COVID-19 Defense Team | Stay up to date on the COVID-19 pandemic

The Federally Supported Health Centers Assistance Act and Insurance Coverage (December Litigation Quarterly 2008)

December 1, 2008

The Federally Supported Health Centers Assistance Act (“Act”) allows the United States to “deem” actors, agencies and employees to be part of the Public Health Service (“PHS”).  Such “deemed” actors qualify for a type of limited insulation from suit under the Federal Tort Claims Act (“FTCA”).

The facility, called an “entity” under the Act, and its employees enjoy the Act’s protection by being “deemed” employees of the PHS.  A facility does not enjoy immunity simply by virtue of receiving federal funds.  It must take affirmative steps to obtain immunity.  This is done by applying to the Secretary of Heath and Human Services (“HHS”), who then makes the determination of whether or not the entity meets the requirements to be “deemed” a PHS employee.

The relevant code sections specifically delineate four requirements for the Secretary of HHS to determine whether an entity should be deemed to be a part of the PHS: (1) the Secretary must find that the entity has implemented appropriate policies and procedures for reducing the risk of malpractice; (2) the entity must have reviewed and checked the credentials of its physicians and other health care practitioners; (3) 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; and (4) 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.

In determining what action to take when handling a file that might involve FTCA protection, the insurer should make two initial determinations: (1) the insurer needs to consider whether the file involves a facility or an individual; and (2) whether the issue involved is a claim being filed or a simple evaluation of the insured’s coverage.

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.  However, facilities will still need “gap” insurance to cover those acts or omission outside the FTCA.  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.  Additionally, any procedural miscue on the part of the facility that disqualifies an entity’s application, will preclude FTCA coverage for the facility and its employees.  Therefore, the insurer has an incentive to make sure that the facility follows all the proper procedures for obtaining FTCA protection.

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 a PHS entity by the Secretary of HHS.  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.  If the facility has been deemed, the insurer should make certain that the insured’s 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.

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.  There is no statutory protection until the deeming process has been completed.  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.  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.

The Act covers acts or omissions, relating to the grant-supported activity, occurring after the date the entity becomes a deemed facility and related to the grant-supported activity.  Determination of two key elements is essential to establishing facility coverage under the Act: (1) the date the facility was deemed an employee under the Act; and (2) whether the alleged act or omission that forms the basis of the claim is related to the scope of services funded by the grant.

Any statutory protection is not retroactive and only applies to acts or omissions occurring on or after the date the Secretary deemed the facility to be an employee of the PHS.  Even after a health care facility is deemed an employee of the PHS, the health care facility is not protected under the FTCA from all suits brought against it.  The protection only extends to services related to the grant-supported activity.  This is known as being within the “Scope of Project.”  When a health care facility faces a cause of action, it must notify the Attorney General of the claim or lawsuit so that the Attorney General can determine whether the Act covers the particular incident.

Once the Attorney General receives notification of a lawsuit against any entity or one of its employees, the Attorney General has fifteen (15) days to make an appearance in court to advise the court whether the entity or its employees are deemed PHS employees for the purposes of the acts or omissions at issue in the suit.  If the Attorney General finds that the entity or its employees are PHS employees, such finding will satisfy the Act’s requirements that the Attorney General certify that the entity and its employees were acting within their scope of employment.  Thus, the PHS employees would receive the Act’s protection.  If the acts are not related to the federal funding, then neither the entity nor the individual will receive protection from the federal government.

It is possible for the Act to protect an entity and not cover a physician performing services at the health care facility.  The Act provides that an individual may be considered a contractor of the entity if the individual meets certain criteria:

The Act defined a Public Health Service employee to include “an entity described in [§ 233(g)(4)], and any officer, governing board member, or employee of such an entity, and any contractor of such an entity who is a physician or other licensed or certified health care practitioner (subject to paragraph 5).1

Paragraph (5) states:

An individual may be considered a contractor of an entity … only if…

A) The individual normally performs on average of at least 32 1/2 hours of service per week for the entity for the period of the contract. § 233(g)(5); or

B) In the case of an individual who normally performs less than 32 1/2 hours of service per week for the entity for the period of the contract, the individual is a licensed or certified provider of services in the fields of family practice, general internal medicine, general pediatrics, or obstetrics and gynecology.2

Conceivably, a physician who is not an employee of the health care facility may perform services related to the facility’s federal funding.  If the facility had completed the deeming process, it should be covered by the Act; however, the physician would not be covered because he is neither an actual employee nor meets the requirements to be considered a contactor.

A finding that the facility or physician is an employee allows the Attorney General to remove the case to federal district court, with the substitution of the United States as the defendant.  At this point the United States will take over the case and the entity or individual’s involvement will be limited to cooperating with the United States in defending the lawsuit.

The Act protects health care facilities and their employees by deeming them PHS employees, which means that the sole remedy against them is to bring suit against the United States pursuant to the FTCA.  In cases involving deemed entities, even though the United States is substituted as the defendant, it is vital for a health care facility to understand how the FTCA works because the facility and its employees will often remain involved in the suit.  In cases where the United States substitutes itself for an entity or employee of the facility, the original defendant will be expected to cooperate fully so that the United States can adequately defend the case.  Moreover, in cases where a health care facility maintains dual coverage, the private insurer will have an additional interest in the outcome of the case because the United States may seek payment from the insurer for any judgment against the United States pursuant to a statutory right of subrogation.

Conclusion

While the Act does provide some coverage/immunity for medical malpractice claims, a facility covered under the Act still needs additional insurance coverage for several reasons.  Facilities will still need “gap” insurance to cover those acts or omission that fall outside the FTCA.  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.  Additionally, any procedural miscue on the part of the facility, should it disqualify the application, will preclude FTCA coverage for the facility and its employees.

Moreover, the Act only covers acts or omissions occurring after the date the entity becomes a deemed facility and related to the grant-supported activity.  Any statutory protection is not retroactive and only applies to acts or omission occurring on or after the date the Secretary deemed the facility to be an employee of the PHS.  Even after a health care facility is deemed an employee of the PHS, the health care facility is not protected under the FTCA from all suits brought against it.  The protection only extends to services related to the grant-supported activity, and the determination as to whether the Act covers the particular incident is within the discretion of the Attorney General.

Finally, it is possible for the Act to protect a facility and not cover a physician performing services at the health care facility.  If the physician in question is neither an actual employee nor meets the requirements to be considered a contractor under the Act, then coverage would not be provided.

Endnotes

1         42 U.S.C. § 233(g)(1)(A).

2         42 U.S.C. § 233(g)(5).

 


Our team is available to discuss the topics written here and ready to provide additional information contained in this article. Contact us for more information.


Latest Publications

FAQ: NCAA Athlete’s Guide[...]

September 10, 2021 | Michael Clouser
What are the most common NIL deals that have been signed thus far? While the[...]

Action Steps with Sexual[...]

September 8, 2021 | Robert F. Lasky
Another high-profile case regarding sexual harassment claims surfaced this past week at ABC News with[...]

Navigating Through the Discovery[...]

August 30, 2021
It is well known that the Florida Rules of Civil Procedure are patterned after the[...]