United States General Accounting Office

GAO Report to the Committee on the

Judiciary, U.S. Senate, and the

Committee on Commerce, House of

Representatives

April 1997 MEDICAL

MALPRACTICE

Federal Tort Claims

Act Coverage Could

Reduce Health Centers’

Costs

GAO/HEHS-97-57

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-272377 

April 14, 1997

The Honorable Orrin G. Hatch, Chairman

The Honorable Patrick J. Leahy, Ranking Minority Member

Committee on the Judiciary

United States Senate

The Honorable Thomas J. Bliley, Jr., Chairman

The Honorable John D. Dingell, Ranking Minority Member

Committee on Commerce

House of Representatives

Federally funded community and migrant health centers, which provide

health care to over 9 million people regardless of their ability to pay, are

facing growing patient populations and increasing financial pressures. To

help these 716 centers meet budgetary constraints, the Congress gave

them the opportunity to reduce or eliminate their spending for private

malpractice insurance, estimated at $50 million in 1994. In the past,

centers have typically purchased comprehensive malpractice insurance to

protect their physicians and other practitioners against claims. By offering

Federal Tort Claims Act (FTCA) coverage to these centers, the federal

government has agreed to assume responsibility for malpractice claims

against covered centers and their practitioners, if certain conditions are

met. The savings realized by centers may be used to expand health

services. FTCA coverage was authorized in 1993 for 3 years referred to by

the Department of Health and Human Services (HHS) as the demonstration

period. This coverage was made permanent by the Federally Supported

Health Centers Assistance Act of 1995 (P.L. 104-73).

This act also directed us to review the implementation of FTCA coverage

for community health centers. In response, we examined the centers’ use

of FTCA coverage and determined the status of claims filed against

FTCA-covered centers through March 21, 1997. In addition, we reviewed

HHS’ management of FTCA for community and migrant health centers, and

studied its efforts to reduce claims through risk management programs.1

To develop our information, we interviewed officials at HHS, including its

Health Resources and Services Administration (HRSA), which is charged

with administering FTCA coverage for community health centers. We

obtained FTCA claims data for covered centers and determined the status of

1

Risk management programs related to medical malpractice are intended to limit financial losses

resulting from allegations of improper patient care. These programs typically include risk

identification and assessment, risk prevention and control, and risk monitoring.

Page 1 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

these claims. We also interviewed officials from the Department of Justice,

35 community and migrant health centers, and 7 insurers offering

malpractice coverage to centers. In addition, we obtained the views of

other health care, malpractice, and risk management experts. More details

on our scope and methodology are in appendix I. A complete list of the

organizations we contacted is in appendix II. We performed our review

between March 1996 and March 1997 in accordance with generally

accepted government auditing standards.

Results in Brief The permanent authorization of FTCA coverage, the greater availability of

supplemental policies to cover incidents not covered under FTCA, and the

reports of some centers already realizing substantial savings have

contributed to the willingness of many centers to now obtain FTCA

coverage. Although HRSA required centers to apply for FTCA coverage

during the demonstration period, centers were not compelled to cancel

their private comprehensive malpractice insurance. Although HRSA does

not have complete data on center participation during the 3-year

demonstration period, it appears that most centers retained their private

comprehensive malpractice insurance during this time. Because these

centers were covered by both FTCA and their private policies, they did not

reduce their insurance costs. Of the 716 centers eligible for FTCA coverage,

452 have elected this coverage and are now required to cancel their private

comprehensive malpractice insurance. Despite this level of participation, a

significant number of centers have not reapplied for FTCA coverage since

its recent extension. As of March 21, 1997, 264 of the 716 centers eligible

for FTCA coverage, or 37 percent, had not applied for it.

Since the demonstration period began in 1993, there have been 138 claims

filed against FTCA-covered centers alleging damages of more than

$414 million. However, the actual amount of the federal government’s

liability for these claims is unclear. As of March 21, 1997, only five claims

have been settled, with total payments of $355,250. Seven others have been

disallowed.

At the recommendation of HHS’ Office of Inspector General (OIG), HRSA

developed a legislative proposal that, if enacted, would limit the federal

government’s liability to $1 million for claims filed against FTCA-covered

centers. Unlike private insurance policies, which limit the insurer’s

liability, FTCA coverage does not have a monetary limitation. HRSA’s

proposal is currently under review by the Secretary of HHS. If adopted, this

cap would be consistent with the exposure assumed by private carriers

Page 2 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

insuring these centers. Of the 126 remaining claims, 59 are seeking

payments in excess of $1 million.

By extending FTCA coverage to centers, the federal government has

assumed potential liabilities that need oversight and careful management.

HHS could improve its administration of FTCA coverage for community and

migrant health centers by strengthening data collection efforts and claims

management practices. For example, HRSA has not obtained adequate

information on the centers’ use of FTCA during the demonstration period

nor has it gathered sufficient data on the centers’ expenditures for

malpractice insurance. Without this information, HRSA cannot determine

whether centers have reduced their malpractice insurance costs. HHS has 6

months in which to either deny a claim or make a settlement offer before a

claimant may file suit in federal court. In some cases, HHS did not contact

claimants regarding their claims. For 22 of the 32 claims that have resulted

in federal lawsuits, HHS had not attempted to respond to the claimants

during this 6-month period.

Risk management services can help centers minimize liability by reducing

their financial exposure to claims. Although directed to oversee the

implementation of FTCA coverage for eligible centers, HRSA is not required

to provide centers with risk management services. Private insurers

conduct risk management programs because they believe it helps reduce

their exposure to claims and helps maintain an acceptable standard of

care. While HRSA is making plans to provide centers with some services, it

is not preparing to provide as many of these services as do some private

insurers or other federal agencies with FTCA malpractice coverage.

Furthermore, HRSA has not implemented a claims-tracking system

comparable to those used by other federal agencies and insurers.

Background Community and migrant health centers are financed in part with federal

grants administered by HRSA.

2 HHS awards grants to public and nonprofit

entities to plan, develop, and operate health centers for medically

underserved populations. To assist in providing health care to these

groups, HHS awarded over $750 million in grant assistance in fiscal year

1996.3

2

In fiscal year 1995, these grants constituted 30 percent of health centers’ revenue.

3

Centers may receive these grant funds under any of the following four sections of the Public Health

Service Act: (1) section 329—migrant health centers, (2) section 330—community health centers,

(3) section 340—health services for the homeless, and (4) section 340A—health services for residents

of public housing. To be eligible for FTCA coverage, a center must receive grant funds from one of

these four sources.

Page 3 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

Like all patients, those receiving care from community or migrant health

centers may seek compensation for medical malpractice if they believe the

treatment they receive does not meet an acceptable standard of care.

Patients may seek payment for economic losses such as medical bills,

rehabilitation costs, and lost income; and noneconomic losses such as

pain, suffering, and anguish. To obtain protection against malpractice

claims before FTCA coverage became available, most centers had

purchased private comprehensive malpractice insurance.

The Congress enacted the Federally Supported Health Centers Assistance

Act of 1992 (P.L. 102-501) to provide FTCA medical malpractice coverage to

community and migrant health centers. This law made FTCA coverage

available to grantees for a 3-year period beginning January 1, 1993, and

ending December 31, 1995. It provided centers an opportunity to reduce

their malpractice insurance expenditures. The Congress extended the

availability of permanent FTCA coverage to centers in December 1995. FTCA

coverage, which is provided at no cost to the centers, is an alternative to

private comprehensive malpractice insurance and gives centers a chance

to redirect their savings to the provision of health services. Centers opting

for FTCA coverage may decide to purchase a supplemental or “gap” policy

to cover events not covered by FTCA. Even with the purchase of a gap

policy, HRSA expects that centers will spend less on insurance than they

would if they continued to purchase comprehensive coverage.4

In a center not covered by FTCA, patients or their representatives would file

a malpractice claim with the private carrier insuring the provider. Insurers

are generally responsible for investigating claims, defending the provider,

and paying any successful claims, up to a stated policy limit. If not

resolved by the insurer, a claim could result in a lawsuit filed in state

court. In addition to insuring centers against instances of malpractice,

insurers may provide risk management services. Private carriers generally

view these services as a way to reduce the incidence of malpractice, and in

turn, reduce or minimize their liability.

Malpractice claims against FTCA-covered centers are resolved differently

from those filed against centers with private insurance. Patients of

4

In 1993, on the basis of projected estimates, we reported that if all community health centers used

FTCA coverage instead of private insurance coverage for the 3 years authorized, the federal

government’s costs to resolve the centers’ FTCA malpractice claims could have been greater than the

amount the centers would have spent on insurance coverage. We found the unlimited coverage

provided by FTCA could add about 50 percent to the cost of settling claims. This projection was based

on actuarial assumptions that subject the results to a significant amount of uncertainty. See Medical

Malpractice: Estimated Savings and Costs of Federal Insurance at Health Centers (GAO/HRD-93-130,

Sept. 24, 1993).

Page 4 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

FTCA-covered centers must file administrative claims with HHS. Claims must

be filed within 2 years after the patient has discovered or should have

discovered the injury and its cause. Under FTCA procedures, the claim is

filed against the federal government rather than against the provider. After

reviewing the claim, the HHS Office of General Counsel may attempt to

negotiate a financial settlement or, if it finds the case to be without merit,

it may disallow the claim.

Claimants dissatisfied with HHS’ determination have 6 months to file a

lawsuit against the federal government in federal district court. Claimants

may also file suit if HHS fails to respond to their claims within 6 months of

receipt. If a claim results in the filing of a medical malpractice suit, the

Attorney General, supported by the Department of Justice (DOJ),

represents the interest of the United States in either settling the case out

of court or in defending the case during the trial. If the claim continues to

trial, the case is heard in a federal district court without a jury; punitive

damages cannot be awarded.

Protection against malpractice claims through FTCA has been provided to

federally employed health care providers since 1946, when the government

waived its sovereign immunity for torts, including medical malpractice.

Prior to this date, individuals were prohibited from bringing a civil action

against the federal government for damages resulting from the negligent or

other wrongful acts or omissions of its employees acting within the scope

of their employment. Since then, the federal government defends

malpractice claims made against federal employees practicing medicine at

agencies such as the Department of Veterans Affairs, the Indian Health

Service, and the Department of Defense, so long as those practitioners

were providing care within the scope of their employment.

While FTCA coverage may reduce centers’ insurance costs, it imposes a

potentially significant liability on the federal government because FTCA

does not limit the amount for which the government can be held liable.

Private policies generally limit the amount that can be paid on a claim,

typically to $500,000 or $1 million. The total amount paid for all claims is

also usually limited. For example, a policy with coverage limits of

$1 million/$3 million will pay up to $1 million for each claim and no more

than $3 million for all claims annually. As FTCA does not specify a monetary

Page 5 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

limitation, payments could be substantially higher than the monetary limits

of private malpractice insurance policies.5

More Centers Plan to

Use FTCA Coverage

to Reduce Their Costs

While most eligible centers did not rely on FTCA coverage during the

demonstration period, centers now seem to be taking greater advantage of

the opportunity to reduce their costs. The number of centers relying on

FTCA coverage appears to have increased significantly. During the

demonstration period, all centers were required to apply for FTCA coverage

but did not necessarily cancel their private comprehensive malpractice

insurance. As a result, most centers incurred the cost of private insurance

during the demonstration period and were not relying on FTCA coverage.

As of March 21, 1997, 452 of 716 eligible centers have applied for FTCA

coverage. HRSA has told centers to cancel private comprehensive

malpractice insurance when they come under FTCA but remains uncertain,

as it was in the demonstration period, about which FTCA-covered centers

have actually terminated that insurance and are thus not paying for

duplicate coverage.

During the demonstration period, many centers were uncertain FTCA

coverage would be permanently extended and retained private insurance.

Centers feared that converting back to private comprehensive malpractice

insurance, if an extension was not enacted, would be both difficult and

costly. Others were concerned about the possibility that not all claims

would be covered by FTCA. While HRSA permits centers to combine gap

policies with FTCA coverage, the expense and difficulty associated with

obtaining gap coverage was an additional concern.

The permanent extension of FTCA and provisions in the new law appear to

have eased many of the centers’ concerns. Since the demonstration began,

private insurers have developed more gap policies to insure against

incidents not covered by FTCA. The new law made FTCA coverage optional

for centers. Centers that do not want FTCA coverage are no longer required

to apply for it. In addition, the new law addressed other concerns raised by

the centers during the demonstration period. For example, FTCA coverage

was expanded to include part-time practitioners in the fields of family

practice, general internal medicine, general pediatrics, and obstetrics and

gynecology. Centers were also given greater assurance that the federal

government would cover their claims. During the demonstration period,

5

Malpractice suits are generally tried under the law of the state where the alleged incident of

malpractice occurred. Some states limit the amount that can be recovered by claimants in malpractice

suits, and such a state-imposed cap on damages would apply to court decisions on FTCA claims as

well.

Page 6 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

DOJ could invalidate HHS’ decision to grant a center FTCA coverage after a

claim was filed. Now, HHS’ decision is binding upon the Attorney General.

The possibility of reducing center costs also influenced many of the center

officials with whom we spoke. For example, one center in New England

reported its malpractice insurance costs were reduced by almost $600,000

since 1993. A center official there told us that the savings have been used

to improve medical staff retention and will also be used to expand patient

programs. Another center in the Midwest reported savings of $350,000. Of

the center officials we spoke to who now intend to rely on FTCA coverage,

all reported the opportunity to reduce costs as the main factor in choosing

FTCA over private comprehensive malpractice insurance.

Although FTCA participation appears to have grown substantially since the

demonstration period, not all centers have opted for FTCA coverage. Of the

approximately 716 centers currently eligible for this coverage, 264 of the

eligible centers, or 37 percent of them, have not applied for it. FTCA is still a

relatively recent option for centers and some center personnel may be

questioning the desirability of this coverage for their facility. Uncertainty

about which practitioners and services are not covered by FTCA, the

availability of private policies to cover any gaps, and questions about the

FTCA claims resolution process may all contribute to a center’s decision to

retain private coverage. Center officials from two southern states told us

that their malpractice premiums were low enough that there was little

incentive to convert to FTCA coverage. Officials from other centers that do

not have FTCA coverage told us that resistance from the medical staff and

the loss of tailored risk management services are also contributing factors

in their decision to keep private insurance.

Few FTCA Health

Center Claims

Resolved to Date

Few of the 138 FTCA claims filed against health centers since the beginning

of FTCA coverage have been resolved. Although the number of FTCA claims

filed against centers has increased since the demonstration period began

in 1993, only five settlements have been made and all have been relatively

small. Table 1 shows the number of claims filed and compensation sought

and awarded by fiscal year.

Page 7 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

Table 1: Number and Dollar Amount of

FTCA Claims Filed and Settled for

Community and Migrant Health

Centers

Fiscal year

Number of

claims Amount claimed Claims settleda Amount paid

1994 4 $5,950,000 1 $5,250

1995 18 66,327,000 2 325,000

1996 76 252,467,470 2 25,000

1997b 40 90,055,003 0 0

Total 138 $414,799,473 5 $355,250

aClaim settlement information is displayed according to the year the claim was filed. This is not

necessarily the year in which the claim was actually settled.

bThrough Mar. 21, 1997.

In addition to the five claims that have been settled, seven others have

been disallowed by HHS. The total amount of compensation sought by the

126 remaining claimants is in excess of $400 million. Thirty-two FTCA

claims have resulted in lawsuits that have been filed in federal court. The

94 remaining claims are pending in HHS.

Current claims and settlement experience may not be an accurate

indicator of future claims. Although claim payments to date have been

relatively small, one large settlement or court award could dramatically

increase the total.6

 Other factors also make it difficult to predict future

payments. There may be a time lag between alleged instances of

malpractice and claim filings, as claimants have 2 years from the date of

the alleged incident to file a claim. However, a prior analysis of claims

reported by centers before the demonstration period showed that their

claims experience was considered favorable by actuaries in relation to the

insurance premiums they paid.7

HRSA Recommends

Capping Payments Made

on Behalf of

FTCA-Covered Centers to

Limit Federal Liability

HRSA has drafted a legislative proposal limiting the federal government’s

liability for FTCA claims filed against migrant and community health

centers. This proposal, initially recommended by HHS’ OIG and currently

under review by the Secretary of HHS, calls for capping the amount a

claimant may seek in damages from an FTCA-covered center at $1 million.8

6

For HHS medical malpractice claims against federal employees and paid under FTCA in calendar

years 1986 through 1996, the largest administrative settlement was $975,000 (paid in 1989), and the

largest federal court case payment was $5.7 million (paid in 1986).

7

GAO/HRD-93-130, Sept. 24, 1993.

8

Department of Health and Human Services, Office of Inspector General, Cost to the Government for

Providing Medical Malpractice Coverage to Community and Migrant Health Centers (Washington, D.C.:

Mar. 25, 1996).

Page 8 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

This would be comparable with the $1 million cap per claim that private

insurance carriers typically place on malpractice policies, including those

sold to health centers. If enacted, this proposal would, for the first time,

limit the federal government’s liability under FTCA and would be an

exception for only federally funded health centers. According to HHS’ OIG

report, this cap could save the federal government as much as

$30.6 million over a 3-year period, if all health centers elected FTCA

coverage. Of the 126 unresolved FTCA claims, which include the 32 pending

lawsuits, 59 seek compensation in excess of $1 million.

Management of FTCA

Coverage Could Be

Improved

HRSA’s collection of FTCA participation data has been limited. This

information is necessary to determine whether FTCA coverage is reducing

health centers’ costs and is also critical to the agency’s ability to provide

risk management. Although HRSA has attempted to collect data related to

centers’ use and savings under FTCA, these attempts have not been

effective. HHS has also failed to respond to claimants in a timely manner,

which gives them the opportunity to file lawsuits in federal court. While

HRSA intends to provide centers with some risk management services, it

has not developed a comprehensive risk management plan and presently

does not intend to provide some of the important risk management

activities currently provided by private insurers and other federal

agencies.

HRSA’s Data Collection

and Claims Management

Are Ineffective

HRSA cannot accurately report the amount centers spent on comprehensive

private malpractice insurance during the FTCA demonstration period, nor

can the agency report with certainty the total cost reductions realized by

FTCA-covered centers during that period. HRSA officials were unable to

identify those centers that canceled these comprehensive policies during

the demonstration period and relied on FTCA coverage. Although HRSA

collected data from centers regarding their insurance costs and savings

under FTCA, we found that these data were not reliable for determining

whether centers canceled their private comprehensive malpractice

insurance and reduced their costs. The form HRSA provided to centers was

not accompanied by instructions. In addition, the form did not provide

centers with a means of reporting and identifying all of their malpractice

insurance expenditures. Consequently, centers may have supplied

inappropriate data or reported expenditures inaccurately while other

information, critical to determining actual cost reductions, was not

obtained. Without reliable information on centers’ reliance on FTCA it will

be difficult for HRSA to target its limited risk management services on

Page 9 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

FTCA-covered centers. Similarly, without sound data on cost reductions,

HRSA will be unable to determine if coverage under FTCA saves centers

money.

HRSA is now taking steps to end dual coverage, which has hampered HRSA’s

data collection efforts and oversight of FTCA. While HRSA advised centers in

April 1996 that they must choose between FTCA coverage and private

comprehensive malpractice insurance, it did not establish a date after

which duplicate insurance will no longer be an allowable charge to the

grant at centers with FTCA coverage. We spoke with officials at 27 centers

with FTCA coverage. Of those 27 centers, 6 were also covered by private

comprehensive malpractice insurance. We subsequently advised HRSA that

a deadline was needed to ensure that health centers reduce their costs by

terminating duplicate coverage. HRSA officials agreed and recently issued a

directive to FTCA-covered centers to cancel their private comprehensive

malpractice insurance by March 31, 1997.

In many cases, HHS has not contacted claimants regarding their claims, and

some claimants have filed suit in federal court. Claimants are precluded

from filing suit for 6 months unless HHS has denied the claim. For 22 of the

32 claims involving FTCA-covered centers that have resulted in federal

lawsuits, HHS had not responded to the claimants or contacted them to

discuss a settlement during the 6-month period. HHS officials told us that in

many cases they had been unable to obtain documentation and medical

reviews needed to assess the merits of these claims and were therefore not

prepared to either settle or deny them. DOJ is now responsible for

representing the government in these lawsuits. If HHS had achieved a

settlement in any of these cases, some of the costs of FTCA administration

associated with involving another federal agency, preparing for trial, and

defending the case in court might have been avoided.

HRSA Planning to Offer

Limited Risk Management

Services

Risk management provides an opportunity to limit financial losses

resulting from allegations of improper patient care. It also offers providers

a way to improve service to patients, avoid patient injuries, and reduce the

frequency of malpractice claims. The health care experts we spoke with

consistently promoted risk management as a tool to simultaneously

minimize loss and improve the quality of patient care. Although the law

extending FTCA coverage to centers does not direct HRSA to provide risk

management, HRSA officials acknowledge both the need to minimize the

federal government’s potential liability and provide risk management

services to centers. HRSA has begun to provide centers with some of these

Page 10 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

services. However, HRSA is not planning as extensive a risk management

program as some private insurance carriers or other federal agencies with

FTCA malpractice coverage, such as the Department of Defense and the

Indian Health Service. (App. III provides more details on the purpose and

potential benefits of risk management for health care facilities.)

A wide range of risk management services was offered to health facilities

and practitioners by the insurance companies and federal agencies we

interviewed. While some provided extensive services—including site

inspections, periodic risk reassessments, and telephone hotlines to

respond to center concerns—others offered these services on request or to

larger facilities. The more commonly offered services included claims

tracking, analysis, and feedback on specific incidents, educational

seminars, risk management publications, and the opportunity to obtain

specific guidance on center concerns.

Most of the health center officials we spoke with valued their insurer’s risk

management services. Many regarded the opportunity to discuss a new

procedure or a potential malpractice claim with a risk manager as the

most important feature of their insurer’s risk management plan. Several

officials said they were reluctant to cancel private comprehensive

malpractice coverage in favor of FTCA because they would then lose the

risk management services they have come to rely upon. In contrast, other

centers find risk management services are still available from their private

insurer if they purchase a supplemental policy to cover gaps in FTCA

coverage. Additionally, HRSA has advised centers that the purchase of

private risk management services by centers will be an allowable charge to

their grant.

Recently, HRSA has begun to take steps to provide centers with risk

management. HRSA has contracted with the National Association of

Community Health Centers (NACHC) to provide telephone consultations

with centers regarding FTCA and risk management issues. NACHC may also

provide a limited number of special risk management seminars to centers

through HRSA-sponsored training. HRSA officials told us that they will obtain

a subscription for all FTCA-covered centers to the Armed Forces Institute of

Pathology’s annual publication, Open File, which is exclusively devoted to

risk management issues. Individually tailored risk management

assessments may also be offered to centers through HRSA’s Technical

Assistance Program. This assistance would supplement the agency’s

periodic site inspections of centers, already a routine component of its

grant management process.

Page 11 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

While HRSA has taken important steps in providing centers with some risk

management services, some critical risk management

activities—performed by other insurers, including other federal

agencies—have been excluded from its efforts. For example, it has not

established a policy for providing centers with specific feedback based on

their claims experience nor has it instituted a useful claims tracking

system, widely regarded by risk management experts as an essential

component of managing risk. The experts we spoke to told us that a

tracking system provides a way of identifying problem practitioners as

well as patterns among practitioners and facilities. While HRSA officials

agreed with the importance of these risk management activities, they told

us that the initial activities related to the implementation of FTCA for health

centers necessarily took priority over the development of a comprehensive

risk management plan.

Conclusions Community and migrant health centers are being challenged by increasing

financial pressures, jeopardizing their service to large medically needy

populations. By opting for FTCA coverage, centers can reduce their

malpractice insurance expenditures and redirect these funds to providing

needed services to their communities.

Malpractice coverage provided by FTCA differs in many ways from that

provided by private malpractice insurance coverage. One of the significant

differences is the lack of a monetary limitation on liability coverage, which

could play a signiftcantant role in determining the federal government’s

ultimate cost of providing FTCA coverage to community and migrant health

centers and which heightens the importance of a sound risk management

plan.

As more centers rely on FTCA for malpractice coverage, the federal

government’s potential liability will increase as will the need for risk

management. Insurers and other federal agencies have employed a variety

of risk management practices to limit liability and improve clinical

practices. The growth in FTCA coverage offers both the challenge of a

greater federal liability to manage and a new opportunity to help

community and migrant health centers improve the quality of their care.

Recommendations We recommend that the Secretary of Health and Human Services direct

the Administrator of HRSA to develop a comprehensive risk management

Page 12 GAO/HEHS-97-57 FTCA Coverage for Health Centers
B-272377 

plan, including procedures to capture claims information and to identify

problem-prone clinical procedures, practitioners, and centers.

Agency Comments We provided HHS an opportunity to comment on a draft of this report, but

it did not provide comments in time for inclusion in the final report.

However, program officials provided us with updated claims information

and also offered several technical comments based on their review of the

draft report, which we have incorporated as appropriate. In addition, we

also discussed the findings presented in this report with program officials

who generally agreed with the facts we presented and with our evaluation

of HRSA’s management of FTCA coverage for community health centers.

We are sending copies of this report to the Director of the Office of

Management and Budget, the Secretary of Health and Human Services, and

interested congressional committees. We will make copies available to

others upon request. Major contributors include Paul Alcocer, Geraldine

Redican, Barbara Mulliken, and Betty Kirksey. Please call me at

(312) 220-7767 if you or your staff have any questions concerning this

report.

Leslie G. Aronovitz

Associate Director, Health Financing

 and Systems Issues

Page 13 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Contents

Letter 1

Appendix I 

Scope and

Methodology

16

Appendix II 

Organizations

Contacted

17

Appendix III 

Risk Management Is

Intended to Minimize

Financial Losses and

Improve Care

19

Table Table 1: Number and Dollar Amount of FTCA Claims Filed and

Settled for Community and Migrant Health Centers

8

Abbreviations

AFIP Armed Forces Institute of Pathology

DOJ Department of Justice

FTCA Federal Tort Claims Act

HHS Department of Health and Human Services

HRSA Health Resources and Services Administration

IHS Indian Health Service

NACHC National Association of Community Health Centers

OIG Office of Inspector General

PIAA Physician Insurers Association of America

Page 14 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Page 15 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Appendix I 

Scope and Methodology

To review HHS’ implementation of FTCA coverage for community health

centers, we spoke with officials from HRSA’s Bureau of Primary Health

Care in Bethesda, Maryland, as well as the agency’s regional FTCA

coordinators. To assess the FTCA claims resolution process and to

determine the status of claims filed, we met with and obtained data from

the Public Health Service Claims Office, HHS’ Office of General Counsel,

and DOJ. However, we did not independently verify the status of these

claims. To obtain information on why community health centers do and do

not participate in the FTCA program, we interviewed officials from the

National Association of Community Health Centers (NACHC) and three state

primary care associations. We also interviewed officials from 35

community health centers, including 27 centers with FTCA coverage and 8

centers that were not participating in the FTCA program.

To determine the types of risk management services provided to

community health centers, we interviewed representatives of seven

insurers and three risk management consulting firms providing these

services. We also discussed these services with some of the community

health center officials we interviewed. We identified the insurance carriers

through discussions with HRSA officials in both headquarters and regional

offices, community health centers, NACHC, and others knowledgeable about

the malpractice market. We selected carriers selling malpractice insurance

in a variety of geographic areas, including both coasts, the midwest, and

the south. We also selected carriers with significant experience insuring

community health centers. We estimate that collectively, these carriers

have insured over 300 community health centers against malpractice

claims. We also discussed the unique risk management needs of

community health care centers with a variety of health care experts. In

addition, we contacted the Armed Forces Institute of Pathology and the

Indian Health Service to discuss their risk management programs.

Page 16 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Appendix II 

Organizations Contacted

Risk Management

Experts and

Consultants

Accreditation Association for Ambulatory Health Care, Inc.

American Society for Healthcare Risk Management

American Medical Association

Illinois Risk Management Services

Joint Commission on Accreditation of Healthcare Organizations

MMI Companies, Inc.

Physician Insurers Association of America

QA/RM Consultants

S. A. Gross & Associates

Malpractice Insurers Clinic Mutual Insurance Co.

Frontier Insurance Group, Inc.

Healthcare Underwriters Mutual Insurance Company

PICOM Insurance Company

Risk Management Foundation of the Harvard Medical Institutions, Inc.

The St. Paul Companies, Inc.

Washington Casualty Company

Government Agencies Armed Forces Institute of Pathology

Department of Health and Human Services

 Health Resources and Services Administration

 Indian Health Service

 Office of the General Counsel

 Office of Inspector General

 Public Health Service

Department of Justice

Community Health

Centers

Alcona Citizens for Health, Inc. (MI)

Barnes-Kasson County Hospital (PA)

Brownsville Community Health Center (TX)

Citizens of Lake County for Health Care, Inc. (TN)

Columbia Valley Community Health Services (WA)

Country Doctor Community Clinic (WA)

Crusaders Central Clinic Association (IL)

Detroit Community Health Connection, Inc. (MI)

East Arkansas Family Health Center, Inc. (AR)

El Rio Santa Cruz Neighborhood Health Center, Inc. (AZ)

Erie Family Health Center, Inc. (IL)

Grace Hill Neighborhood Health Center (MO)

Page 17 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Appendix II 

Organizations Contacted

Greater New Bedford Community Health Center, Inc. (MA)

Indian Health Board of Minneapolis, Inc. (MN)

Kitsap Community Clinic (WA)

La Clinica de Familia, Inc. (NM)

La Clinica del Pueblo de Rio Arriba (NM)

Lamprey Health Care, Inc. (NH)

Laurel Fork-Clear Fork Health Centers, Inc. (TN)

Lawndale Christian Health Center (IL)

Manet Community Health Center, Inc. (MA)

Memphis Health Center, Inc. (TN)

Missoula City/County Health Department (MT)

Model Cities Health Center, Inc. (MN)

Ossining Open Door Health Center (NY)

Perry County Medical Center, Inc. (TN)

Presbyterian Medical Services (NM)

Providence Ambulatory Health Care Foundation, Inc. (RI)

Sea Mar Community Health Center (WA)

Shawnee Health Service Development Corporation (IL)

Southern Ohio Health Services Network (OH)

South Plains Health Provider Organization, Inc. (TX)

Southwest Community Health Center, Inc. (CT)

The Clinic in Altgeld (IL)

Westside Health Services, Inc. (NY)

Community Health

Center Organizations

Illinois Primary Health Care Association

National Association of Community Health Centers, Inc.

Massachusetts League of Community Health Centers

Michigan Primary Care Association

Page 18 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Appendix III 

Risk Management Is Intended to Minimize

Financial Losses and Improve Care

Risk management offers physicians and other health care practitioners

and facilities a means of improving patient services, avoiding patient

injuries, and reducing the frequency of malpractice claims. Organizations

such as the American Medical Association, the American Hospital

Association, the Joint Commission on the Accreditation of Healthcare

Organizations, and the Physician Insurers Association of America (PIAA)

recognize risk management as an effective tool for minimizing liability and

enhancing quality care. The insurers and health care experts we spoke

with concurred that risk management provides the underwriter or, in the

case of FTCA coverage, the federal government, the possibility of

preventing instances of malpractice from occurring and thereby reducing

financial liability. They also told us that risk management can help educate

physicians and other medical personnel while improving their

performance. Many of the center officials we spoke with also valued risk

management services.

The insurance industry and federal officials we spoke with consistently

underscored claims tracking and analysis as one of risk management’s

most critical components. Claims tracking and analysis provides a way of

identifying patterns in the types of malpractice claims filed against

providers. This information may be used to identify facilities or

practitioners that pose risks and problem-prone clinical practices. It can

also be key to implementing corrective actions, such as selecting a

practitioner or an entire facility for other risk management services.

Aggregating and analyzing claims data and sharing results with health care

providers may reduce the number of claims by bringing to light factors

that lead to claims. Analyzing claims made and settled is done by

individual insurers, organizations representing groups of insurers, such as

PIAA, and federal agencies administering health programs FTCA covers for

malpractice claims.

Many insurers collect medical malpractice data. Data collected may relate

to the cause of claims and their severity, the amounts requested and paid

by type of injury, and demographic features of claimants and providers.

For example, PIAA, which represents physician-owned or -directed

professional liability insurance companies, routinely collects and analyzes

data from 21 of its member companies. PIAA has issued special reports on

topics such as lung cancer, medication errors, and orthopedic surgical

procedures. This information can alert providers to situations that may put

them at greater risk for a malpractice claim and increase their awareness

of new or continuing problem areas.

Page 19 GAO/HEHS-97-57 FTCA Coverage for Health Centers
Appendix III 

Risk Management Is Intended to Minimize

Financial Losses and Improve Care

The federal government also recognizes the value of analyzing claims data

as both a risk management tool and a means of improving quality care. The

Armed Forces Institute of Pathology (AFIP) performs detailed claims

analysis for all branches of the military and other federal agencies, such as

the Department of Veterans Affairs, that are covered by FTCA. In addition

to conducting studies, AFIP also provides direct feedback and responds to

queries from facilities seeking to improve performance and minimize risk.

The Indian Health Service (IHS) provides health care services at both

hospitals and outpatient facilities. IHS performs its own analysis of claims,

although on a smaller scale than AFIP. IHS has tracked claims for 10 years

and provides routine feedback to all facilities and practitioners after a

claim has been resolved. It has also created a database of all filed claims

and has issued reports of its analysis to IHS facilities.

(108271) Page 20 GAO/HEHS-97-57 FTCA Coverage for Health Centers
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