[House Report 104-398]
[From the U.S. Government Publishing Office]



H.L.C.

                                                                       
104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-398
_______________________________________________________________________


 
       FEDERALLY SUPPORTED HEALTH CENTERS ASSISTANCE ACT OF 1995
_______________________________________________________________________


 December 12, 1995.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______


  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                        [To accompany H.R. 1747]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 1747) to amend the Public Health Service Act to 
permanently extend and clarify malpractice coverage for health 
centers, and for other purposes, having considered the same, 
report favorably thereon with amendments and recommend that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     4
Background and Need for Legislation..............................     5
Hearings.........................................................     8
Committee Consideration..........................................     8
Rollcall Votes...................................................     8
Committee Oversight Findings.....................................     8
Committee on Government Reform and Oversight.....................     8
New Budget Authority and Tax Expenditures........................     8
Committee Cost Estimate..........................................     9
Congressional Budget Office Estimate.............................     9
Inflationary Impact Statement....................................    10
Advisory Committee Statement.....................................    10
Section-by-Section Analysis and Discussion.......................    10
Changes in Existing Law Made by the Bill, as Reported............    13


    The amendments are as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; REFERENCES.

    (a) Short Title.--This Act may be cited as the ``Federally 
Supported Health Centers Assistance Act of 1995''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Public Health Service Act.

SEC. 2. EXTENSION OF PROGRAM.

  (a) In General.--Section 224(g)(3) (42 U.S.C. 233(g)(3)) is amended 
in the last sentence by striking ``January 1, 1996'' and inserting 
``January 1, 1999''.
  (b) Conforming Amendments.--Section 224(k) (42 U.S.C. 233(k)) is 
amended--
          (1) in paragraph (1)(A), by striking ``each of the fiscal 
        years 1993, 1994, and 1995'' and inserting ``each of the fiscal 
        years 1996 through 1998''; and
          (2) in paragraph (2), by striking ``each of the fiscal years 
        1993, 1994, and 1995'' and inserting ``each of the fiscal years 
        1996 through 1998''.

SEC. 3. CLARIFICATION OF COVERAGE.

  Section 224(g)(1) (42 U.S.C. 233(g)(1)) is amended--
          (1) in the first sentence, by striking ``officer, employee, 
        or contractor'' and inserting ``officer, governing board 
        member, or employee of such an entity, and any contractor''; 
        and
          (2) in the second sentence, by inserting after ``officer,'' 
        the following ``governing board member,''.

SEC. 4. COVERAGE FOR SERVICES FURNISHED TO INDIVIDUALS OTHER THAN 
                    CENTER PATIENTS.

  Section 224(g)(1) (42 U.S.C. 233(g)) is amended--
          (1) by redesignating paragraph (1) as paragraph (1)(A); and
          (2) by adding at the end thereof the following:
  ``(B) The deeming of any entity or officer, governing board member, 
employee, or contractor of the entity to be an employee of the Public 
Health Service under subparagraph (A) shall apply with respect to 
services provided--
          ``(i) to all patients of the entity, and
          ``(ii) subject to subparagraph (C), to individuals who are 
        not patients of the entity.
  ``(C) Subparagraph (B)(ii) applies to services provided to 
individuals who are not patients of an entity if the Secretary 
determines, after reviewing an application submitted under subparagraph 
(D), that the provision of the services to such individuals--
          ``(i) benefits patients of the entity and general populations 
        that could be served by the entity through community-wide 
        intervention efforts within the communities served by such 
        entity;
          ``(ii) facilitates the provision of services to patients of 
        the entity; or
          ``(iii) are otherwise required under an employment contract 
        (or similar arrangement) between the entity and an officer, 
        governing board member, employee, or contractor of the 
        entity.''.

SEC. 5. APPLICATION PROCESS.

  (a) Application Requirement.--Section 224(g)(1) (42 U.S.C. 233(g)(1)) 
(as amended by section 4) is further amended--
          (1) in subparagraph (A), by inserting ``and subject to the 
        approval by the Secretary of an application under subparagraph 
        (D)'' after ``For purposes of this section''; and
          (2) by adding at the end thereof the following:
  ``(D) The Secretary may not deem an entity or an officer, governing 
board member, employee, or contractor of the entity to be an employee 
of the Public Health Service under subparagraph (A), and may not apply 
such deeming to services described in subparagraph (B)(ii), unless the 
entity has submitted an application for such deeming to the Secretary 
in such form and such manner as the Secretary shall prescribe. The 
application shall contain detailed information, along with supporting 
documentation, to verify that the entity, and the officer, governing 
board member, employee, or contractor of the entity, as the case may 
be, meets the requirements of subparagraphs (B) and (C) of this 
paragraph and that the entity meets the requirements of paragraphs (1) 
through (4) of subsection (h).
  ``(E) The Secretary shall make a determination of whether an entity 
or an officer, governing board member, employee, or contractor of the 
entity is deemed to be an employee of the Public Health Service for 
purposes of this section within 30 days after the receipt of an 
application under subparagraph (D). The determination of the Secretary 
that an entity or an officer, governing board member, employee, or 
contractor of the entity is deemed to be an employee of the Public 
Health Service for purposes of this section shall apply for the period 
specified by the Secretary under subparagraph (A).
  ``(F) Once the Secretary makes a determination that an entity or an 
officer, governing board member, employee, or contractor of an entity 
is deemed to be an employee of the Public Health Service for purposes 
of this section, the determination shall be final and binding upon the 
Secretary and the Attorney General and other parties to any civil 
action or proceeding. Except as provided in subsection (i), the 
Secretary and the Attorney General may not determine that the provision 
of services which are the subject of such a determination are not 
covered under this section.''.
  (b) Approval Process.--Section 224(h) (42 U.S.C. 233(h)) is amended--
          (1) in the matter preceding paragraph (1), by striking 
        ``Notwithstanding'' and all that follows through ``entity--'' 
        and inserting the following: ``The Secretary may not approve an 
        application under subsection (g)(1)(D) unless the Secretary 
        determines that the entity--''; and
          (2) by striking ``has fully cooperated'' in paragraph (4) and 
        inserting ``will fully cooperate''.

SEC. 6. TIMELY RESPONSE TO FILING OF ACTION OR PROCEEDING.

  Section 224 (42 U.S.C. 233) is amended by adding at the end thereof 
the following subsection:
  ``(l)(1) If a civil action or proceeding is filed in a State court 
against any entity described in subsection (g)(4) or any officer, 
governing board member, employee, or any contractor of such an entity 
for damages described in subsection (a), the Attorney General, within 
15 days after being notified of such filing, shall make an appearance 
in such court and advise such court as to whether the Secretary has 
determined under subsections (g) and (h), that such entity, officer, 
governing board member, employee, or contractor of the entity is deemed 
to be an employee of the Public Health Service for purposes of this 
section with respect to the actions or omissions that are the subject 
of such civil action or proceeding. Such advice shall be deemed to 
satisfy the provisions of subsection (c) that the Attorney General 
certify that an entity, officer, governing board member, employee, or 
contractor of the entity was acting within the scope of their 
employment or responsibility.
  ``(2) If the Attorney General fails to appear in State court within 
the time period prescribed under paragraph (1), upon petition of any 
entity or officer, governing board member, employee, or contractor of 
the entity named, the civil action or proceeding shall be removed to 
the appropriate United States district court. The civil action or 
proceeding shall be stayed in such court until such court conducts a 
hearing, and makes a determination, as to the appropriate forum or 
procedure for the assertion of the claim for damages described in 
subsection (a) and issues an order consistent with such 
determination.''.

SEC. 7. APPLICATION OF COVERAGE TO MANAGED CARE PLANS.

  Section 224 (42 U.S.C. 223) (as amended by section 6) is amended by 
adding at the end thereof the following subsection:
  ``(m)(1) An entity or officer, governing board member, employee, or 
contractor of an entity described in subsection (g)(1) shall, for 
purposes of this section, be deemed to be an employee of the Public 
Health Service with respect to services provided to individuals who are 
enrollees of a managed care plan if the entity contracts with such 
managed care plan for the provision of services.
  ``(2) Each managed care plan which enters into a contract with an 
entity described in subsection (g)(4) shall deem the entity and any 
officer, governing board member, employee, or contractor of the entity 
as meeting whatever malpractice coverage requirements such plan may 
require of contracting providers for a calendar year if such entity or 
officer, governing board member, employee, or contractor of the entity 
has been deemed to be an employee of the Public Health Service for 
purposes of this section for such calendar year. Any plan which is 
found by the Secretary on the record, after notice and an opportunity 
for a full and fair hearing, to have violated this subsection shall 
upon such finding cease, for a period to be determined by the 
Secretary, to receive and to be eligible to receive any Federal funds 
under titles XVIII or XIX of the Social Security Act.
  ``(3) For purposes of this subsection, the term `managed care plan' 
shall mean health maintenance organizations and similar entities that 
contract at-risk with payors for the provision of health services or 
plan enrollees and which contract with providers (such as entities 
described in subsection (g)(4)) for the delivery of such services to 
plan enrollees.''.

SEC. 8. COVERAGE FOR PART-TIME PROVIDERS UNDER CONTRACTS.

  Section 224(g)(5)(B) (42 U.S.C. 223(g)(5)(B)) is amended to read as 
follows:
          ``(B) in the case of an individual who normally performs an 
        average of less than 32\1/2\ hours of services 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.''.

SEC. 9. DUE PROCESS FOR LOSS OF COVERAGE.

  Section 224(i)(1) (42 U.S.C. 233(i)(1)) is amended by striking ``may 
determine, after notice and opportunity for a hearing'' and inserting 
``may on the record determine, after notice and opportunity for a full 
and fair hearing''.

SEC. 10. AMOUNT OF RESERVE FUND.

  Section 224(k)(2) (42 U.S.C. 223(k)(2)) is amended by striking 
``$30,000,000'' and inserting ``$10,000,000''.

SEC. 11. REPORT ON RISK EXPOSURE OF COVERED ENTITIES.

  Section 224 (as amended by section 7) is amended by adding at the end 
thereof the following subsection:
  ``(n)(1) Not later than April 1, 1997, the Secretary, in consultation 
with the Attorney General, shall submit to the Congress a report on the 
medical malpractice liability claims experience of entities that have 
been deemed to be employees for purposes of this section, and the risk 
exposure associated with such entities.
  ``(2) The report under paragraph (1) shall include an analysis by the 
Secretary comparing--
          ``(A) the Secretary's estimate of the aggregate amounts that 
        such entities (together with the officers, governing board 
        members, employees, and contractors of such entities who have 
        been deemed to be employees for purposes of this section) would 
        have directly or indirectly paid to obtain medical malpractice 
        liability insurance coverage if this section were not in 
        effect; with
          ``(B) the aggregate amounts by which the grants received by 
        such entities under this Act were reduced pursuant to 
        subsection (k)(2).
  ``(3) In preparing the report under paragraph (1), the Secretary 
shall consult with public and private entities with expertise on the 
matters with which the report is concerned.''.

  Amend the title so as to read:

      A bill to amend the Public Health Service Act to extend 
and clarify malpractice coverage for health centers, and for 
other purposes.

                          Purpose and Summary

    Under section 224 of the Public Health Service Act, 
community, migrant, and homeless health centers are eligible 
for coverage for medical malpractice under the Federal Tort 
Claims Act (FTCA). Health centers were brought under the FCTA 
in 1993 by the Federally Supported Health Centers Assistance 
Act of 1992 (Public Law 102-501). Health centers and their 
employees, officers, and contractors are covered for 
malpractice claims in the same manner as employees of the 
Public Health Service who provide medical care. Section 224 of 
the Public Health Service Act provides this coverage for a 
three-year period, which expires December 31, 1995. During this 
period, FTCA coverage for health centers has only been 
partially implemented. Final regulations were issued only 
recently on May 8, 1995. Additional clarifications of coverage 
were issued by the Department of Health and Human Services in a 
Federal Register notice dated September 25, 1995.
    H.R. 1747 would extend the FTCA coverage program for health 
centers for another three year period, through December 31, 
1998. The bill also makes clarifications in scope of coverage 
provided under the law. H.R. 1747 clarifies that malpractice 
coverage under the FTCA applies to all employees, officers, and 
governing board members of a health center, as well as to 
contractors of health centers who are licensed or certified 
health care practitioners. The bill also codifies provisions of 
the final regulations which clarify the application of FTCA 
malpractice coverage to health services provided in certain 
situations when health care clinicians are treating patients 
who are not registered with the health center. For example, 
health center clinicians participating in a community-wide 
immunization fair will have FTCA coverage when providing 
immunizations. Finally, the bill provides for coverage under 
FTCA of part-time health center clinicians who practice in the 
primary care areas of family practice, general internal 
medicine, general pediatrics, and obstetrics and gynecology.
    H.R. 1747 also makes several procedural modifications to 
current law to improve the efficiency of the operation of the 
program. The bill establishes procedures for health centers to 
apply to the Department of Health and Human Services and 
receive approval for malpractice coverage under FTCA.
    Finally, the bill recognizes the movement of the health 
care market toward managed care and the increased participation 
by health centers as providers in managed care plans. H.R. 1747 
applies FTCA coverage to health services provided by centers to 
enrollees of managed care plans who have chosen the health 
center as their provider. The bill also establishes that FTCA 
coverage is to be accepted by managed care plans as meeting the 
requirements for malpractice coverage for health centers who 
contract to be providers for managed care plans.

                  Background and Need for Legislation

    The Federal government makes primary health care services 
available to medically underserved populations through four 
programs: the Community Health Center program (section 330 of 
the Public Health Service (PHS) Act); the Migrant Health 
program (section 329 of the PHS Act); the Health Care for the 
Homeless program (section 340 of the PHS Act); and the Health 
Services for Residents of Public Housing program (section 340A 
of the PHS Act). In each program, the Department of Health and 
Human Services (HHS) makes grants to public or private 
nonprofit entities to provide primary health care services to 
specified underserved populations, regardless of their ability 
to pay. In Fiscal Year 1995, $756.5 million will be used to 
provide primary and preventive health services to approximately 
7.6 million people through community, migrant, homeless, and 
public housing health centers.
    To provide health care services, the grantees (and 
subcontracting organizations) employ physicians and other 
health care practitioners either directly or on a contract 
basis. Purchase of malpractice insurance is one of the most 
significant expenses for health centers. In 1992, the Committee 
examined health center expenses for malpractice insurance and 
found, based on data provided by HHS and others, that over $50 
million had been spent in Fiscal Year 1989 for malpractice 
insurance premiums; less than 10 percent of that amount had 
been paid out in actual claims payments and related costs. The 
Bureau of Primary Health Care at HHS estimates that in 1994, 
health centers spent just under $50 million for malpractice 
insurance premiums. Grant funds continue to be used to pay a 
large percentage of these premium costs--funds that otherwise 
could be used for patient care.
    At the time the Committee first began to examine this 
issue, health clinics operated by tribes and tribal 
organizations under contracts with the Indian Health Service 
pursuant to the Indian Self-Determination Act had been afforded 
the protection of the FTCA for malpractice for five years. In 
addition, National Health Service Corps physicians, who provide 
much of the staffing for health centers, also were covered 
under the FTCA. Based on the similarity of health center 
experience to the tribal clinics and the National Health 
Service Corps, as well as the low malpractice claim rates 
experienced by health centers, Congress enacted Public Law 102-
501, extending malpractice coverage under the FTCA to health 
centers for a three-year period, ending December 31, 1995.
    To date, P.L. 102-501 has been implemented only partially. 
Final regulations were issued on May 8, 1995, with additional 
clarifications issued in a September 19, 1995, Policy 
Information Notice and a September 25, 1995, Federal Register 
notice. The lengthy period of uncertainty regarding the law's 
scope made it necessary for many health centers to continue 
their private malpractice coverage. To date, 542 health centers 
have been ``deemed'' by HHS as eligible for malpractice 
coverage under FTCA, and 119 health centers have dropped 
private malpractice coverage for one or more of their 
clinicians. Twenty-nine percent of health center clinicians 
currently are covered by FTCA. The Committee expects that the 
enactment of this legislation extending the program, clarifying 
coverage, and improving procedures, along with continued 
efforts by the Department to implement the legislation, will 
lead many more health centers to drop their private malpractice 
coverage and participate fully in the program.
    The program has yielded significant savings for 
participating health centers. For example, Roderick Manifold, 
the Executive Director of Central Virginia Health Services in 
New Canton, Virginia, estimates that, due to the FTCA program, 
the center is saving $90,000 annually that otherwise would be 
expended by the center on malpractice insurance premiums. These 
funds are being redirected to patient care. Another health 
center generating savings from the program is Monway Family 
Health Center in Carlton, Michigan, which is saving over 
$14,000 annually. The National Association of Community Health 
Centers estimates that over the past two and one half years, 
over $14.3 million in malpractice insurance costs have been 
saved and used to provide care for an additional 75,000 
patients.
    The number of medical malpractice claims against health 
centers under FTCA has been very low. To date, only 15 claims 
have been approved for FTCA coverage. This low number is 
consistent with the low rate of claims filed against health 
centers under private insurance. A total of $11 million of 
health center appropriations has been set aside over the last 
three years for FTCA judgment costs. None of these funds have 
been obligated or expended thus far. Another $5 million is 
anticipated to be transferred to the judgment fund from health 
center appropriations for Fiscal Year 1996.
    The Committee's review of the initial experience under this 
program revealed that several factors have served as 
disincentives for full health center participation in the 
program. In particular, there was uncertainty over the scope of 
FTCA coverage under the program, which the Committee bill seeks 
to clarify in two ways. First, the bill makes clear that 
malpractice coverage under FTCA is provided to a health center 
and all its employees, officers, and governing board members, 
both health professionals and others. In the case of 
contractors providing health services to health center 
patients, coverage is provided only to contractors who are 
licensed or certified health care practitioners.
    Second, the bill codifies provisions of the May 8, 1995, 
final regulations which state that malpractice coverage will be 
provided under FTCA for acts and omissions related to the 
grant-supported activity of the health center and describe the 
conditions under which health center practitioners are covered 
for services to individuals who are not registered patients of 
the health center. In its September 25, 1995, Federal Register 
notice, HHS provided example of such situations which include 
health fairs, immunization campaigns, outreach and screening at 
migrant camps and homeless shelters, periodic hospital call or 
emergency room coverage required for obtaining hospital 
admitting privileges, and cross-coverage arrangements with 
other community providers. The Committee intends that those 
situations continue to be recognized as being within the scope 
of coverage.
    The Committee is concerned about the length of time that it 
has taken for malpractice claims to be processed. When a claim 
is filed against a health center, the Department of Justice 
(DOJ) requests the health center's application for FTCA 
coverage from HHS and often has requested additional supporting 
documentation from the health center concerning the items 
described in the application. The examination of this 
documentation after a claim is filed, rather than when the 
application for coverage is approved, has resulted in delays in 
the appearance by DOJ in State or local court. This has 
resulted in at least one default judgment against a health 
center involving a claim that later was determined to be 
covered under the FTCA. H.R. 1747 remedies this problem by 
establishing a procedure in which a health center files a 
formal application for FTCA coverage containing all supporting 
documentation. The application also will detail the situations 
in which health center practitioners treating non-registered 
patients of the center would be covered. The Committee believes 
that having health centers provide this documentation in 
advance will enhance greatly the ability of HHS and DOJ to 
respond when a malpractice claim is filed against a health 
center.
    Some concerns have been raised that insufficient data 
exists to support the permanent extension of malpractice 
coverage for health centers under the FTCA. In an effort to 
generate additional data concerning the program, H.R. 1747 
requires the Secretary of HHS, in consultation with the 
Attorney General, to submit to the Congress a report on the 
medical malpractice liability claims experience of health 
centers covered under FTCA and the risk exposure associated 
with the coverage of health centers. In preparing the report, 
the Secretary will consult with public and private entities 
with expertise in this area. The Committee believes that the 
report will generate sufficient data to eliminate any remaining 
concerns about the cost-effectiveness of the program.

                                Hearings

    The Committee on Commerce has not held hearings on the 
legislation.

                        Committee Consideration

    On September 27, 1995, the Committee on Commerce met in 
open markup session and ordered H.R. 1747 reported to the 
House, as amended, by voice vote, a quorum being present.

                             Rollcall Votes

    Clause 2(l)(2)(B) of rule XI of the Rules of the House 
requires the Committee to list the recorded votes on the motion 
to report legislation and on amendments thereto. There were no 
recorded votes taken in connection with ordering H.R. 1747 
reported or in adopting the amendment. The voice votes taken in 
Committee are as follows:
    Bill: H.R. 1747, Federally Supported Health Centers 
Assistance Act of 1995.
    Amendment: Amendment by Mr. Bilirakis re: extend the 
program for three years, rather than permanently.
    Disposition: Agreed to, by a voice vote.
    Motion: Motion by Mr. Bliley to order H.R. 1747, as 
amended, reported to the House.
    Disposition: Agreed to, by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of 
the House of Representatives, the Committee has not held 
oversight or legislative hearings on this legislation.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

               New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee states 
that H.R. 1747 would result in no new or increased budget 
authority or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 403 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of rule XI of the Rules of 
the House of Representatives, following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
403 of the Congressional Budget Act of 1974:

                                      U.S. Congress
                               Congressional Budget Office,
                                  Washington, DC December 11, 1995.
Hon. Thomas J. Bliley, Jr.,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 1747, a bill to reauthorize malpractice coverage 
under the Federal Tort Claims Act (FTCA) for employees of 
federally-supported health centers, as ordered reported by the 
House Committee on Commerce on September 27, 1995. Pay-as-you-
go procedures would not apply because the bill would not affect 
direct spending.
    Under the Federally Supported Health Centers Assistance Act 
of 1992, the Secretary of Health and Human Services may deem 
full-time providers and select part-time contractors at 
federally-supported health centers to be employees of the 
Public Health Service. As such, these providers are eligible 
for malpractice coverage under FTCA for services rendered 
within the scope of their contract or the center's grant. Any 
malpractice claims filed against these providers are defended 
by the Justice Department and are heard in U.S. District Court.
    At the start of each fiscal year, the Attorney General 
estimates the dollar amount of malpractice claims expected to 
arise in that year and transfers this amount into a reserve 
fund; judgments are paid out of this fund. Eligible centers and 
employees are covered under FTCA only in years in which this 
money transfer occurs. Current law limits the annual amount of 
these transfers to $30 million, although balances in the fund 
remain available for obligation in later years. If the dollar 
value of claims filed in a given year surpasses the amount in 
the reserve fund, any remaining claims are paid out of the 
claims and judgments fund.
    H.R. 1747 would reauthorize the Federally Supported Health 
Centers Assistance Act through 1998, with some modifications to 
the program. The proposal would cap the amount the Attorney 
General could transfer into the reserve fund at $10 million a 
year. It would also extend malpractice coverage to employees of 
managed care organizations that have contracts to care for 
centers' patients. Additionally, the bill would offer coverage 
to part-time contract providers in the fields of general 
internal medicine, general pediatrics, family practice or 
obstetrics and gynecology. Finally, H.R. 1747 would, under 
certain circumstances, over deemed employees for services 
rendered to individuals who are not health center patients.
    Lags in the filing of malpractice claims and in the 
settlement process make it difficult to estimate the dollar 
value of claims incurred per fiscal year. Based on current 
claims data, however, CBO believes that $10 million annual 
transfer to the reserve fund would be sufficient to cover 
claims that would arise from incidents in a fiscal year. This 
estimate is based that the assumption that health centers' 
participation in the program remains at its current rate of 20 
percent; if more health centers were to participate, the funds 
provided under the proposal might not be sufficient. 
Additionally, costs would likely increase if the program's 
authorization was extended for a longer period.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Anne Hunt.
            Sincerely,
                                         June E. O'Neill, Director.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that H.R. 1747 
would have no inflationary impact.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act are created by this 
legislation.

             Section-by-Section Analysis of the Legislation

Section 1. Short title; reference

    Section 1 states that the short title of the bill is the 
Federally Supported Health Centers Assistance Act of 1995.
    Section 1 also provides that, unless otherwise expressly 
provided, all references are to the Public Health Service Act.

Section 2. Extension of program

    Under current law (section 224 of the Public Health Service 
Act), certain Federally assisted health centers, and their 
physicians and other health care practitioners, are covered for 
malpractice claims under the Federal Tort Claims Act (FTCA) (28 
U.S.C. sections 1346(b) and 2671-2680) in the same manner as 
are employees of the Public Health Service who provide medical 
care. The law provides this coverage for a three-year period, 
which expires December 31, 1995.
    Section 2 extends the period of coverage through December 
31, 1998. This section also revises other references to the 
period of coverage in section 224(k) to conform to the revised 
termination date of December 31, 1998.

Section 3. Clarification of coverage

    Under current law, FTCA coverage is extended to officers, 
employees, and certain contracting physicians of the covered 
health centers. The bill would extend coverage to governing 
board members of the covered health centers as well and would 
clarify that all officers, employees, and governing board 
members would receive FTCA coverage whether or not they are 
health care practitioners.

Section 4. Coverage for services furnished to individuals other than 
        center patients

    On May 8, 1995, final regulations were published (60 FR 
22530), clarifying that FTCA coverage would apply with respect 
to services provided not only to all patients of the covered 
health centers, but also to individuals who are not patients if 
the Secretary determines, after reviewing an application 
submitted by a covered health center, that the provision of 
such services: (i) benefits patients of the health center and 
general populations that could be served by the health center 
through community-wide intervention efforts within the 
communities served by such center; (ii) facilitates the 
provision of services to patients of the health center; or 
(iii) is otherwise required under an employment contract (or 
similar arrangement) between the health center and an officer, 
governing board member, employee, or contractor of the health 
center. For example, health center clinicians participating in 
a community-wide immunization fair will have FTCA coverage when 
providing immunizations.
    Section 4 of the bill adds to section 224(g) of the Public 
Health Service Act the clarifying language of the final 
regulation regarding the scope of FTCA coverage.

Section 5. Application process

    Under current law, FTCA coverage is not effective for an 
eligible health center or its personnel until the Secretary has 
determined that the center meets the requirements of section 
224(h) regarding appropriate policies and procedures to reduce 
the risk of malpractice, including review and verification of 
professional credentials; claims history; licensure status of 
physicians and other health care practitioners; and cooperation 
with the Attorney General in matters relating to any 
malpractice claims or claims history.
    Section 5 establishes a process by which each eligible 
health center that desires coverage under the FTCA must submit 
an application in such form and containing such information as 
the Secretary shall prescribe to determine that the health 
center meets the requirements of subsections 224(g) and 224(h). 
The bill stipulates that the Secretary shall make such a 
determination within 30 days after receipt of a health center's 
application, and that the determination shall apply for a 
period specified by the Secretary. Once the Secretary makes a 
determination that a health center and its personnel are 
covered under the FTCA, the determination shall be final and 
binding on the Secretary and the Attorney General and other 
parties to any civil action or proceeding, and shall apply to 
all services which are the subject of such a determination.

Section 6. Timely response to filing of action or proceeding

    Under current law, the Attorney General is responsible for 
securing the removal to Federal Court of any civil action or 
proceeding filed in a State or local court against a health 
center or individual covered under the FTCA. However, current 
law contains no provision concerning the timeliness of such a 
response by the Attorney General. If the response is not 
timely, a default judgment against the defendant health center 
or individual could be filed.
    Section 6 includes a provision requiring that, if a civil 
action or proceeding is filed in a State or local court against 
any covered health center or its covered personnel, the 
Attorney General, within 15 days after being notified of such 
filing, shall make an appearance in such court and advise such 
court as to whether the defendant health center or individual 
is covered under the FTCA with respect to the actions or 
omissions that are the subject of such civil action or 
proceeding. Further, if the Attorney General fails to appear 
within the specified time period, upon the petition of the 
covered health center or its covered personnel, the civil 
action or proceeding shall be removed to the appropriate United 
States district court, and the civil action or proceeding shall 
not be acted on until a hearing is conducted and a 
determination is made as to the appropriate forum or procedure 
for the assertion of the claim for damages.

Section 7. Application of coverage to managed care plans

    Section 7 of the bill clarifies that coverage under the 
FTCA for health centers and their personnel applies with 
respect to services provided to individuals who are enrollees 
of a managed care plan if the covered health center contracts 
with such managed care plan for the provision of services. 
Under the bill, each managed care plan which enters into a 
contract with a covered health center is required to accept 
coverage under the FTCA as meeting whatever malpractice 
coverage requirements it may require of contracting providers. 
Any managed care plan which is found by the Secretary on the 
record, after notice and an opportunity for a full and fair 
hearing, to have violated this requirement shall, upon such 
finding, cease, for a period to be determined by the Secretary, 
to be eligible to receive any Federal funds under title XVIII 
or XIX of the Social Security Act. The bill defines the term 
`managed care plan' as meaning health maintenance organizations 
and similar entities that contract at-risk with payors for the 
provision of health services to plan enrollees and which 
contract with providers (such as the health centers described 
in this subsection) for the delivery of such services to its 
enrollees.

Section 8. Coverage for part-time providers under contracts

    Under current law, FTCA coverage extends to licensed or 
certified providers who contract with a covered health center 
if they perform on average at least 32\1/2\ hours of service 
per week for the health center for the period of their 
contract. Contractors who perform fewer than 32\1/2\ hours of 
service per week are also covered if they are licensed or 
certified providers of obstetrical services and either (1) 
their medical malpractice liability coverage does not extend to 
the services they perform for the covered health centers or (2) 
the Secretary finds that patients of the covered health center 
will be deprived of obstetrical services if the contractors are 
not covered under the FTCA.
    Section 8 revises the latter provision. Individuals who 
normally perform an average of fewer than 32\1/2\ hours of 
services per week for a covered health center will be covered 
under the FTCA if they are licensed or certified providers of 
services in the fields of family practice, general internal 
medicine, general pediatrics, or obstetrics and gynecology.

Section 9. Due process for loss of coverage

    Current law authorizes the Attorney General, in 
consultation with the Secretary, to deny FTCA coverage to an 
individual physician or other licensed or certified health care 
practitioner if the Attorney General determines that extending 
FTCA coverage to the individual would expose the U.S. 
government to an unreasonably high degree of risk of loss. The 
bill would ensure due process in any such action by stipulating 
that any denial or removal of FTCA coverage must be made on the 
record, after notice and an opportunity for a full and fair 
hearing.

Section 10. Amount of reserve fund

    Under current law, FTCA coverage for health centers shall 
be effective in a fiscal year only if the Secretary has 
transferred to the judgment fund sufficient funds to meet the 
cost of any judgments against the U.S. government and related 
fees, as estimated by the Attorney General in consultation with 
the Secretary. The law limits the amount of a transfer to not 
more than $30 million in any fiscal year. For Fiscal Years 1994 
and 1995, the Congress has limited the amount of this transfer 
to not more than $5 million for each fiscal year.
    Section 10 would revise the maximum amount to be 
transferred in any fiscal year to not more than $10 million.

Section 11. Report on risk exposure of covered entities

    Section 11 adds a new subsection 224(n) to the PHS Act, 
which requires the Secretary, in consultation with the Attorney 
General, to submit by April 1, 1997, a report to the Congress 
on the malpractice liability claims experience of health 
centers covered under the FTCA and the risk exposure associated 
with that coverage. The report must include an analysis 
comparing the Secretary's estimate of the amount that the 
covered health centers and their covered personnel would have 
paid to obtain private malpractice insurance coverage, if this 
section were not in effect, with the aggregate amounts that 
were transferred by the Secretary to this judgment fund over 
the same period. In preparing this report, the Secretary is 
expected to consult with public and private entities with 
expertise in matters covered in the report.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

              SECTION 224 OF THE PUBLIC HEALTH SERVICE ACT

          defense of certain malpractice and negligence suits

  Sec. 224. (a) * * *
          * * * * * * *
  (g)(1)(A) For purposes of this section and subject to the 
approval by the Secretary of an application under subparagraph 
(D), an entity described in paragraph (4) and any [officer, 
employee, or contractor] officer, governing board member, or 
employee of such an entity, and any contractor (subject to 
paragraph (5)) of such an entity who is a physician or other 
licensed or certified health care practitioner shall be deemed 
to be an employee of the Public Health Service for a calendar 
year that begins during a fiscal year for which a transfer of 
the full amount estimated under subsection (k)(1)(A) was made 
under subsection (k)(3) (subject to paragraph (3)). The remedy 
against the United States for an entity described in paragraph 
(4) and any officer, governing board member, employee, or 
contractor (subject to paragraph (5)) of such an entity who is 
deemed to be an employee of the Public Health Service pursuant 
to this paragraph shall be exclusive of any other civil action 
or proceeding to the same extent as the remedy against the 
United States is exclusive pursuant to subsection (a).
  (B) The deeming of any entity or officer, governing board 
member, employee, or contractor of the entity to be an employee 
of the Public Health Service under subparagraph (A) shall apply 
with respect to services provided--
          (i) to all patients of the entity, and
          (ii) subject to subparagraph (C), to individuals who 
        are not patients of the entity.
  (C) Subparagraph (B)(ii) applies to services provided to 
individuals who are not patients of an entity if the Secretary 
determines, after reviewing an application submitted under 
subparagraph (D), that the provision of the services to such 
individuals--
          (i) benefits patients of the entity and general 
        populations that could be served by the entity through 
        community-wide intervention efforts within the 
        communities served by such entity;
          (ii) facilitates the provision of services to 
        patients of the entity; or
          (iii) are otherwise required under an employment 
        contract (or similar arrangement) between the entity 
        and an officer, governing board member, employee, or 
        contractor of the entity.
  (D) The Secretary may not deem an entity or an officer, 
governing board member, employee, or contractor of the entity 
to be an employee of the Public Health Service under 
subparagraph (A), and may not apply such deeming to services 
described in subparagraph (B)(ii), unless the entity has 
submitted an application for such deeming to the Secretary in 
such form and such manner as the Secretary shall prescribe. The 
application shall contain detailed information, along with 
supporting documentation, to verify that the entity, and the 
officer, governing board member, employee, or contractor of the 
entity, as the case may be, meets the requirements of 
subparagraphs (B) and (C) of this paragraph and that the entity 
meets the requirements of paragraphs (1) through (4) of 
subsection (h).
  (E) The Secretary shall make a determination of whether an 
entity or an officer, governing board member, employee, or 
contractor of the entity is deemed to be an employee of the 
Public Health Service for purposes of this section within 30 
days after the receipt of an application under subparagraph 
(D). The determination of the Secretary that an entity or an 
officer, governing board member, employee, or contractor of the 
entity is deemed to be an employee of the Public Health Service 
for purposes of this section shall apply for the period 
specified by the Secretary under subparagraph (A).
  (F) Once the Secretary makes a determination that an entity 
or an officer, governing board member, employee, or contractor 
of an entity is deemed to be an employee of the Public Health 
Service for purposes of this section, the determination shall 
be final and binding upon the Secretary and the Attorney 
General and other parties to any civil action or proceeding. 
Except as provided in subsection (i), the Secretary and the 
Attorney General may not determine that the provision of 
services which are the subject of such a determination are not 
covered under this section.
          * * * * * * *
  (3) This subsection shall apply with respect to a cause of 
action arising from an act or omission which occurs on or after 
January 1, 1993. This subsection shall not apply with respect 
to a cause of action arising from an act or omission which 
occurs on or after January 1, [1996] 1999.
          * * * * * * *
  (5) For purposes of paragraph (1), an individual may be 
considered a contractor of an entity described in paragraph (4) 
only if--
          (A) the individual normally performs on average at 
        least 32\1/2\ hours of service per week for the entity 
        for the period of the contract; or
          [(B) in the case of an individual who normally 
        performs on average less than 32\1/2\ hours of services 
        per week for the entity for the period of the contract 
        and is a licensed or certified provider of obstetrical 
        services--
                  [(i) the individual's medical malpractice 
                liability insurance coverage does not extend to 
                services performed by the individual for the 
                entity under the contract, or
                  [(ii) the Secretary finds that patients to 
                whom the entity furnishes services will be 
                deprived of obstetrical services if such 
                individual is not considered a contractor of 
                the entity for purposes of paragraph (1).]
          (B) in the case of an individual who normally 
        performs an average of less than 32\1/2\ hours of 
        services 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.
          * * * * * * *
  (h) [Notwithstanding subsection (g)(1), the Secretary, in 
consultation with the Attorney General, may not deem an entity 
described in subsection (g)(4) to be an employee of the Public 
Health Service Act for purposes of this section unless the 
entity--] The Secretary may not approve an application under 
subsection (g)(1)(D) unless the Secretary determines that the 
entity--
          (1) * * * * * *
          (4) [has fully cooperated] will fully cooperate with 
        the Attorney General in providing information relating 
        to an estimate described under subsection (k).
  (i)(1) Notwithstanding subsection (g)(1), the Attorney 
General, in consultation with the Secretary, [may determine, 
after notice and opportunity for a hearing] may on the record 
determine, after notice and opportunity for a full and fair 
hearing, that an individual physician or other licensed or 
certified health care practitioner who is an officer, employee, 
or contractor of an entity described in subsection (g)(4) shall 
not be deemed to be an employee of the Public Health Service 
for purposes of this section, if treating such individual as 
such an employee would expose the Government to an unreasonably 
high degree of risk of loss because such individual--
          (A) * * *
          * * * * * * *
  (k)(1)(A) For [each of the fiscal years 1993, 1994, and 1995] 
each of the fiscal years 1996 through 1998, the Attorney 
General, in consultation with the Secretary, shall estimate by 
the beginning of the year (except that an estimate shall be 
made for fiscal year 1993 by December 31, 1992, subject to an 
adjustment within 90 days thereafter) the amount of all claims 
which are expected to arise under this section (together with 
related fees and expenses of witnesses) for which payment is 
expected to be made in accordance with section 1346 and chapter 
171 of title 28, United States Code, from the acts or 
omissions, during the calendar year that begins during that 
fiscal year, of entities described in subsection (g)(4) and of 
officers, employees, or contractors (subject to subsection 
(g)(5)) of such entities.
          * * * * * * *
  (2) Subject to appropriations, for [each of the fiscal years 
1993, 1994, and 1995] each of the fiscal years 1996 through 
1998, the Secretary shall establish a fund of an amount equal 
to the amount estimated under paragraph (1) that is 
attributable to entities receiving funds under each of the 
grant programs described in paragraph (4) of subsection (g), 
but not to exceed a total of [$30,000,000] $10,000,000 for each 
such fiscal year. Appropriations for purposes of this paragraph 
shall be made separate from appropriations made for purposes of 
sections 329, 330, 340 and 340A.
  (l)(1) If a civil action or proceeding is filed in a State 
court against any entity described in subsection (g)(4) or any 
officer, governing board member, employee, or any contractor of 
such an entity for damages described in subsection (a), the 
Attorney General, within 15 days after being notified of such 
filing, shall make an appearance in such court and advise such 
court as to whether the Secretary has determined under 
subsections (g) and (h), that such entity, officer, governing 
board member, employee, or contractor of the entity is deemed 
to be an employee of the Public Health Service for purposes of 
this section with respect to the actions or omissions that are 
the subject of such civil action or proceeding. Such advice 
shall be deemed to satisfy the provisions of subsection (c) 
that the Attorney General certify that an entity, officer, 
governing board member, employee, or contractor of the entity 
was acting within the scope of their employment or 
responsibility.
  (2) If the Attorney General fails to appear in State court 
within the time period prescribed under paragraph (1), upon 
petition of any entity or officer, governing board member, 
employee, or contractor of the entity named, the civil action 
or proceeding shall be removed to the appropriate United States 
district court. The civil action or proceeding shall be stayed 
in such court until such court conducts a hearing, and makes a 
determination, as to the appropriate forum or procedure for the 
assertion of the claim for damages described in subsection (a) 
and issues an order consistent with such determination.
  (m)(1) An entity or officer, governing board member, 
employee, or contractor of an entity described in subsection 
(g)(1) shall, for purposes of this section, be deemed to be an 
employee of the Public Health Service with respect to services 
provided to individuals who are enrollees of a managed care 
plan if the entity contracts with such managed care plan for 
the provision of services.
  (2) Each managed care plan which enters into a contract with 
an entity described in subsection (g)(4) shall deem the entity 
and any officer, governing board member, employee, or 
contractor of the entity as meeting whatever malpractice 
coverage requirements such plan may require of contracting 
providers for a calendar year if such entity or officer, 
governing board member, employee, or contractor of the entity 
has been deemed to be an employee of the Public Health Service 
for purposes of this section for such calendar year. Any plan 
which is found by the Secretary on the record, after notice and 
an opportunity for a full and fair hearing, to have violated 
this subsection shall upon such finding cease, for a period to 
be determined by the Secretary, to receive and to be eligible 
to receive any Federal funds under titles XVIII or XIX of the 
Social Security Act.
  (3) For purposes of this subsection, the term ``managed care 
plan'' shall mean health maintenance organizations and similar 
entities that contract at-risk with payors for the provision of 
health services or plan enrollees and which contract with 
providers (such as entities described in subsection (g)(4)) for 
the delivery of such services to plan enrollees.
  (n)(1) Not later than April 1, 1997, the Secretary, in 
consultation with the Attorney General, shall submit to the 
Congress a report on the medical malpractice liability claims 
experience of entities that have been deemed to be employees 
for purposes of this section, and the risk exposure associated 
with such entities.
  (2) The report under paragraph (1) shall include an analysis 
by the Secretary comparing--
          (A) the Secretary's estimate of the aggregate amounts 
        that such entities (together with the officers, 
        governing board members, employees, and contractors of 
        such entities who have been deemed to be employees for 
        purposes of this section) would have directly or 
        indirectly paid to obtain medical malpractice liability 
        insurance coverage if this section were not in effect; 
        with
          (B) the aggregate amounts by which the grants 
        received by such entities under this Act were reduced 
        pursuant to subsection (k)(2).
  (3) In preparing the report under paragraph (1), the 
Secretary shall consult with public and private entities with 
expertise on the matters with which the report is concerned.