State officials are expecting a wave of bankruptcy filings and lawsuits from hospitals targeted for closing by the Berger commission, which is scheduled to release its recommendations on Nov. 28.
"There are going to be significant legal challenges around the state from facilities that must close," says Francis Serbaroli, a partner at Cadwalader Wickersham & Taft. The court actions would aim to block implementation of recommendations made by the hospital closing commission.
The most obvious option for a hospital trying to stave off closure is a bankruptcy filing, which would put it under the control of a federal judge and theoretically out of the reach of state officials. Insiders speculate that some hospitals may hope to use the restructuring process to run out the clock, since the commission's power to implement its recommendations expires on June 30, 2008.
The strategy could backfire. A judge could decide that the state may close a hospital even though it filed for bankruptcy; the hospital could then lose out on millions of dollars in restructuring assistance funds that the state is promising facilities on the Berger list. "Bankruptcy is by no means a shield," says David Sandman, executive director of the Commission on Health Care Facilities in the 21st Century.
The state is also likely to face direct legal tests of its right to force closures. Hospitals could invoke the right to due process if the state tries to withdraw operating licenses without compensation or forces unwanted mergers.
"There will be a flood of litigation on some if not all of these issues," says Cornelius Murray, a partner at Albany's O'Connell and Aronowitz.