PUBLIC
HEALTH
and
the
LAW
The
Federally
Supported
Health
Centers
Assistance
Act
of
1992:
an
Experiment
in
Malpractice
Coverage
DAVID
BENOR,
JD
Mr.
Benor
is
a
Senior
Attorney,
Public
Health
Division,
Office
of
the
General
Counsel,
Department
of
Health
and
Human
Services.
Tearsheet
requests
to
Mr.
Benor
at
Room
4A-53,
5600
Fishers
Lane,
Rockville,
MD
20857;
tel.
301-443-2006.
Synopsis
....................................
Based
on
a
claims
experience
that
was
extremely
low
and
malpractice
insurance
rates
that
remained
at
"commercial"
rates,
the
Congress
concluded
in
1992
that
coverage
of
malpractice
actions
against
these
grantees
and
their
health
care
practitioners
would
be
more
cost-effective
under
the
Federal
Tort
Claims
Act.
This,
in
turn,
would
allow
the
grantees
to
apply
the
savings
to
providing
health
services
to
their
beneficiaries.
The
lawmakers
thereupon
enacted
a
3-year
experiment
in
coverage
of
malpractice
actions
involving
certain
Public
Health
Service
grantees.
This
article
describes
the
background,
structure,
and
administration
of
this
statutory
experiment.
IN
THE
LATE
1980s
and
early
1990s,
a
malpractice
insurance
crisis
faced
many
of
the
Public
Health
Service's
grantees
that
provide
services
to
medically
underserved
populations.
In
an
era
of
fiscal
austerity,
the
costs
of
malpractice
insurance
were
consuming
a
disproportionate
share
of
these
grantees'
operating
budgets.
This
was
especially
a
concern
in
the
face
of
evidence
that
the
malpractice
premiums
being
paid
by
these
grantees
did
not
reflect
the
relatively
low
rate
of
malpractice
claims
and
payfients
by
these
entities.
This
article
addresses
the
Congressional
response
to
this
crisis,
the
Federally
Supported
Health
Centers
Assistance
Act
of
1992
("the
Act"),
Public
Law
102-501,
enacted
in
October
1992.
Background
The
Public
Health
Service
(PHS)
supports
several
categories
of
health
centers
providing
primary
health
services
to
medically
underserved
populations.
The
House
of
Representatives
Committee
report
on
this
legislation
notes
as
follows
(1):
In
FY
92
[Federal
fiscal
year
1992],
the
Federal
government
will
make
$526.5
million
in
grants
to
nearly
1,500
community
health
center
sites
serving
about
5.7
million
people;
$57.7
million
in
grants
to
414
migrant
health
center
sites
providing
services
to
about
500,000
migrant
and
seasonal
farmworkers;
$55.9
mil-
lion
in
grants
to
115
health
care
for
the
homeless
projects
delivering
health
care
to
about
425,000
homeless
people;
and
$6.1
million
in
grants
to
14
community-based
organizations
serving
an
estimated
60,000
pub-
lic
housing
residents.
The
Congress
heard
testimony
from
the
National
Association
of
Community
Health
Centers,
represent-
ing
many
of
these
grantees,
to
the
effect
that
community
health
centers
spent
in
the
range
of
$50
million
for
malpractice
insurance
premiums
each
year,
while
the
amount
of
claims
paid
each
year
was
less
than
10
percent
of
the
premiums
paid
(1).
Assuming
these
data
to
be
accurate,
the
results
were
that
the
insurance
companies
were
reaping
large
profits
on
these
premiums
and
that
funds
that
might
otherwise
subsidize
health
care
were
being
spent
on
malpractice
insurance
that
was
overpriced.
Efforts
to
negotiate
lower
premiums
for
these
grantees,
given
their
low
claims
rate,
were
not
successful;
malpractice
insurers
were
unwilling
to
treat
these
centers
as
different
from
other
health
care
providers,
notwithstanding
their
different
patient
populations
and
their
claims
experience.
Attempts
by
representatives
of
the
grantees
to
set
up
alternative
insurance
mechanisms
were
also
unsuccessful.
A
Federal
legislative
solution
seemed
necessary.
The
model
for
a
statutory
solution
was
found
in
the
manner
in
which
commissioned
officers
and
em-
ployees
of
the
PHS
are
protected.
Normally,
under
the
doctrine
of
sovereign
immunity,
actions
of
Federal
officials
are
not
subject
to
challenge
in
court.
The
Federal
Tort
Claims
Act
(FTCA)
was
enacted
in
May-June
1995,
Vol.
110,
No.
3
357
1946
and
provides
a
limited
waiver
of
that
sovereign
immunity,
under
which
the
U.S.
Government
con-
sented
to
be
sued
for
personal
injury
or
death
caused
by
the
negligence
or
wrongful
act
or
omission
of
Federal
employees
acting
within
the
scope
of
their
employment.
Section
224
of
the
Public
Health
Service
Act
provides
that
the
remedies
under
the
FTCA
constitute
the
exclusive
remedy
for
"damage
for
personal
injury,
including
death,
resulting
from
the
perform-
ance
of
medical,
surgical,
dental,
or
related
functions
...
"by
officers
and
employees
of
the
PHS.
The
persons
covered
by
the
FTCA
have
a
statutory
immunity
from
personal
liability.
Precedent
existed
for
extending
coverage
of
the
FTCA,
and
the
related
personal
immunity,
to
persons
who
are
not
Federal
employees.
Since
1988,
incidents
of
medical
malpractice
and
other
negligent
acts
by
health
care
contractors
carrying
out
grants,
contracts,
or
cooperative
agreements
under
the
Indian
Self-
Determination
Act
(Public
Law
93-638)
have
been
subject
to
FTCA
cove-rage
(2).
Statute
The
Federally
Supported
Health
Centers
Assistance
Act
of
1992,
Public
Law
102-501,
was
signed
into
law
on
October
24,
1992.
It
provides
a
3-year
demonstration
of
an
approach
to
protecting
the
identified
grantees
and
their
health
care
practitioners
from
malpractice
claims,
without
the
need
for
expensive
insurance.
The
statute
covers
grantees
under
the
following
programs:
*
Community
health
centers,
section
330
of
the
PHS
Act.
*
Migrant
health
centers,
section
329
of
the
PHS
Act.
*
Health
services
for
the
homeless,
section
340
of
the
PHS
Act.
*
Health
services
for
residents
of
public
housing,
section
340A
of
the
PHS
Act.
Coverage
is
provided
only
after
the
Secretary
of
Health
and
Human
Services,
acting
through
the
Bureau
of
Primary
Health
Care
within
the
Health
Resources
and
Services
Administration,
deems
the
grantee
to
meet
certain
requirements,
including
the
implementation
of
policies
and
procedures
to
mini-
mize
the
risk
of
malpractice
and
of
lawsuits,
and
has
reviewed
and
verified
the
professional
credentials,
claims
history,
and
related
matters
for
its
health
care
practitioners
(3).
Program
guidance
has
made
clear
that
coverage
for
any
entity
under
the
Act
will
not
be
effective
until
this
"deeming"
process
has
been
completed
(4).
The
Act
provides
that
coverage
is
available
for
acts
and
omissions
occurring
on
or
after
January
1,
1993,
and
before
January
1,
1996
(5).
As
indicated
previously,
the
deeming
process
must
be
successfully
completed
before
a
grantee
may
avail
itself
of
the
Act's
protection.
The
Act
covers
the
grantees
themselves,
but
also
covers
persons
associated
with them.
Included
are
"
...
any
officer,
employee,
or
contractor
...
of
such
an
entity
who
is
a
physician
or
other
licensed
or
certified
health
care
practitioner
...
"
(6).
A
contractor
may
be
covered
if
he
or
she
normally
performs
on
average
32/2
hours
of
service
per
week
for
the
grantee,
or
for
those
providing
less
hours
of
service,
if
(a)
they
are
licensed
or
certified
providers
of
obstetrical
services,
and
(b)
either
their
individual
malpractice
insurance
does
not
extend
to
services
provided
for
the
grantee,
or
the
Secretary
finds
that
the
grantee's
patients
will
be
deprived
of
services
should
coverage
under
the
Act
not
extend
to
them
(7).
FTCA
claims
are
handled
initially
as
administrative
claims.
Claimants
must
file
within
2
years
of
the
alleged
incident
(subject
to
certain
exceptions
based
on
the
patient
not
having
reason
to
suspect
negligence
at
the
time
of
the
incident)
with
the
PHS
Claims
Officer.
If
no
action
is
taken
within
6
months,
or
if
a
satisfactory
settlement
is
not
reached
within
that
time,
the
claimant
may
then
deem
the
claim
denied
and
file
a
civil
suit
in
the
appropriate
Federal
district
court.
Grantees
and
their
health
care
practitioners
may
find
that
civil
suits
have
been
filed
in
State
or
Federal
courts
before
an
FTCA
claim
has
been
filed.
If
so,
they
should
contact
the
PHS
to
obtain
a
determination
whether
the
conduct
involved
is
protected
by
the
Act.
If
it
is
so
determined,
a
motion
would
be
filed
to
remove
any
action
from
State
court
to
Federal
court,
to
substitute
the
Federal
Government
as
the
proper
defendant,
and
to
dismiss
the
action
against
the
grantee
and
the
individual.
The
determination
that
the
conduct
at
issue
is
subject
to
FTCA
coverage
requires
action
by
both
PHS
and
the
Department
of
Justice.
The
PHS
will
determine
whether
the
act
or
omission
occurred
after
a
"deeming"
determination
has
been
made
and
whether
the
action
was
within
the
scope
of
the
grant-
supported
activity.
The
Justice
Department
will
consider
these
issues
and
will
also
certify
whether
the
activity
was
within
the
scope
of
employment,
in
the
case
of
individual
health
care
practitioners.
Coverage
may
be
denied
an
individual
by
the
Department
of
Justice
for
an
inadequate
compliance
with
the
grantee's
risk
reduction
policies,
for
an
excessive
history
of
claims,
or
for
failure
to
cooperate
in
the
358
Public
Health
Reports
defense
of
claims.
Such
denial
of
coverage
would
apply
only
after
the
appropriate
grantee
receives
notice
of
such
a
decision
by
the
Department
of
Justice
(8).
Issue
Arising
Under
the
Act
Funding.
The
Act
provides
that
the
Attorney
General
is
to
estimate
the
likely
costs
associated
with
coverage
of
grantees
and
persons
under
the
Program
and
to
send
the
PHS
a
"bill"
for
such
amounts
for
each
of
Federal
fiscal
years
1993,
1994,
and
1995.
The
amounts
are
not
to
exceed
$30
million
per
year
and
are
to
be
transferred
to
an
account
in
the
U.S.
Treasury
(9).
A
question
arose
whether
funds
for
this
purpose
would
be
derived
from
the
appropriation
for
each
of
the
grant
programs.
Congress
resolved
any
question
about
this
by
amending
the
Act
in
1993
to
state
explicitly
that
funds
were
to
be
obtained
from
a
separate
appropriation
from
that
for
grants
(10).
Furthermore,
in
the
event
of
a
large
estimate
from
the
Attorney
General
for
the
"bill"
to
pay
claims,
the
PHS
is
limited
to
the
amounts
specified
in
each
fiscal
year's
appropriation.
Thus,
for
example,
the
fiscal
year
1995
appropriation
for
the
Department
of
Health
and
Human
Services
limits
to
no
more
than
$5
million
the
amount
that
may
be
paid
in
that
fiscal
year
into
the
claims
account
in
the
Treasury
(11).
Need
for
insurance.
The
Act
provides
"event"
coverage
during
the
time
it
applies
to
a
grantee
and
its
providers.
That
is,
if
the
act
or
omission
under
challenge
occurred
while
the
entity
was
deemed
covered
and
before
the
expiration
of
the
Act's
provisions,
coverage
will
be
available,
regardless
of
when
the
suit
or
claim
is
filed.
However,
for
grantees
whose
prior
insurance
coverage
was
on
the basis
of
"claims
made,"
the
cancellation
of
their
malpractice
insurance
would
leave
open
the
possibility
of
mal-
practice
actions
based
on
events
that
occurred
prior
to
the
Act's
applicability.
These
grantees
have
been
advised
to
purchase
"tail"
insurance,
under
which
coverage
of
prior
acts
and
omissions
is
insured,
regardless
of
when
the
legal
action
is
filed.
Gaps
in
coverage.
In
many
cases,
coverage
for
individual
health
care
practitioners
is
not
going
to
be
certain
in
advance.
A
major
area
of
discussion
between
the
PHS
and
the
Justice
Department
has
been
related
to
coverage
for
treatment
of
persons
who
are
not
patients
of
the
grantee.
Three
examples
have
been
identified
in
a
regulation
to
address
this
issue:
1.
A
proper
grant-supported
activity
is
the
provi-
sion
of
services
in
a
school-based
health
care
program.
2.
As
a
condition
of
a
grantee's
physician
obtain-
ing
staff
privileges
at
a
community
hospital,
he
or
she
must
agree
to
provide
occasional
coverage
at
the
hospital's
emergency
room.
3.
A
grantee's
physician
is
required
by
his
or
her
employment
contract
to
provide
periodic
cross-
coverage
with
a
community
physician,
who
in
turn
will
cover
the
grantee's
patients
after
hours.
In
the
regulation,
the
Department
of
Health
and
Human
Services
provided
a
procedure
for
determina-
tions
by
the
PHS
that
coverage
would
be
available
in
such
situations,
subject
to
certain
safeguards
(12).
The
preamble
to
the
regulation
makes
clear
that
moonlighting
activities
are
not
covered
and
that
the
Justice
Department
must
still
certify
each
claim
as
being
within
the
scope
of
employment.
Still,
it
is
hoped
that
the
rule,
when
implemented,
will
resolve
most
cases
of
uncertainty
regarding
coverage.
Many
grantees
have
felt
the
need
to
purchase
"gap"
insurance,
under
which
acts
and
omissions
not
covered
by
the
FTCA
will
still
be
insured.
For
example,
contract
providers
working
less
than
32
1/2
hours
per
week
for
the
grantee
(other
than
providers
of
obstetrical
services,
as
discussed
above)
would
need
either
their
own
insurance
or
coverage
under
a
policy
from
the
grantee.
The
cost
of
such
gap
insurance
has
been
difficult
to
calculate
due
to
the
uncertainties
regarding
scope
of
coverage.
It
is
expected
that
the
greater
certainty
provided
by
the
regulation
will
make
the
cost
of
gap
insurance
easier
to
calculate
and,
indeed,
lower.
Hospital
admitting
privileges.
Section
3
of
the
Act
further
amended
section
224
of
the
PHS
Act
by
adding
a
new
subsection
(j),
which
provides
that
hospitals
may
not
deny
staff
privileges
to
officers,
employees,
and
contractors
of
covered
grantees
if
they
meet
the
appropriate
professional
qualifications
and
agree
to
abide
by
the
hospital's
bylaws.
Thus,
the
lack
of
malpractice
insurance
may
not
be
used
as
a
basis
to
deny
staff
privileges;
failure
to
comply
may
result
in
losing
Medicare
and
Medicaid
reimburse-
ment
(13).
Need
for
reauthorization.
As
noted
previously,
this
is
a
3-year
demonstration.
Because,
under
the
initial
Act,
coverage
expires
for
acts
and
omissions
occur-
ring
after
December
31,
1995,
Congress
will
need
to
consider
whether
to
reauthorize
the
program.
To
help
in
its
deliberations,
Congress
mandated
that
the
May-June
1995,
Vol.
110,
No.
3
359
Department
of
Justice
report
by
April
1,
1995,
on
the
malpractice
liability
claims
experience
of
covered
entities
and
on
the
risk
exposure
associated
with
such
entities
(14).
The
data
available
to
date
may
be
insufficient
to
allow
a
thorough
analysis
of
the
potential
cost
of
this
program.
Claims
experience
may
be
incomplete
for
several
reasons:
*
The
different
dates
that
grantees
were
"deemed"
covered.
*
The
time
lag
between
the
acts
and
omissions
alleged
to
constitute
malpractice
and
the
deadline
for
filing
claims.
*
The
uncertainty
about
double
coverage,
based
on
some
grantees
carrying
malpractice
insurance
after
being
"deemed"
covered,
and
the
uncertainty
about
which
claims
will
be
covered
by
the
FTCA
and
which
by
"gap"
insurance.
In
fact,
an
analysis
of
the
potential
cost
of
the
program
was
undertaken
by
the
U.S.
General
Accounting
Office
(GAO)
in
1993.
In
September
1993,
the
GAO
issued
a
report
speculating
that
(15):
It
could
cost
the
government
more
money
over
time
to
resolve
the
grantees'
malpractice
claims
under
FTCA
than
it
would
have
cost
to
resolve
the
grantees'
claims
if
the
private
sector's
insurance
coverage
had
continued.
The
GAO
report
acknowledges,
however,
that
this
conclusion
is
based
on
assumptions
that
losses
under
FTCA
will
be
higher
than
under
malpractice
insur-
ance,
for
two
reasons.
1.
FTCA
provides
unlimited
dollar
coverage.
For
example,
the
consulting
firm
under
contract
to
the
GAO
estimated
"coverage
of
slightly
less
than
$5
million
for
each
claim
filed,"
and
the
report
notes
that
"estimates
of
the
government's
costs
would
have
been
lower
if
...
[the
consulting
firm]
had
assumed
a
smaller
per-claim
limit....
"
(15a).
2.
FTCA
coverage
"makes
the
Government
liable
for
a
different
set
of
injuries
than
private
sector
insurers
would
have
been
liable
for
if
FTCA
coverage
had
not
been
enacted"
(15b).
Furthermore,
the
report
admits
that
its
cost
estimates
under
the
FTCA
are
not
based
on
the
grantees'
traditionally
low
claims
experience
and
indicates
that
these
estimates
assume
the
FTCA
coverage
will
have
been
in
effect
for
the
full
3-year
period
authorized,
rather
than
a
shorter
period
based
on
the
dates
of
the
"deeming"
process
(ISa).
While
the
authors
of
the
GAO
report
met
informally
with
PHS
officials
prior
to
issuing
the
report,
the
GAO
did
not
obtain
written
comments
from
the
agency
(15c).
However,
the
Bureau
of
Primary
Health
Care,
the
unit
within
PHS
responsible
for
implementing
the
Act,
has
advised
Congress
of
its
disagreement
with
the
"assessment
and
conclusions
offered
by
the
GAO
report
...
",
citing
the
issues
described
previously
(letter
of
December
8,
1993,
to
Congressman
Ron
Wyden
from
Marilyn
H.
Gaston,
MD,
Assistant
Surgeon
General
and
Director,
Bureau
of
Primary
Health
Care).
Conclusion
This
program
represents
an
experiment
in
provid-
ing
malpractice
coverage
for
a
category
of
Federal
grantees
whose
needs
the
private
insurance
market
had
failed
to
meet.
While
it
will
take
some
years
to
determine
whether
it
proves
to
be
cost-effective,
in
the
short
term,
it
has
enabled
the
PHS
to
support
increased
funding
for
health
care
services.
References
..................................
1.
H.R.Rep.
No.
823,
Part
2,
p.
5,
102nd
Cong.
2nd
Sess.
2.
Public
Laws
100-202
and
101-121.
3.
Section
224(h)
of
the
PHS
Act,
42
U.S.C.
233(h).
4.
Proposed
42
CFR
ยง
6.5
as
set
forth
in
59
Federal
Register
42792,
Aug.
19,
1994.
S.
Section
224(g)(3)
of
the
PHS
Act,
42
U.S.C.
233(g)(3).
6.
Section
224(g)(1)
of
the
PHS
Act,
42
U.S.C.
233(g)(1).
7.
Section
224(g)(5)
of
the
PHS
Act,
42
U.S.C.
233(g)(5).
8.
Section
224(i)
of
the
PHS
Act,
42
U.S.C.
233(i).
9.
Section
4
of
the
Act,
adding
a
new
subsection
(k)
to
Section
224
of
the
PHS
Act,
42
U.S.C.
233(k).
10.
Section
706(a)
of
Public
Law
103-183,
Dec.
14,
1993.
11.
Title
II
of
Public
Law
103-333,
Oct.
4,
1994.
12.
60
Federal
Register
22530-32,
May
8,
1995.
13.
57
Federal
Register
62349
at
62350,
1
V,
Dec.
30,
1992.
14.
Section
5
of
Public
Law
102-501,
Oct.
24,
1992.
Is.
Medical
malpractice:
estimated
savings
and
costs
of
federal
insurance
at
health
centers.
Report
of
the
GAO
to
the
Sub-
committee
on
Labor,
Health
and
Human
Services,
Education,
and
Related
Agencies,
Committee
on
Appropriations,
U.S.
Senate,
No.
GAO/HRD-93-130.
(a)
p.
3;
(b)
p.
4;
(c)
p.
14.
360
Public
Health
Reports
