Dental Patient Bankruptcy

Dental Patient Bankruptcy

It isn’t unusual for a dentist to see a patient who is in some physical distress; dealing with toothaches and other painful dental issues is part of a day’s work. But treating a patient who is in severe financial distress, so severe that they have filed for bankruptcy, can be far trickier than a filling or root canal.

That is because a bankrupt or insolvent patient requires a dentist to weigh several competing legal, financial, and ethical obligations. The dentist wants to be paid for services rendered to a patient and doesn’t want to keep working for free, but that patient may need continuing care. They want to get their outstanding bills paid, but bankruptcy can slam the brakes on any collection efforts. What the dentist can and can’t do depends on whether the debt arose before or after the bankruptcy filing, what treatment is currently underway, and professional rules.

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The Automatic Stay

When a patient files for bankruptcy, the most immediate and impactful effect is the automatic stay, which prohibits creditors from making further efforts to collect pre-bankruptcy debts. Violating the stay can come with significant consequences.

For a dentist, the automatic stay means the practice should immediately stop ordinary collection activity concerning a pre-petition balance. The office should not send collection demands, threaten a lawsuit, garnish wages, or otherwise attempt to force payment of the old debt outside the bankruptcy process.

This does not necessarily mean that every interaction concerning money is prohibited. The critical distinction here is between collecting an existing pre-bankruptcy debt and establishing appropriate payment arrangements for services to be provided after the filing. Because the distinction can become complicated, dentists should always consult counsel before sending a patient a demand for payment or taking other action against a bankrupt patient.

Dismissing a Bankrupt Patient is OK, Abandoning Them Is Not

The Bankruptcy Code’s automatic stay puts a stop to most of a dentist’s collection efforts, but can a dentist also stop treating a patient after they have filed for bankruptcy?

Generally, a dentist is not required to continue an indefinite course of treatment in the face of a patient’s bankruptcy. A private dental practice doesn’t become a free clinic just because a patient is insolvent.

However, the right to terminate a dentist-patient relationship is not the same thing as terminating it the right way, as we discuss in detail in this post. Abruptly terminating an existing dentist-patient relationship because the patient filed for bankruptcy can create professional and legal risks. The key distinction at the end of a patient relationship is between dismissal, which is permissible, and abandonment, which is not.

A dentist who chooses to dismiss a patient can’t simply show them the door, send them a break-up text, or refuse to answer their calls. Dentists must end the relationship such that they avoid any claim that they have abandoned their patient.

According to the ADA’s Principles of Ethics and Code of Professional Conduct, Section 2. F.:

Once a dentist has undertaken a course of treatment, the dentist should not discontinue that treatment without giving the patient adequate notice and the opportunity to obtain the services of another dentist. Care should be taken that the patient’s oral health is not jeopardized in the process.

Patient abandonment is a serious ethical violation. For example, the Illinois Dental Practice Act lists “abandonment of a patient” as one of the many reasons the Illinois Department of Financial and Professional Regulation may revoke, suspend, refuse to issue or renew, reprimand, or take other disciplinary or non-disciplinary action against a dentist. A dentist also exposes themselves to a malpractice claim if injuries result from their termination of the patient at the wrong time during treatment or without proper notice.

Accordingly, before reflexively declining to further treat an insolvent patient, the better approach is to evaluate the patient's clinical situation first. If the patient is in the middle of a procedure, has temporary work in place, or faces a foreseeable risk of harm from stopping treatment, the dentist should consider what care is reasonably necessary to protect the patient while arranging an appropriate transition.

Bankruptcy v. Emergency

If a patient of record is facing both bankruptcy and a dental emergency, the emergency — if it is, in fact, an emergency — wins. That is, per ADA ethical guidance, dentists should make reasonable arrangements to provide emergency care to existing patients. Its practice guidance likewise emphasizes that dentists should be available to patients of record when emergencies arise and should have procedures for handling or referring emergencies. These obligations don’t disappear because the patient is insolvent.

That does not necessarily mean the dentist must provide every conceivable treatment at no charge. It does mean the practice should carefully distinguish an emergency from elective or discretionary treatment and should avoid placing the patient's health at unnecessary risk simply because the patient has sought bankruptcy protection.

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Requiring Payment for New Treatment

As noted, the date of a bankruptcy petition’s filing establishes a line between debts subject to the automatic stay and any debts assumed thereafter. That is why it is critical for dentists to distinguish charges incurred before bankruptcy from charges for services provided afterward, and to separately document new services and any lawful payment arrangement for those services. Because the Bankruptcy Code and any specific orders in the patient’s bankruptcy case impact a creditor dentist’s course of dealing with the patient, counsel should be consulted before establishing a billing and payment arrangement for a proposed procedure and new course of treatment.

What Happens to Prepaid Treatments?

The treatment of funds previously paid by a bankrupt patient to a dental practice for future services — whether the dentist must issue a refund, keep providing services, or file a claim in the bankruptcy proceeding — depends on several factors.  

If the patient has prepaid for dental services that remain partially or entirely unperformed as of the bankruptcy filing, the patient may have a contractual or other legal claim relating to those unperformed services, including a potential right to a refund. The nature and value of any such claim should be determined based upon the treatment agreement, amounts paid, services actually rendered, and applicable law and court orders.

In a Chapter 7 proceeding, a patient's legally enforceable right to a refund or other monetary recovery may constitute an asset of the bankruptcy estate and generally must be disclosed to the bankruptcy trustee. The trustee may determine whether the claim has value and, if applicable, how it should be administered for the benefit of creditors.

In a Chapter 13 proceeding, the patient's obligations and potential claims may be addressed within the framework of the debtor's repayment plan. The specific treatment will depend upon the circumstances of the case. 

Dental practices should consult counsel and carefully review the treatment agreement, payment history, services rendered, and bankruptcy documents before taking any action concerning prepaid funds.

Don’t Hold Records Hostage

Whatever the circumstances, a dental practice should never use a patient's medical and dental records as leverage for collecting an unpaid account. Section 1.B. of the ADA Principles of Ethics and Code of Professional Conduct obligates dentists to provide relevant records to a patient or new dentist upon request, and specifically notes that “This obligation exists whether or not the patient’s account is paid in full.” 

Bankruptcy is not necessarily a reason to stop treating a patient, nor is it a reason to necessarily write off an outstanding balance. But it is a reason to slow down, document a patient’s account carefully, and consult experienced counsel before taking action that could violate the automatic stay or create a patient-abandonment problem.

If you have questions or concerns about how to handle a patient who has filed for bankruptcy, please call Grogan Hesse & Uditsky at (630) 833-5533 or contact us online to arrange for your free initial consultation.

We Focus on You So You Can Focus on Your Patients

At Grogan, Hesse & Uditsky, P.C., we focus a substantial part of our practice on providing exceptional legal services for dentists and dental practices, as well as orthodontists, periodontists, endodontists, pediatric dentists, and oral surgeons. We bring unique insights and deep commitment to protecting the interests of dental professionals and their practices and welcome the opportunity to work with you.

Jordan Uditsky, an accomplished businessman and seasoned attorney, combines his experience as a legal counselor and successful entrepreneur to advise dentists and other business owners in the Chicago area. Jordan grew up in a dental family, with his father, grandfather, and sister each owning their own dental practices, and this blend of legal, business, and personal experience provides Jordan with unique insight into his clients’ needs, concerns, and goals.