” ECF Doc. # 38.) A hearing was held on the Motion on

February 16, 2023. The Motion raises the important question whether the Court should deny the

Motion for appointment of an ombudsman in an SBRA case where adding administrative

expense may make it considerably more difficult for the Debtor successfully to restructure and

no issues relating to patient care have arisen.

For the reasons explained below, the Court SUSTAINS the Debtor’s Objection and

DENIES the Motion WITHOUT PREJUDICE.

I. BACKGROUND

The US Trustee filed the Motion pursuant to section 333(a)(1) of the Bankruptcy Code

(the “Code”), which requires the Court to order the appointment of an ombudsman to monitor the

quality of patient care (a “Patient Care Ombudsman”) where the debtor is a health care business,

as defined by section 101(27A), filing for chapter 7, 9, or 11 relief, unless the Court finds that

such appointment is not necessary for the protection of patients. See 11 U.S.C. § 333(a)(1). The

Debtor did not affirmatively acknowledge that it is a health care business in its voluntary

petition. (Motion at 1; see also “Petition,” ECF Doc. # 1, at 2.) According to the declaration of

Dr. Sameh H. Aknouk annexed to the Debtor’s Objection (“Aknouk Declaration,” ECF Doc. #

38-1) and Dr. Sameh Aknouk’s Section 341 Meeting testimony cited in the Declaration of

Shannon Anne Scott annexed to the Motion (“Scott Declaration,” ECF Doc. # 33-1), the Debtor

is a family owned and operated full-service general and cosmetic dentistry practice which has

been in operation for approximately twenty-five years and services between 1,000 and 2,000

patients. (Aknouk Declaration ¶ 2; Scott Declaration ¶ 4.) The Debtor currently operates as a

debtor-in-possession and manages patient record keeping using a software program called

“Dentrix.” (Motion at 2.)

The Debtor initiated bankruptcy proceedings due to mounting legal costs stemming from

a labor dispute in conjunction with declining revenues due to the COVID-19 pandemic.

(Aknouk Declaration ¶ 6.) According to the Debtor’s declaration filed pursuant to Local Rule

1007-2 (“Rule 1007-2 Declaration,” ECF Doc. # 2), the Debtor had a collective bargaining

agreement (the “CBA”), now terminated, with Local 553, International Brotherhood of

Teamsters (the “Union”) at the time Dr. Aknouk began operating the dental practice, which the

Debtor renewed several times over the years. (Rule 1007-2 Declaration ¶ 4.) The Debtor claims

it was the Debtor’s understanding that only full-time employees were eligible for certain benefits

under the CBA. (Id.) The Union’s audit firm conducted regular audits of the Debtor’s payroll

records to confirm proper reporting to the Union, and, following the audit firm’s 2018 payroll

audit, the Union demanded approximately $98,378.30 for unpaid benefits to part-time

employees. (Id. ¶¶ 5–7.)

The Union commenced an action in the United States District Court for the Eastern

District of New York on August 24, 2018 (the “District Court Action”) seeking to recover

allegedly delinquent contributions plus 18% interest and attorneys’ fees. (Id. ¶ 8.) In February

2021, the National Labor Relations Board investigated the Union’s claims and sought recovery

from the Debtor of $232,139 (the “NLRB Action”), which the Debtor believes would need to be

paid in addition to any judgment or settlement arising out of the District Court Action. (Id. ¶ 9.)

The Debtor failed to file an answer in the NLRB Action by the deadline, which was sometime in

November 2022, although Debtor does not provide an exact date. The NLRB subsequently

moved for entry of a default judgment. (Id.) The Debtor denies that it has any liability to the

Union but seeks Chapter 11 bankruptcy protections in order to restructure its affairs. (Id. ¶ 10–

11.)

A. The Debtor’s Status as a Health Care Business

The US Trustee claims that the Debtor is a health care business within the meaning of

section 101(27A) despite the Debtor not identifying itself as such in its voluntary petition.

(Motion at 7–9.) The US Trustee relies on information presented on the Debtor’s website as well

as Dr. Aknouk’s testimony to argue that the Debtor offers surgical treatments to the general

public at its facilities. (Id.) Specifically, the US Trustee notes that the Debtor’s website

advertises dental procedures including root canals, crowns, tooth extraction, and dental implants

to the general public and that Dr. Aknouk testified to administering local anesthesia to patients

for such procedures. (Id. at 8.) The Debtor objects to the US Trustee’s claim that it is a health

care business within the meaning of section 101(27A) on the grounds that it does not provide

inpatient services and is therefore not the type of business described in section 101(27A)(B).

(Objection ¶¶ 5–6.)

B. The Necessity of a Patient Care Ombudsman

The US Trustee states that a Patient Care Ombudsman is necessary because the Debtor’s

record keeping software, Dentrix, does not provide any oversight or monitoring of the quality of

Debtor’s patient services. (Motion at 2.) The US Trustee argues that such oversight is required

because a decline in the quality of patient care could reduce the Debtor’s income, which is

essential to funding the Debtor’s reorganization efforts. (Id. at 10.) The US Trustee further

claims that the cost of appointing an ombudsman would not render it unnecessary because

Debtor has sufficient cash on hand and a busy practice and because industry-wide revenues have

substantially recovered to pre-pandemic levels. (Id. at 10–11.) The Debtor objects to the US

Trustee’s claim that a Patient Care Ombudsman is necessary even if it were properly classified as

a health care business because, among other reasons, the cause of its bankruptcy is unrelated to

patient care quality, it is subject to licensing and supervising authorities, and it has no prior

history of deficient patient care. (Objection ¶¶ 7–16.) At a hearing in this matter on January 4,

2023, counsel for the Debtor indicated that the parties had tried to reach a compromise whereby

the subchapter V trustee, Yann Geron, (the “Subchapter V Trustee”) would serve as the Patient

Care Ombudsman, but Debtor’s counsel indicated that proposal had not been acceptable to the

US Trustee.

II. LEGAL STANDARD

Section 333(a)(1) of the Code provides:

(a)(1) 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.

11 U.S.C. § 333(a)(1) (emphasis added).

Compensation and reimbursement of an ombudsman is allowable as an administrative

expense pursuant to section 503(b)(2) of the Code. 11 U.S.C. § 503(b)(2). The last italicized

clause permits the Court to deny the motion for appointment of an ombudsman if it is “not

necessary for the protection of patients under the specific facts of the case.” Thus, the Court

must decide whether the facts in this case make the appointment unnecessary.

A. The Debtor’s Status as a Health Care Business

The definition of a “health care business” is defined in 11 U.S.C. § 101(27A) as follows:

(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 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 center;

(IV) home for the aged;

(V) domiciliary care facility; and

(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.

11 U.S.C. § 101(27A).

Courts determine whether a debtor is a health care business under section 101(27A) by

applying a four-part test (the “Pinellas test” or “Pinellas elements”):

The leading case on § 101(27A)(A) is In re Medical Assc. Of Pinellas, LLC . . .

[which held that] (1) the debtor must be a private or public entity; (2) the debtor

must be primarily engaged in offering to the general public facilities and services;

(3) the facilities and services must be for the diagnosis or treatment of injury,

deformity or disease; and (4) the facilities must be for surgical care, drug treatment,

psychiatric care or obstetric care.

In re Alternate Family Care, 377 B.R. 754, 757 (Bankr. S.D. Fla. 2007) (citing In re Med.

Assocs. of Pinellas, LLC, 360 B.R. 356, 359 (Bank. M.D. Fla. 2007)).

Courts are divided over the existence of an implicit fifth factor—whether a business is an

inpatient facility. The debate hinges on whether the statute requires the Debtor to meet the

requirements of subsections A and B of section 101(27A), which would require the Debtor to be

both a medical provider and an inpatient provider, or only subsection A, which would not require

the debtor to be an inpatient provider. Contrast, e.g., In re Anne C. Banes, D.D.S., P.L.L.C., 355

B.R. 532, 534-35 (Bankr. M.D.N.C. 2006) (finding that a debtor’s dental practice was not a

health care business because it did not “provide patients with shelter and sustenance in addition

to medical treatment” or “fit within the categories of health care businesses described in” section

101(27A)(B)) (citing In re 7-Hills Radiology, LLC, 350 B.R. 902, 904 (Bankr. D. Nev. 2006))

with In re Smiley Dental Arlington, P.C., 503 B.R. 680, 687 (Bankr. N.D. Tex. 2013)

(“Requiring this judicially created element . . . 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).”).

B. The Necessity of a Patient Care Ombudsman

In determining whether a Patient Care Ombudsman is necessary under the specific facts

of a case, courts have examined the following nine non-exclusive 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;

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.

In re Valley Health Sys., 381 B.R. 756, 761 (Bankr. C.D. Cal. 2008); Alternate Family Care, 377

B.R. at 758.

“Other factors to be considered by the court include: (1) the high quality of the

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, 381 B.R. at 761 (citing 3 COLLIER ON BANKRUPTCY P 333.02, at 333-4 (Alan N.

Resnick & Henry J. Sommer eds., 15th ed. 2007)).

Section 333 requires the appointment of a Patient Care Ombudsman unless a court finds

such appointment is not necessary. 11 U.S.C. § 333. Debtors found to be health care businesses

bear the burden of establishing that the appointment of a Patient Care Ombudsman is not

necessary. See In re Starmark Clinics, LP, 388 B.R. 729, 734 (Bankr. S.D. Tex. 2008) (“The

text of Section 333(a)(1) of the Bankruptcy Code makes clear that the burden of demonstrating

that appointment of an ombudsman is not necessary for the protection of patients is on any party

opposing the appointment of an ombudsman.”).

III. DISCUSSION

In this case, the Court agrees with the US Trustee, and rejects the Debtor’s argument—

the Debtor qualifies as a health care business under section 333 of the Bankruptcy Code under

the more reasonable disjunctive interpretation of section 101(27A). Nevertheless, the Court

finds that a patient services ombudsman is not necessary here on the facts.

A. Debtor is a Health Care Business

Debtor qualifies as a health care business under the broader interpretation of section

101(27A), which is the more reasonable reading of the statute. Under the broader (disjunctive)

interpretation of section 101(27A), the analysis requires merely that the Debtor meet the

definition of subsection A, which tracks the original four Pinellas Elements. See, e.g., Smiley

Dental, 503 B.R. at 685-86. The narrower (conjunctive) interpretation of section 101(27A)

requires the Debtor meet the definition of subsection B as well, which contains an inpatient

requirement. See, e.g., Banes, 355 B.R. at 534-35. For the reasons set forth in section III.A.2,

infra, this Court declines to follow the narrower (conjunctive) interpretation of the statute.

1. The Debtor Meets All Four of the Pinellas Elements

The first factor of the Pinellas test, that the debtor is a public or private entity, “‘includes

almost every conceivable entity,’ so the inquiry typically focuses on the last three elements.” In

re William L. Saber, M.D., P.C., 369 B.R. 631, 636 (Bankr. D. Colo. 2007) (quoting Pinellas,

360 B.R. at 359). This is satisfied because Debtor here is undoubtedly a private entity. (See

Rule 1007-2 Declaration ¶ 2.) The second factor, which requires the debtor to be primarily

engaged in offering facilities and services to the general public, is met where patients can make

appointments without the assistance of a referring physician. Alternate Family Care, 377 B.R. at

757. The fact that a debtor has a website through which prospective patients can make

appointments is strong evidence that this second prong is satisfied. Id. (“[T]he very presence of

the website suggests that [the debtor] has a public presence and with [a link to check availability

of appointments] it is plausible to suggest that it is offering its services to the general public.”).

The second factor is satisfied here because Debtor operates a website that advertises various

services patients can obtain at Debtor’s facilities and encourages interested patients to call to

book appointments. (Scott Declaration ¶¶ 2–3.)

The third Pinellas factor requires that a debtor’s services or facilities be used for

“treatment of injury, deformity or disease.” Pinellas, 360 B.R. at 359; 11 U.S.C. § 101(27A).

This prong is met where a debtor provides “medically supervised treatment, whether or not it

involves pharmacological treatment” for patients’ conditions but is not met if a debtor provides

solely administrative or procurement services for medical care facilities. Alternate Family Care,

377 B.R. at 758; see also Pinellas, 360 B.R. at 360. The Debtor here meets this prong because it

provides root canals, tooth extraction, dental implants, and treatment for sleep apnea, and

administers local anesthesia to patients for some of these procedures. (Scott Declaration ¶¶ 2, 4.)

Finally, the fourth Pinellas factor requires that “the services or facilities be used for surgical

care, drug treatment, psychiatric care or obstetric care.” Alternate Family Care, 377 B.R. at 758.

Courts have held that minor surgeries performed with local anesthetics are sufficient to qualify a

business as a facility providing surgical care because “the statute does not differentiate between

minor and major surgeries.” Saber, 369 B.R. at 637. Debtor qualifies as a surgical facility under

this factor because “Dr. Aknouk administers local anesthesia to patients for dental procedures

such as root canals for the Debtor.” (Scott Declaration ¶ 4.) In sum, the Debtor undeniably

qualifies as a health care business under section 101(27A) per the Pinellas test.

2. The Court Will Not Read the Inpatient Requirement into the Statute

Courts applying the conjunctive interpretation of section 101(27A) typically require that

the debtor offers inpatient services and provides “sustenance and shelter” to patients. See, e.g.,

Banes, 355 B.R. at 535 (quoting In re 7-Hills Radiology, LLC, 350 B.R. 902, 904 (Bankr. D.

Nev. 2006)). The inpatient requirement was first enunciated in In re 7-Hills Radiology, LLC, in

which the court held that subsections A and B of section 101(27A) should be read conjunctively

and then applied the canon of noscitur a sociis to subsection B to find that only businesses

providing “direct and ongoing contact with patients to the point of providing them shelter and

sustenance in addition to medical treatment” qualified as health care businesses. 350 B.R. 902,

905 (Bankr. D. Nev. 2006). A later decision by another bankruptcy judge applied this analysis

and 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 . . . an outpatient dental practice[] to be read into the statute.” Banes, 355

B.R. at 535.

Other courts have declined to follow this requirement, mainly disagreeing with the 7-

Hills Radiology court’s approach to statutory interpretation. See, e.g., Smiley Dental, 503 B.R. at

687-88. In Smiley Dental, the court analyzed the debtor, a dental practice, to determine if it was

a health care business as defined by section 101(27A). Id. Although the court ultimately held

that a Patient Care Ombudsman was unnecessary regardless whether the debtor was a health care

business, it reasoned that the debtor’s provision of minor dental surgeries such as “root canals,

wisdom tooth removal, and tooth extractions” was likely sufficient to qualify the debtor as a

health care business under both possible constructions of section 101(27A) because it met all of

the requirements of section 101(27A)(A) and was specifically enumerated in section

101(27A)(B)(i)(II) as a “surgical treatment facility.” Id. The Smiley Dental court declined to

read the “sustenance and shelter” requirement into section 101(27A) because it believed such a

reading “misconstrue[d] the statute” and because several other courts had determined debtors to

be health care businesses despite only providing outpatient services. Id. at 687 (collecting

cases). The court further noted 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).” See id. (citing 11 U.S.C. § 102(3)) (“In this title ...

‘includes’ and ‘including’ are not limiting.”).

This Court similarly declines to read an inpatient services requirement into the definition

of a health care business in section 101(27A). As Smiley Dental correctly notes, to read in this

limitation would inappropriately curtail the reach of the statute, when there is nothing in the text

to indicate that the statute should be read conjunctively. Further, there is no need to turn to

canons of construction such as noscitur a sociis to interpret the statute when a plain reading of its

language reveals that the entity at issue (Debtor) is explicitly enumerated as an example in

subsection B. 11 U.S.C. § 101(27A)(B)(i)(II) (“includes . . . any . . . ancillary . . . surgical

treatment facility.”) Here, as noted above, Debtor is a “surgical treatment facility” because it

provides root canals; the Debtor therefore qualifies as a health care business under a plain

reading of the statute and the Court need not turn to canons of interpretation to make that finding.

See, e.g., Pfizer v. United States Dep’t of Health and Human Servs., 42 F.4th 67, 73-77 (2d Cir.

2022) (noting that canons of construction such as noscitur a sociis are only necessary where the

meaning of a term is ambiguous according to a plain reading of the statute).

Because the Debtor meets all the required elements of the Pinellas test and because a

plain reading of section 101(27A) indicates there is no inpatient services requirement, the Debtor

here qualifies as a health care business.

B. A Patient Care Ombudsman is Not Necessary

Even though the Debtor is a health care business, the Debtor has met its burden of

establishing that a Patient Care Ombudsman “is not necessary for the protection of patients under

the specific facts of the case.” 11 U.S.C. § 333(a)(1). Each of the factors enumerated in Valley

Health, discussed in turn below, weigh against appointing a Patient Care Ombudsman.

1. Factor 1: Cause of Bankruptcy

This factor weighs against the appointment of a Patient Care Ombudsman because the

cause of the bankruptcy was liability related to the Debtor’s alleged failure to remit employer

contributions to the Union, and not any patient care issues, such as a malpractice. While this

triggering event does indicate that the Debtor lacked the funds to satisfy potential liability arising

out of the labor dispute, there is no indication that there has been any reduction in patient care or

privacy due to financial constraints or any other reason. See Smiley Dental, 503 B.R. at 689

(finding affiliated dental clinic debtors satisfied the burden to show a patient care ombudsman

was not necessary in large part because the bankruptcy was caused by “cash flow problems

resulting from changes to Medicare reimbursement practices for orthodontics.”).

2. Factor 2: The Presence and Role of Licensing

The Debtor, as a dental practice, is monitored by state regulatory and licensing agencies.

(See Aknouk Declaration ¶¶ 8–10.) Further, the dentists employed by the Debtor are also subject

to state licensing rules and regulations. (Objection ¶ 13.) The Debtor is inspected regularly by

New York State and the dentists complete continuing education to ensure that they are up to date

on the latest skills, treatments, techniques, and developments in the industry. (Aknouk

Declaration ¶¶ 8–10.) The presence and role of these licensing agencies weighs against

appointing a Patient Care Ombudsman. See Alternate Family Care, 377 B.R. at 758; Smiley

Dental, 503 B.R. at 689 (up-to-date licenses and insurance coverage in accordance with state

requirements weigh against the appointment of a Patient Care Ombudsman). Thus, this factor

weights against appointing a Patient Care Ombudsman.

3. Factors 3 and 4: The Debtor’s History of Patient Care; the Ability of Patients

to Protect Their Rights

The Debtor has no history of compromised patient care or rights. The Debtor has

operated for 25 years in good standing and Dr. Aknouk, its principle, has been in practice for 30

years. (Aknouk Declaration ¶ 4.) There have been no malpractice suits filed against the Debtor

or its dentists and no complaints relating to deficient patient care. (Id. ¶¶ 7, 11.) The Debtor’s

patients are fully informed about their treatment plan and their rights and have avenues both

within and outside the Debtor’s organization to voice questions or concerns if any exist.

(Objection ¶ 15.) At the hearing, the US Trustee argued that because the Debtor operates a large

practice, reportedly between 1000 and 2000 patients, the possibility of a future complaint is high

and additional oversight is needed. As an initial matter, the US Trustee cites no caselaw for the

proposition that the size of the practice is a factor that weighs in favor of appointing a Patient

Care Ombudsman. (See Motion at 10.) Nevertheless, the Court agrees that as a practical matter,

no party can guarantee that future patient complaints will not arise. Given that the Court here

denies the Motion without prejudice, the US Trustee is free to bring a renewed motion should

patient care concerns arise in the future. Accordingly, these factors weigh against appointing a

Patient Care Ombudsman.

4. Factor 5: The Patients Level of Dependency on the Debtor

Where, as here, a debtor is entirely an outpatient facility, courts have considered patients

to be less dependent on the facility than they would be in an inpatient facility. See, e.g., In re

Miss. Maternal-Fetal Med., P.A., No. 21-0091-NPO, 2021 WL 1941627, at *3 (Bankr. S.D.

Miss., Feb. 18, 2021) (“The risk to patient care is lessened further by the Debtor’s role in only

providing outpatient care instead of a continuity of day-to-day care.”). Courts have also found a

low level of dependency, where, as here, a debtor’s services are easily found at numerous other

dental offices. See, e.g., Smiley Dental, 503 B.R. at 689 (finding a low level of provider

dependency where dental patients have access to their medical records and the nature of a dental

clinic is such that a patient may “seek alternate dental or orthodontic care” if he or she so

chooses). While patients who are under local anesthesia following a dental surgery are certainly

dependent on the Debtor, there is no long-term dependency comparable to that of a hospital or

other inpatient facility because such patients leave shortly after surgery. Accordingly, this factor

weighs against appointing a Patient Care Ombudsman.

5. Factors 6 and 7: The Likelihood of Tension Between the Interests of the

Patients and the Debtor; the Potential Injury to the Patients if the Debtor

Drastically Reduced its Level of Patient Care

There is a low likelihood of tension between the interests of the patients and the Debtor

because the Debtor did not file bankruptcy because of deficient patient care or an inability to pay

vendors and suppliers who are critical to patient care. See Smiley Dental, 503 B.R. at 689

(stating that “[b]ecause malpractice does not appear to have caused the bankruptcy, no likelihood

of tension between the interests of the patients and Debtors appears to exist”).

As to the consequences of a drastic reduction in patient care, courts typically find this

factor to weigh in favor of appointing a Patient Care Ombudsman where the Debtor is a long-

term care facility or hospital that performs a high volume of inpatient procedures. See, e.g.,

Valley Health, 381 B.R. at 764 (finding that the seventh factor weighed in favor of appointing a

Patient Care Ombudsman because the sensitive nature of the debtor’s patient services, including

inpatient surgery, critical care, and pediatric services, meant that “a drastic reduction in the

quality of care [could] create[] a significant risk for patients” and because a “cessation of

operations at one of the Debtor’s hospitals would require a transfer of patients to another

facility”) For example, in Alternate Family Care, which involved an inpatient psychiatric

facility for children, the court found this factor weighed in favor of appointing a Patient Care

Ombudsman because a drastic reduction in the quality of the debtor’s patient care services would

require children to be moved to another facility, likely causing severe trauma and disruption.

377 B.R. at 760. Here, in contrast, the Debtor provides dental services that involve only local

anesthesia on occasion and require little to no recovery time for patients in the clinic. (Objection

¶ 20.) If the level of Debtor’s patient care became drastically reduced, it could certainly be

harmful to patients, but patients could find another dentist to frequent without the attendant

disruption that occurs when one is moved from one inpatient setting to another.

6. Factor 8: The Presence and Sufficiency of Internal Safeguards to Ensure

Appropriate Level of Care

As set forth in detail in the Aknouk Declaration, the Debtor has sufficient internal

mechanisms in place to monitor patient care and resolve complaints. The Debtor is certified in

Emergency Care and Safety and maintains the number of continuing education credits required

by New York State. (See Aknouk Declaration ¶¶ 8–10.) The Debtor’s x-ray machines are

inspected by the Department of Health and Dental Hygiene every three years, and the Debtor

provides a lead shield to patients using the x-ray machine. (Id.) To ensure cleanliness, the

Debtor uses an air purifier; an ultraviolet light to sterilize the room and dental tools; and dentists

and assistants use gloves, masks, shields, and disposable coats. (Id. at ¶¶ 11–13.)

While the US Trustee argues that the Debtor’s dental record system, Dentrix, provides no

oversight of patient care (Motion at 2), the Debtor has explained that it has numerous checks and

balances in place to ensure appropriate patient care. (See Objection ¶¶ 8–10; 14–15.) In

addition to oversight from regulatory agencies, the Debtor has systems in place to process

complaints or issues with care through its team of dentists and its office manager. (Objection

¶ 23); see also Smiley Dental, 503 B.R. at 689 (stating that internal safeguards were sufficient

where the debtor’s dentists worked in teams, which “provide[d] a form of internal oversight and

safeguard for patient care”).

Furthermore, though not articulated in the caselaw, the Court noted at the hearing, and

reiterates here, that this case is a small business bankruptcy under Subchapter V of Chapter 11

with the Subchapter V Trustee appointed. The presence of such a trustee weighs against

appointing a Patient Care Ombudsman. While a Subchapter V trustee does not provide the same

level of oversight as a Patient Care Ombudsman would, and the Court can certainly imagine

situations in which a Patient Care Ombudsman would be necessary in addition to a Subchapter V

trustee, the Subchapter V trustee is an extra safeguard against patient care issues that gives the

Court additional comfort that the Debtor’s operations are being monitored. Thus, this factor

weighs against appointing a Patient Care Ombudsman.

7. Factor 9: the impact of the cost of an ombudsman on the likelihood of a

successful reorganization

The US Trustee argues that because the Debtor has approximately $25,000 on hand and

does not anticipate needing a loan from the Debtor’s principle, the cost of an ombudsman is not

an issue here. The Court disagrees. For the reporting month of January, the Debtor’s monthly

operating report shows that the Debtor was cash negative in the amount of $7,464.24.

(“Operating Report,” ECF Doc. # 41, at 3.) The Debtor does project that it will be cash flow

positive in the amount of $9,995.29 next month. (Id.) However, the budget that the Debtor

submitted as part of its cash collateral motion indicates that the Debtor will be very narrowly

cash positive week to week, sometimes by under $1000 dollars. (See generally “Budget,” ECF

Doc. # 24.) In short, the margins here are thin and the Debtor does not have much room for

additional administrative expenses, even if it does have a modest amount of cash on hand. The

additional cost of a Patient Care Ombudsman could eat into these small margins and be the

difference between a cash flow positive and negative business. Accordingly, this factor weighs

against appointing a Patient Care Ombudsman.

IV. CONCLUSION

In sum, even though the Debtor is a health care business under the statute’s meaning,

because all of the Valley Health factors weigh against appointing a Patient Care Ombudsman, the

Debtor has met its burden of establishing that a Patient Care Ombudsman is not necessary on the

facts. Nevertheless, because the Court is cognizant that further patient care issues could arise

and because the Court takes seriously the need to protect patient care during the pendency of the

bankruptcy, the Motion is DENIED WITHOUT PREJUDICE. Should patient care issues arise

in the future, the US Trustee may renew the motion.

Dated: March 3, 2023

New York, New York

Martin Glenn

_____ ____________

MARTIN GLENN

Chief United States Bankruptcy Judge