While on the surface, this is not great news, when you get into it, it makes sense for both sides.
For the C's, the qualifying offer under the new CBA would have been a large sum for a team that is looking at a lot of cap space and looking for stars to pair with Rondo and Pierce. Considering Green's condition, it would have been a lot of money to have on the table for him.
For Green, being a RFA was going to dramatically affect his ability to get a contract elsewhere, since qualifying offers need to be at least 2 years before any option years, and given his condition, my guess is that no teams would even talk with him, and he would basically be a slave to whatever the C's wanted to do.
More than anything though, this was an act of good faith between a GM and a super agent (Falk is one of the biggest names out there). Without the restricted status, Falk is able to at least look elsewhere, particularly if the C's decide to use their cap space on bigger fish. However, because of this act of good will (after a very unfortunate situation), Falk will feel obliged to bring any offers back to Danny to try to match in an unofficial manner (or to work on a sign and trade, if they want to go that route)...and it also keeps the relationship strong for future clients.