The Federally Supported Health Centers Assistance Act: National Malpractice Insurance and How it Works

• Publication year: 2010

The Federally Supported Health Centers Assistance Act: National Malpractice Insurance and How It Works

Don A. Dennis

Two of the biggest issues facing the American legal system today are tort reform and the medical malpractice crisis. The Federally Supported Health Centers Assistance Act[1] (Act) is an example of how Congress has attempted to address these two issues in the context of providing health services to the underserved.[2] Under these auspices, the Act allows the United States to "deem" actors, agencies, and employees to be part of the Public Health Service (PHS).[3] Such "deemed" actors qualify for a type of limited insulation from suit, as outlined by the Federal Tort Claims Act (FTCA).[4] The Act demarcates the exclusive remedy for medical malpractice committed by "deemed" actors acting within the scope of both their employment and agency mission.[5]

While Congress has made a serious attempt to tackle this problem, the legislation and its subsequent iterations raise many new issues and questions that will confront Congress, the judiciary, and legal practitioners in the future.[6] This Article attempts to address the questions raised by the Act and provide a practical guide for courts, practitioners, facilities, and insurers to use when confronted with conflicting scenarios of potential medical malpractice and statutory governmental immunity.

I. Purpose of the Act

The federal government provides primary health care services through four federal programs to populations that are unable to obtain them from private sources: 1) the Migrant Health Program;[7] 2) the Community Health Center Program;[8] 3) the Health Care for the Homeless Program;[9] and 4) the Health Care for Residents of Public Housing Program.[10] The federal government, through the Department of Health and Human Services (HHS), provides grants to public or private nonprofit entities to provide health care services to the respective underserved populations.[11] Congress designed the Act to help these health care facilities provide additional medical services to underserved populations by providing de facto medical malpractice insurance for acts or omissions relating to federal funding.[12]

In 1995, the House of Representatives projected that $756.5 million would be spent to provide primary health care services to 7.6 million people.[13] In 1992, the House Commerce Committee had found that health care facilities receiving federal funds spent over $50 million for medical malpractice insurance premiums in 1989.[14] The Act sought to help facilities provide more services to the targeted populations not by providing additional funds, but by reducing the expenses the facilities incurred to obtain medical malpractice insurance.[15] The Act seeks to further this goal by outlining that the sole remedy available to a plaintiff for damages arising out of personal injury or death resulting from services provided by one of the covered facilities lies against the United States.[16]

The facility, called an "entity" under the Act, and its employees enjoy the Act's protection by being "deemed" employees of the Public Health Service (PHS).[17] To take advantage of the Act's safe harbor, it is crucial for all parties involved in the process—including health care facilities, individual physicians working for such facilities, and insurers of these health care providers—to understand the process by which a health care facility becomes eligible for protection.[18]

II. Becoming Eligible for Protection Under the Act

A facility does not enjoy immunity simply by virtue of receiving federal funds.[19] It must take affirmative steps to "obtain" immunity.[20] This is done by applying to the Secretary of Health and Human Services, who makes the determination of whether the entity meets the requirements for being "deemed" a PHS employee.[21] The application aims to provide the Secretary with the statutory requirements for deeming, which include verification of a risk management plan implemented by the health center to reduce the possibility of malpractice as well as evidence of the health center's credentials, claims history, and the license status of its physicians and health care practitioners.[22]

The facility must submit an application providing information outlining, inter alia, how the facility operates and the scope of its operations.[23] Upon proper submission by an erstwhile entity, the Secretary has thirty days to determine whether the facility is deemed.[24]

The relevant code sections specifically delineate four requirements for proper entity deeming.[25] First, the Secretary must find that the entity has implemented appropriate policies and procedures for reducing the risk of malpractice.[26] Second, the entity must have reviewed and checked the credentials of its physicians and other health care practitioners.[27] Third, the entity must have no claims filed against the United States as a result of this Act, or if so, the entity must have cooperated fully with the Attorney General and taken corrective steps to assure that such claims will not arise in the future.[28] Finally, the entity must cooperate with the Attorney General and provide information that will help the Attorney General estimate the amount of claims that will arise during the year.[29]

Congress designed these requirements to prevent health care facilities from abusing federal protection.[30] The requirements allow the government some degree of risk management control by imposing conditions on health care facilities so that the entities actually delivering medical services have incentives to prevent claims from arising. There are no deductibles or coverage limits under the Act; absent these government-insulation requirements, a health care provider would have no incentive to take precautions to reduce the risk of malpractice claims.[31]

A. What Should an Insurer Do to Get Protection for Its Insured?

In determining what action to take when handling a file that might involve FTCA protection, the insurer should make two initial determinations. First, the insurer needs to consider whether the file involves a facility or an individual, and second, whether the issue involved is a claim being filed or a simple evaluation of the insured's coverage. The answers to these two questions will in large part determine what action the insurer should take.

The insurer should also realize how the FTCA affects the relationship between the insurer and its insured. The purpose of the Act is to eliminate the facility's need for private medical malpractice insurance.[32] However, facilities will still need "gap" insurance to cover those acts or omissions outside the rubric of the FTCA.[33] Where an insured fails to properly obtain FTCA protection, a claim that could have been covered by the FTCA would then have to be handled by the insurer under any "gap" coverage.[34] Additionally, any procedural miscue on the part of the facility, should it disqualify an entity's application, will preclude FTCA coverage for the facility and its employees.[35] Therefore, the insurer has an incentive to make sure that the facility follows all the proper procedures for obtaining FTCA protection.

B. Qualifying as an FTCA-Eligible Health Care Facility

Insurers especially should be on notice for claims implicating health care facilities. Once an insurer handles a claim involving a health care facility, it is too late to seek immunity for a facility that has not been deemed by the Department of Health and Human Services.[36] The insurer should contact the facility to determine whether it has been through the deeming process. If the facility has not been deemed, it of course will not receive FTCA protection.[37] If the facility has been deemed, the insurer should make certain that the insured facility notifies the federal government of the adverse suit or claim. This should be done regardless of whether the claim is an actual suit or simply a notice of intent; the prudent insurer will cover all procedural bases at the earliest opportunity.

If the insurer is not handling a pending claim or lawsuit but rather is evaluating coverage, the insurer should find out if the facility receives federal funding that would qualify it for protection under the Act. If the facility meets the Act's statutory requirements, the insurer should make sure the facility begins and completes the deeming process as quickly as possible. There is no statutory protection until the deeming process has been completed.[38] The insurer should further determine the portion of the facility's services that will be devoted to federal health care and accordingly covered by federal funding.[39] Such a determination allows the insurer to give the facility the appropriate discount on its premiums since a certain portion of medical services will be excluded from coverage under the policy.[40]

C. Individual Qualification Under the Act

Just as an insurer dealing with a claim must determine whether the facility is deemed, an insurer that covers an individual physician must also assess whether the physician's facility has been deemed.[41] If the physician's facility has not been deemed, then it is unlikely that the physician will have FTCA protection.[42]

When evaluating coverage absent a claim or lawsuit, the insurer should determine how much of the physician's services will be rendered under circumstances that would qualify him for protection under the Act.[43] However, if certain steps are not implemented by the facility, the physician may not receive the protection that normally would be provided under the FTCA.[44]

Even when a facility fails to follow procedures necessary for FTCA protection, an insurer can limit liability through other means. An insurer may incorporate two types of exclusionary clauses in its insurance contract. An insurer may try to limit its policy coverage by excluding all acts that could have been protected by the FTCA. This type of...