I. PURPOSE

This Policy Information Notice (PIN) supplements existing guidance of the Bureau of Primary Health Care (BPHC) regarding malpractice liability protection by the Federal Tort Claims Act (FTCA) for sections 329, 330, 340, and 340A grantees (termed "health centers" in this document). This guidance also applies to all health centers funded under section 330, as amended by the Health Centers Consolidation Act of 1996 (Pub.L. 104-299) and has been reviewed by the HHS Office of the General Counsel and the Department of Justice.

II. INTRODUCTION

The Federally-Supported Health Centers Assistance Act (FSHCAA) of 1992 and the FSHCAA of 1995 (Pub.L. 102-501 and Pub.L. 104-73, respectively) extended the availability of malpractice liability coverage under the FTCA to health centers and their officers, board members, employees, and certain contractors since January 1, 1993. Periodically, clarification of BPHC policies and procedures is needed to assist health centers in the implementation of the program.

III. SCOPE OF THE PROJECT

Only acts and omissions related to activities within the scope of the approved Federal project, as defined in the Notice of Grant Award are covered. BPHC PIN 96-14, June 3, 1996, outlines the core elements of the scope of the project and the procedures for updating the scope of the project. An accurate account of the scope is important since the HHS Office of the General Counsel or Department of Justice may request a copy of the grant application or other pertinent documentation to verify that a particular activity was within the scope of the project.

IV. DUAL COVERAGE

BPHC PIN 96-7, issued April 23, 1996, stated that dual malpractice liability coverage (both FTCA and private malpractice insurance covering the same activities) would not normally be an allowable cost to the PHS grant. The BPHC acknowledged that there may be situations where temporary dual coverage during a phase-in period would be financially beneficial to the health center and the Federal Government. For example, dropping private policies for one half the physicians 1 year and the remainder the next, may be necessary if the cost of tail insurance is too high for the health center to pay all in one year. In this case, by phasing-in its providers, the health center receives some savings the first year and realizes full savings once all providers are under the FTCA. However, the BPHC is concerned that some deemed health centers may still be at a point of deciding whether FTCA coverage would be beneficial to the health center. More than 6 months has elapsed since BPHC initially notified grantees regarding the need to review their malpractice liability protection needs and determine the best means to satisfy that requirement. Dual coverage does not allow health centers to reduce the expenditure for malpractice insurance and use the saving for health services delivery. Therefore, deemed health centers must terminate any private malpractice insurance policies which create dual coverage by February 28, 1997. If the health center is unable to make a decision or obtain any required gap or wrap-around insurance by this deadline, the health center should request withdrawal of their deemed status and consider reapplication at a later date. Of course, a malpractice claim based on acts or omissions that occurred during the time period the health center was deemed remain covered by FTCA. Any deemed health center that requires continued partial dual coverage due to phase-in or other issues, shall request approval in writing, with adequate justification, to the Director, BPHC, through the Regional FTCA Coordinator at its respective HRSA Field Office in order to avoid a disallowance.

V. HEALTH CENTER RE-DEEMING

Deemed health centers interested in maintaining FTCA coverage will be required to re-apply using the application in PIN 96-7, issued April 23, 1996, at the end of their project period (i.e., submitted with the competitive PHS grant application) starting in FY 1998.

VI. VERIFICATION OF FTCA COVERAGE

The BPHC receives numerous requests for verification of coverage under the FTCA for individual health care practitioners. Since FTCA coverage is conveyed to the individual practitioner by virtue of employment or certain contractual relationship with the health center, the name of the health center would expedite these requests. The health care practitioner should write the name of their employing health center on the "Release of Information" form provided by the hospital, managed care organization, etc.

VII. INDEMNIFICATION OF OTHER ENTITIES

The BPHC is aware that many managed care organizations, State/local governmental entities, etc., insist upon "hold harmless" clauses in contracts with potential providers. However, there is no statutory basis for extending FTCA coverage to those other entities in such situations. Health centers should be very cautious in entering into such agreements. Section 7 of the FSHCAA of 1995 which requires, under penalty of losing Medicare and Medicaid reimbursement, managed care plans to accept FTCA as meeting whatever malpractice coverage requirements such plans require, should assist the health center in resolving any such matters.

VIII. RISK MANAGEMENT

On-going risk management is essential to the provision of quality health care services. Private malpractice insurance companies have traditionally provided risk management services ranging from minimal to comprehensive. As deemed health centers have migrated to FTCA coverage as the means of malpractice liability protection, there has been concern of the potential loss of risk management services. The BPHC is committed to assuring that health centers continue to have the availability of risk management services. However, the BPHC is unable to bear the full burden of cost and expects, as health centers begin to realize savings in malpractice insurance costs due to coverage under the FTCA, re-investment of some of the savings to target risk reduction. Although the BPHC is aware that the majority of private malpractice insurers are bundling risk management services with "gap or wrap-around" policies sold to health centers as a companion to FTCA coverage, the following are some specific steps being taken by BPHC:

• The BPHC is entering into an Interagency Agreement with the Armed Forces Institute of Pathology, Division of Legal Medicine, for the dissemination to all health centers of their periodical named the "Open File". This document, which is published once a year, is devoted solely to the discussion of risk management issues and offers five credits of continuing medical education.
• Individually tailored risk management assessment and assistance is available, on a limited basis, through the BPHC Technical Assistance program. Specific requests should be relayed to the Division of Health Service Delivery in the appropriate HRSA Field Office.
• The BPHC has provided funding to the National Association of Community Health Centers to provide health centers with: (1) risk management training and education and (2) limited risk management consultation services via telephone.
• Support, as an allowable cost, the purchase of separate private risk management services on the open market by health centers.

Issued January 13, 1997 - Last reviewed November 22, 2006