Community Health Centers and the Growing Need For FTCA Wrap Coverage

In my previous blog post, Decreasing Physician Practice Ownership – A New Paradigm, I pointed out change does not just take opportunities away – it also creates them.  Case in point – Community Health Centers and the growing opportunity for the sale of FTCA Wrap coverage.

The Community Health Center (CHC) model we see today grew out of the civil rights movement and the Johnson Administration’s War on Poverty in the 1960’s.  The idea at the time was to both create a healthcare safety net for the nation’s most vulnerable and underserved populations and empower local communities by giving them significant influence in the operation of these facilities.  CHC’s are non-profit organizations.  The vast majority of them accept funding under the Health Resources and Services Administration’s (HRSA) Health Center Program, the primary mechanism by which Federal funds are granted to CHC’s in the U.S. today

Per the National Association of Community Health Centers March 2014 publication “A Sketch of Community Health Centers, Chart Book 2014,” the number of CHC’s receiving funding under the Health Center Program has grown dramatically over the past ten years, as has the number of patients they serve.  From 2002 – 2012 the number of CHC organizations has grown from 843 to 1,198 – many with multiple locations.  During that same period the number of patients CHC’s serve increased from 11.3 million to 21.1 million.

Federal funding for community health clinics was increased dramatically when the Patient Protection & Affordable Care Act was signed into law in 2010.  Under that law funding for the Health Center Program was increased by a whopping $11 billion.  The bulk of those funds were earmarked for the creation of new CHC’s and the expansion of capacity at existing CHC’s.  According to the National Association of Community Health Centers March 2014 publication “Access Is The Answer: Community Health Centers, Primary Care & the Future of American Health Care,” CHC’s currently “…serve over 22 million people through over 9,000 urban, suburban and rural locations in every state and territory…” in the U.S.

As with other medical facilities, CHC’s have substantial medical malpractice exposure.  The Federally Supported Health Centers Assistance Acts of 1992 and 1995extended Federal Tort Claims Act (FTCA) protections to those CHC’s funded by the Health Center Program.  Basically, employees of CHC’s funded under the Health Center Program are deemed to be Federal employees under the FTCA.  As such, if a CHC employee is sued for actual or alleged medical malpractice they are defended by the Federal government – ultimately the Department of Justice.

The whole idea behind extending FTCA protection to CHC’s funded under the Health Center Program is to reduce their operating expenses so that more revenue can be spent on providing healthcare related services to those in their community that need them.  As a result of the coverage afforded under the FTCA CHC’s don’t need to purchase traditional medical professional liability insurance.  This saves them tens of thousands to hundreds of thousands of dollars annually.

And yet there are medical professional liability exposures the FTCA will not pick up – something many CHC administrators are not aware of.  The entire list is lengthy, but some of the more notable of these exposures are:

• Activities/services that are not “deemed” or approved under the Health Center Program for any particular healthcare center

• Work performed by contracted providers working less than an average of 32.50 hours per week over the term of the contract with the exception of a short list of specialties

• Services provided by an individual that are outside the scope of employment (or if contracted, outside the scope of the contract)

• Services provided by volunteers, even in emergency situations

To cover the medical professional liability exposures not picked up by the FTCA many CHC’s purchase what is commonly referred to as an FTCA Wrap product.  FTCA Wrap products are usually facility-driven medical professional liability policies modified via endorsement to “wrap around” the coverage provided by the FTCA and pick up any exposures that fall through the cracks.  Understanding the entirety of exposures not picked up by the FTCA and the nuances between the various FTCA Wrap products is necessary not only to successfully sell the product, but to ensure it is properly placed.

Historically the larger, multi-location CHC’s have been much more likely to purchase FTCA Wrap coverage.  This makes sense to a certain degree because the larger a community health clinic operation grows the more exposure it has in the aggregate from the things that fall through the FTCA cracks.  Larger operations also have more revenue with which to buy FTCA Wrap coverage.  The good news is if Federal funding for CHC’s is sustained at its current level into the future we can expect CHC’s in the U.S. to not only grow in number, but in size.  That means an increasing number of potential purchasers of the FTCA Wrap product and a growing list of targets for retail agents focused on the healthcare industry.

If you want help targeting this growing area of opportunity, contact Ethos Insurance Partners, Inc. today.