Bankruptcy Prevention: New Effort to Reflect on Legal and Social Changes.

Every corporation has an economic and moral responsibility to its stockholders to perform well financially. However, the number of bankruptcies in Slovakia has been growing for several years without an apparent macroeconomic cause. To prevent a rapid denigration and to prevent the outflow of foreign capital, various efforts are being zealously implemented. Robust analysis using conventional bankruptcy prediction tools revealed that the existing models are adaptable to local conditions, particularly local legislation. Furthermore, it was confirmed that most of these outdated tools have sufficient capability to warn of impending financial problems several years in advance. A novel bankruptcy prediction tool that outperforms the conventional models was developed. However, it is increasingly challenging to predict bankruptcy risk as corporations have become more global and more complex and as they have developed sophisticated schemes to hide their actual situations under the guise of "optimization" for tax authorities. Nevertheless, scepticism remains because economic engineers have established bankruptcy as a strategy to limit the liability resulting from court-imposed penalties.

Bankruptcy as Implicit Health Insurance.

This paper examines the implicit health insurance that households receive from the ability to declare bankruptcy. Exploiting multiple sources of variation in asset exemption law, I show that uninsured households with a greater financial cost of bankruptcy make higher out-of-pocket medical payments, conditional on the amount of care received. In turn, I find that households with greater wealth at risk are more likely to hold health insurance. The implicit insurance from bankruptcy distorts the insurance coverage decision. Using a microsimulation model, I calculate that the optimal Pigovian penalties are three-quarters as large as the average penalties under the Affordable Care Act.

Against the proportionality principle: Experimental findings on bargaining over losses.

The outcomes of bargaining over losses, the subject of this paper, have rarely been studied. But experimental studies of related situations, such as those involving bankruptcies or bequests in which the sum of the legal claims that can be made against a bank or firm or estate are greater than their values, have produced strong support for the proportionality principle. To test whether this principle would find support in other situations involving losses we designed an experimental game in which four players start out with differing initial endowments of real money. They are then informed that a certain amount of this resource has to be given back to the experimenter. How should the loss be shared among the agents? This game was run at different locations and under different treatments over a period of almost three years. We found that the proportionality principle was rarely proposed and even less frequently accepted as a solution to this problem. One of the main reasons for this result was that the two players with the smallest endowments opposed most of the proposals which asked them to contribute at least some positive amount of their own initial resource.

Moving Beyond Marriage: Healthcare and the Social Safety Net for Families.

This article teases out the relationship between family form and the state's social safety nets around healthcare, showing the deep unfairness of measuring social safety nets by whether a couple marries. By continuing to tie healthcare benefits to specific family structures, we perpetuate the "galloping" inequality marking America today. This article concludes that, whatever happens with the thousands of benefits given to married couples in other domains, social policy should move beyond marriage with respect to healthcare. Delinking support for healthcare coverage and services from family form is just, better assists struggling families, and is in our collective self-interest.

COBRA notice--bankruptcy--stay. Buchanan v. Golden Casting Corporation Hourly Health Benefit Plan.

In an absence of special circumstances, the automatic stay that protects an employer from suit while its bankruptcy is pending does not apply to an action brought against its employee welfare benefit plan under ERISA because the plan, not the employer, is the proper entity to sue for benefits. Similarly, the employer's automatic stay does not apply to the individual fiduciary sued for breach of fiduciary duty in administering the plan. The bankrupt employer has no property interest in either the plan assets or the assets of the individual fiduciary and, therefore, the stay does not protect them from suit.

Insolvency risk in health carriers: innovation, competition, and public protection.

This paper reviews the framework of regulatory and managerial devices that have evolved in response to the special dangers to the public posed by insolvency of health carriers. These devices include "prudential" measures designed to decrease the likelihood of insolvency, and measures to "protect enrollees" in the event that insolvency occurs nevertheless. It also reviews the current debate over how this framework should be adapted to new forms of risk-bearing entities, especially provider-sponsored networks engaged in direct contracting with purchasers of coverage. Parallels to solvency concerns in the banking industry are explored.

Bankruptcy risk and state regulation of continuing care retirement communities.

Continuing care retirement communities (CCRCs) often require substantial financial investment from residents, prompting concern about potential losses to residents in the event of a CCRC's bankruptcy. State governments have responded to this concern with varying levels of regulation. Overall, CCRC bankruptcy rates are very low (.3% per year). We found that measures of varying regulation stringency had no effect on indicators of CCRCs' financial performance relating to bankruptcy risk. CCRCs that offer extensive contracts, including unlimited long-term care in addition to housing, have less positive indicators of financial strength than other types of CCRCs. When measured by traditional health care industry standards of financial strength, CCRCs appear less profitable than other types of health care facilities. This raises the question of whether CCRCs can continue to attract the needed capital from private markets and because of that, suggests that their future growth may be limited.

The bankruptcy of the Allegheny Health System and its consequences.

In the midst of the healthcare consolidation of the past decade, many have overlooked the inevitable: some of the consolidated systems are bound to fail. The following Commentary gives the reader a close look at the rapid decline of one such system, the Allegheny Health System, and the impact of that failure, the "rescue" of the System's facilities, and the System's ongoing bankruptcy upon delivery of healthcare in the Philadelphia area.

Section 525(a) of the bankruptcy code plainly does not apply to Medicare provider agreements.

Section 525(a) of the Bankruptcy Code prevents government entities from discriminating against debtors based on the debtor's bankruptcy filing. This Article analyzes how this provision is applied to healthcare providers who file for bankruptcy. Some commentators have expressed concerns that because of Section 525, the federal government is unable to deny a bankrupt provider a new Medicare provider agreement due to the debtor's failure to pay debts discharged during bankruptcy. This Article, however, argues that Section 525 does not apply to a provider agreements because it is not a "license, permit, charter, franchise, or other similar grant" as defined by the statute. Therefore, the author concludes that debtor healthcare providers should not be allowed back into the Medicare program without first paying their statutorily required debts.

Maneuvering the mundane minefield: a practical guide to legal opinions in healthcare transactions.

This Article examines the multitude of issues presented when attorneys prepare legal opinions for health law transactions. The authors analyze the two major pieces of guidance for the drafting of such opinions, and offer practical guidance and checklists for the preparation of such opinions.

Bankruptcy opportunities and pitfalls: strategies for restructuring and unwinding integrated delivery systems.

Many organizations in the healthcare field are facing issues regarding the "dis-integration" of previously assembled integrated delivery systems. In many situations, bankruptcy is the most effective effective means for pursuing this course of action. This article examines and explains the bankruptcy process, its applicability to an IDS, and strategies for dealing with the process.

The fiduciary duties of healthcare directors in the "zone of insolvency".

Directors of healthcare organizations normally owe fiduciary duties to their shareholders or, in the case of nonprofits, to the charitable mission of the organization. As an organization descends to bankruptcy, however, the board's duties may shift. At some point, the board may be imposed with different and often conflicting obligations to the corporate enterprise as a whole, with a primary criterion being the interests of creditors. In this article, the authors analyze the murky areas of the Zone and give guidance as to when the board's duty may shift-and as to how directors should proceed both in determining their duties and in working to fulfill them.

Certain legal aspects of derivatives.

This article discusses legal characteristics of derivatives that a not-for-profit health care company may use in a conduit financing in which a governmental issuer issues bonds for the benefit of a health care company. This article also presents the Master Agreement promulgated by the International Swaps and Derivatives Association; discusses how to get out of a derivative; discusses the status of a derivative after insolvency of a counterparty; presents disclosure issues relating to documents prepared in connection with an issue of bonds; and describes the treatment of derivatives under commodities regulations. It concludes with a presentation of possible new regulations applying to derivatives.

The demise of the small HMO in California.

On May 25, 2001, the California Department of Managed Health Care served Maxicare, a Los Angeles-based HMO with approximately 250,000 subscribers, a notice of conservatorship. Within the following 16 months, four other small California HMOs either filed for bankruptcy or were put under state conservatorship. The age of the small HMO in California had come to an end.