[Federal Register Volume 69, Number 185 (Friday, September 24, 2004)]
[Notices]
[Pages 57294-57297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21450]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES


Office of the Secretary, Office of the General Counsel; Notice 
Regarding the Federal Tort Claims Act, the Federally Supported Health 
Centers Assistance Act, and the Indian Self-Determination and Education 
Assistance Act; Alternative Settlement Process for Certain 
Administrative Claims Under the Federal Tort Claims Act

AGENCY: Office of the General Counsel, Office of the Secretary.

ACTION: Notice of Pilot Program for an Alternative Settlement Process 
for Certain Administrative Claims Under the Federal Tort Claims Act.

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SUMMARY: The Secretary of Health and Human Services is implementing a 
Pilot Program to study the effectiveness of an Early Offers Alternative 
Dispute Resolution Process (``Early Offers'') for certain 
administrative tort claims under the Federal Tort Claims Act 
(``FTCA''). The Pilot Program becomes effective upon the publication of 
this Notice and will be applicable to administrative claims filed with 
the Department of Health and Human Services (``HHS'' or ``the 
Department'') on or after the publication date. The Pilot Program 
applies to all medical negligence tort claims cognizable under the FTCA 
and arising from the acts or omissions of HHS employees or deemed 
employees. The Pilot Program does not create new causes of action or 
change the requirements of the FTCA for the handling of administrative 
tort claims or the approval of administrative tort claim settlements. 
See 28 U.S.C. 2672 and 28 CFR Part 14.

DATES: This notice is effective upon publication in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Richard Bergeron, Office of the 
General Counsel, (202) 619-0150, U.S. Department of Health and Human 
Services, 330 Independence Avenue, SW., Room 4760, Washington, DC 
20201.

SUPPLEMENTARY INFORMATION

I. Introduction

    The FTCA mandates that administrative tort claims arising out of 
the medical negligence of HHS employees and deemed employees must be 
submitted to HHS for investigation and potential resolution before a 
lawsuit can be filed against the United States. 28 U.S.C. 1346(b) and 
2671, et seq. Medical negligence claims against HHS may arise from acts 
or omissions of HHS employees (see, e.g., 42 U.S.C. 233(a)) or from the 
acts or omissions of deemed employees of HHS (see, e.g., 42 U.S.C. 
233(g); 25 U.S.C. 450f(d)). The resolution of those administrative 
claims requires the claimant and HHS to engage in negotiations that 
often include a number of offers and counteroffers, sometimes over the 
course of a number of months, and, then, if such negotiations are 
unsuccessful, the filing of a lawsuit against the United States.
    The Early Offers Pilot Program is designed to determine whether 
there is a better, quicker, less expensive method for resolving medical 
negligence claims. The Pilot Program applies to all medical negligence 
tort claims asserted under the FTCA and arising from the acts or 
omissions of HHS employees or deemed employees. The Pilot Program is a 
voluntary program available to claimants who submit timely tort claims 
under the FTCA. If a claim is not settled

[[Page 57295]]

under the Early Offers program, it will continue to be processed under 
HHS's current procedures and may be resolved using traditional 
negotiating techniques.

II. Background

    In its March 3, 2003 report entitled ``Addressing the New Health 
Care Crisis: Reforming the Medical Litigation System to Improve the 
Quality of Health Care,'' the Department's Office of the Assistant 
Secretary for Planning and Evaluation (OASPE) outlined the litigation 
crisis facing the Nation's health care delivery system, the role of the 
litigation system in increasing medical malpractice insurance premiums, 
and the resulting reduction in the availability of quality, affordable 
health care. This report concluded that federal action is needed to 
address the impact of the medical litigation crisis on health care 
costs and quality of care, and emphasized the President's support for 
federal reforms to implement steps in improving our health care system, 
including the establishment of a fair, predictable, and timely process 
for resolving medical malpractice cases.
    The report noted that delay in claims resolution is a significant 
problem in the current medical liability litigation process. Litigation 
delays prevent patients injured by negligence from receiving 
compensation quickly. The Early Offers Pilot Program being implemented 
by HHS is one promising approach for fairly and promptly compensating 
patients injured by negligence without requiring them to go through 
time-consuming and expensive litigation. If the Pilot Program 
demonstrates that Early Offers are an effective method for fairly and 
promptly compensating patients injured by alleged medical malpractice, 
this method could be adopted by other federal agencies for a variety of 
tort claims, including medical negligence claims, and by the private 
sector.
    Like patients who bring claims against non-governmental health care 
providers, individuals who claim to be injured through the acts or 
omissions of HHS employees or deemed employees often face a lengthy, 
complicated, and expensive litigation process before their claims are 
adjudicated. This Pilot Program will evaluate whether the Early Offers 
mechanism described herein will encourage fair and speedy resolution of 
administrative claims in appropriate circumstances, to the benefit of 
both negligently injured patients and the United States.
    Participation in an Early Offers system by claimants and the 
Department is entirely voluntary and confidential (to the extent 
permitted by federal law). Under this program, a claimant can decide 
whether or not to submit an Early Offer to an independent third party 
(described below). Likewise, the Department will decide, with respect 
to each administrative tort claim within the scope of this program, 
whether or not to submit an Acceptance of Offer to the independent 
third party.
    Through use of an independent third party as a Settlement 
Depository (SD), the Early Offers system overcomes the concern that a 
settlement offer will be viewed by the other party as an indication of 
litigation weakness. Both the Department and the claimant would make 
their submissions of Acceptances of Offer and Early Offers 
confidentially to the SD. By utilizing an independent SD, neither the 
claimant nor the Department will know whether the other has submitted 
an Early Offer or an Acceptance of Offer with the SD unless the 
claimant's Early Offer and the Department's Acceptance of Offer result 
in a settlement. Whether an Early Offer had been submitted by the 
claimant or an Acceptance of Offer had been submitted by the 
Department, the terms of any such Early Offer or Acceptance of Offer 
will ordinarily be inadmissible in any subsequent litigation concerning 
the alleged medical negligence, see Fed. R. Evid. 408, though such 
facts may be admissible in a proceeding concerning the enforcement of a 
settlement reached through this Pilot Program.

III. The Early Offers Pilot Program

A. Introduction

    Under the FTCA, a person seeking money damages for injuries caused 
by the negligent or wrongful acts or omissions of a federal employee 
acting within the scope of employment must submit a claim to the 
responsible federal agency before filing a tort suit against the United 
States. 28 U.S.C. 2675. Medical malpractice claims arising out of the 
acts or omissions of HHS employees or deemed employees (see, e.g., 42 
U.S.C. 233(g) and 25 U.S.C. 450f(d)) must be submitted to HHS. Claims 
for medical negligence filed with HHS on or after the publication date 
of this Notice are eligible for inclusion in the Early Offers Pilot 
Program.
    The Early Offers Pilot Program is a voluntary alternative method 
for resolving administrative tort claims that have been submitted to 
HHS for alleged medical malpractice. In the event that the claim is not 
settled through the system described in this notice, the claim will be 
processed following the normal procedures used for resolving 
administrative claims filed with HHS. All claimants who submit 
administrative tort claims to HHS within the scope of this Pilot 
Program will be given detailed instructions on the procedures that must 
be followed and the terms and conditions of participation.
    Any Early Offer by a claimant or Acceptance of Offer by HHS must be 
for a lump-sum cash amount only. As with all administrative tort claim 
settlements, all Early Offers and Acceptances of Offer under the Early 
Offers Pilot Program will be subject to the settlement authority 
requirements and limitations of the Federal Tort Claims Act. All Early 
Offers and Acceptances of Offer will be subject to the following 
conditions: (1) The claimant must obtain approval of the settlement by 
an appropriate court if HHS deems such court approval to be necessary; 
(2) any and all persons who have an interest in the claim, in addition 
to the claimant, must sign a release; and (3) the standard Department 
of Justice Stipulation for Compromise Settlement and Release for cash 
settlements must be utilized to consummate the settlement. In addition, 
payment of any settlement of claims arising from acts or omissions of 
community health center employees (and certain contractors) will be 
subject to the availability of funds, as is currently the case for all 
such claims. 42 U.S.C. 233(k). Set forth below in Part B is a summary 
of the steps and procedures that will be used in the Early Offers Pilot 
Program. HHS anticipates conducting an evaluation of the implementation 
of the Pilot Program, to ascertain whether the process worked as 
planned and claimants' views of the Pilot Program. At the conclusion of 
the Pilot Program or the resolution of claims made during the Pilot 
Program, research may also be conducted on such questions as whether 
Early Offers has an impact on the settlement rate, timing of 
settlement, and amount of settlement.

B. Summary of Steps and Procedures for Early Offers Pilot Program

1. Submission of Administrative Tort Claim
    In order to be eligible for inclusion in the Early Offers Pilot 
Program, a claimant must first submit a timely administrative tort 
claim under the FTCA alleging medical negligence by an employee or 
deemed employee of the Department. 45 CFR Part 35, Tort Claims Against 
the Government. The claimant must also provide the documentation 
required by 45 CFR 35.4.
2. Notification to Claimants
    The Department will notify all such claimants of this Pilot Program 
by

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mailing to the claimant the notice described below and a form for use 
should the claimant decide to submit an Early Offer pursuant to this 
program. Provision of this notice and form to a claimant will not 
necessarily result in the Department's submission to the Settlement 
Depository (SD) of an Acceptance of Offer with respect to the claim 
filed by the claimant.
    Pursuant to 44 U.S.C. 3518(c)(1), the information collected on the 
Early Offer form is not subject to the Paperwork Reduction Act because 
the collection takes place during the conduct of a civil action to 
which the United States or any official or agency is a party, or during 
the conduct of an administrative action involving an agency against 
specific individuals or entities.
    The notice shall provide that, among other things:
    (a) The Department may or may not submit an Acceptance of Offer 
agreeing to accept an Early Offer in a specified lump-sum amount to 
settle the claim at any time within 90 days of the date of mailing of 
such notice;
    (b) Any Acceptance of Offer submitted by the Department will be 
sent to the independent third party the Department has designated as 
the SD for this program;
    (c) Any Acceptance of Offer submitted by the Department, and any 
Early Offer submitted by the claimant, shall be confidential (except in 
the circumstances stated in Section 4 below); and
    (d) At any time within the 90-day period after the date on which 
the Department mails the notice to the claimant notifying the claimant 
of the option of participating in this Pilot Program, the claimant may 
submit an Early Offer to the SD using the form provided with the 
notice. The Early Offer must specify the minimum lump-sum amount that 
the claimant will accept to settle the claim;
    (e) If the claimant has submitted an Early Offer and the Department 
has submitted an Acceptance of Offer within this 90-day period, and if 
the amount of the claimant's Early Offer is less than or equal to the 
amount of the Department's Acceptance of Offer, the SD shall promptly 
notify the claimant and the Department that the claim has been settled 
for the amount specified in the claimant's Early Offer; and
    (f) In the event of a settlement, the claimant will be responsible 
for the payment of any attorney fees. However, any attorney fees 
charged to the claimant may not exceed 20 percent of the settlement 
amount. 28 U.S.C. 2678.
3. Settlement of Claims
    If the Department files an Acceptance of Offer and the claimant 
files an Early Offer with the SD within 90 days of the date of mailing 
of the notice described in section 2 above, and the amount of the 
claimant's Early Offer is less than or equal to the amount of the 
Department's Acceptance of Offer, the SD shall promptly notify the 
Department and the claimant that the claim has been settled in the 
amount indicated in the claimant's Early Offer. As indicated in the 
Early Offer Form provided by the Department, by submitting an Early 
Offer, the claimant thereby agrees that any settlement shall be subject 
to the following conditions: (1) The settlement must be for a lump-sum 
cash amount only; (2) the settlement must be consummated on the 
standard Department of Justice Stipulation for Compromise Settlement 
and Release (``Stipulation'') for cash settlements, available for 
review by claimant through the SD; (3) the claimant must obtain 
approval of the settlement by an appropriate court if the Department 
deems such court approval to be necessary; and (4) any and all persons 
who have an interest in the claim, in addition to each claimant, must 
sign a release. The determination as to whether to require court 
approval or additional releases is within the sole discretion of the 
Department. The Department's Acceptance of Offer will state whether 
court approval and/or additional releases are required and, if so, will 
specify the terms applicable to those requirements (e.g., the identity 
or description of persons in addition to the claimant who must sign a 
release, or the person or persons on whose behalf court approval must 
be obtained). By submitting an Early Offer, the claimant agrees to such 
conditions relating to court approval and additional releases as the 
Department may state in its Acceptance of Offer. Any Acceptance of 
Offer made by the Department in excess of $200,000.00 will have been 
approved by the Department of Justice prior to its submission to the 
SD.
4. Confidentiality
    If a settlement is not reached through this Pilot Program, the SD 
shall not disclose to the Department or to the claimant, or to any 
other person (except to the extent required by federal law), whether or 
not the Department has submitted an Acceptance of Offer or whether or 
not the claimant has submitted an Early Offer. However, information 
held by the SD may be made available for research purposes after 
settlement of the claim or final disposition of any litigation with 
respect to the claim.
5. Consummation of Settlement
    In the event the SD advises HHS and the claimant that a settlement 
has been reached, HHS will prepare and submit to the claimant or 
claimant's counsel (if the claimant is represented by counsel) a 
Stipulation for signature by the claimant(s) and counsel, if any, using 
the standard Department of Justice form for cash settlements. The 
Stipulation may require the execution of releases by other persons and/
or approval by a court, in accordance with the terms of the Acceptance 
of Offer submitted by the Department as stated in Section 3 above. The 
Stipulation may be released to the public, including the amount of the 
settlement.
6. Admissibility in Subsequent Proceedings
    Any Early Offer or Acceptance of Offer shall be considered to be 
made pursuant to settlement negotiations and as such neither the fact 
that such an Early Offer or Acceptance of Offer was or was not made, 
nor the terms of any such Early Offer or Acceptance of Offer, will 
ordinarily be admissible in any subsequent litigation concerning the 
alleged medical malpractice. Fed. R. Civ. P. 408.
7. Examples
    Three examples follow on how the Early Offers Pilot Program might 
function in practice:

    (i) Claimant files original claim (with supporting 
documentation), as required by 45 CFR Part 35 in the amount of 
$250,000. Claimant submits separate Early Offer to the SD in the 
amount of $50,000. Department reviews initial claim and background 
submitted by claimant under 45 CFR Part 35 and submits Acceptance of 
Offer of $55,000 to the SD. SD reviews the Early Offer and 
Acceptance of Offer and finds a match. The claim settles for 
$50,000.
    (ii) Claimant files original claim (with supporting 
documentation), as required by 45 CFR Part 35 in the amount of 
$100,000. Department reviews initial claim and background submitted 
by claimant under 45 CFR Part 35 and submits Acceptance of Offer of 
$10,000 to the SD. Claimant submits separate Early Offer to the SD 
in the amount of $50,000. SD reviews the Acceptance of Offer and 
Early Offer and finds no match, and therefore no settlement. Neither 
party is informed that the Acceptance of Offer or the Early Offer 
was submitted to the SD.
    (iii) Claimant has sustained a potentially life-threatening 
injury due to alleged medical negligence. Claimant is married and 
has two minor children. Claimant files original administrative tort 
claim with Department, but claimant's spouse and children do not 
file administrative tort claims. Department reviews initial claim 
and background

[[Page 57297]]

submitted by claimant under 45 CFR Part 35 and submits Acceptance of 
Offer of $300,000. In order to ensure that any personal injury 
settlement with claimant is binding and final and resolves all 
potential claims arising out of the alleged negligence, Department 
in its sole discretion determines that, in the event of a 
settlement, claimant's spouse and children will be required to 
execute the standard Stipulation, thereby waiving and releasing all 
past, present, and future claims, including any future claims for 
wrongful death. Because the children are minors, Department in its 
sole discretion determines that in the event of a settlement, 
claimant will be required to obtain, at claimant's expense, 
appropriate court approval of any settlement on behalf of the minor 
children to ensure that the waivers and releases by the children are 
enforceable. Department includes these conditions in its Acceptance 
of Offer submitted to SD. Claimant submits separate Early Offer of 
$250,000. SD finds the Early Offer is equal to or less than the 
Acceptance of Offer and informs claimant and Department that the 
claim has settled for $250,000, subject to claimant's fulfillment of 
the conditions stated by Department in its Acceptance of Offer.
    (a) Claimant obtains, at claimant's expense, court approval of 
the settlement on behalf of the minor children, and claimant's 
spouse and children execute the standard Stipulation. The settlement 
becomes binding and final and is consummated.
    (b) Claimant informs Department that she cannot obtain 
concurrence of her spouse or minor children, or that she cannot 
obtain court approval on behalf of the minor children. Because 
claimant cannot satisfy conditions of the settlement, the settlement 
does not become binding or final. Department may continue to process 
claimant's claim under Department's traditional procedures, and 
claimant may file lawsuit if appropriate under 28 U.S.C. 2675(a). 
The existence and terms of the unconsummated settlement will 
ordinarily be inadmissible in a subsequent lawsuit for the alleged 
medical negligence. See Fed. R. Evid. 408.

IV. Further Information

    This notice is not intended to constitute, and does not constitute, 
a comprehensive notice pertaining to any provision of the FTCA except 
to the extent that procedures governing the Department's settlement of 
claims brought pursuant to the FTCA are described above. The decisions 
regarding whether to file an Acceptance of Offer, and the terms of any 
such Acceptance of Offer, are within the sole discretion of the United 
States. In particular, the determinations whether to require releases 
from persons in addition to the claimant or claimants, and whether to 
require court approval on behalf of any such persons, are within the 
sole discretion of the Department. This program gives rise to no cause 
of action, and claimants have no right to require the Department to 
make an Acceptance of Offer. Claimants' rights shall be determined 
solely by the terms of any settlement reached hereunder and applicable 
law.

    Dated: September 20, 2004.
Alex M. Azar II,
General Counsel.
[FR Doc. 04-21450 Filed 9-21-04; 11:43 am]
BILLING CODE 4150-26-P