New CMS rules and legislative actions regarding Federally Qualified Health Centers

Federally Qualified Health Centers (FQHCs) are facilities that provide healthcare to underserved areas or populations. To qualify for the FQHC designation, the facilities must offer a sliding fee scale for services, provide comprehensive rather than specialized care, have a quality assurance program, and be overseen by a governing board of directors. Currently Medicare and Medicaid payments at FQHCs cover the cost of care over the course of a day of services as opposed to payments for each service, otherwise referred to as a per diem payment.

Recent agency actions

In May 2014, the Centers for Medicare & Medicaid Services (CMS) published a final rule regarding implementation of a Prospective Payment System (PPS) for Medicare payments to FQHCs. The Affordable Care Act (ACA) mandates that CMS develop a new PPS for Medicare payments to FQHCs beginning October 1, 2014. Under the ACA’s requirements, the new PPS must have a simple method for implementation, present minimal administrative burden, and preserve access for Medicare patients at FQHCs. CMS determined that the new Medicare PPS will be based on a single-encounter per diem rate per patient, as opposed to the current system of paying FQHCs an all-inclusive rate for services provided to the patient over the course of the day of service.

Under the current system, rural FQHCs receive an upper limit payment of $111.67 per patient and urban FQHCs receive an upper limit payment of $129.02 per patient. Under the new Medicare PPS model, the per diem rate would be $158.85, creating a significant increase in Medicare payments for FQHCs. There are two major exceptions to the new Medicare PPS model where services will be reimbursed at rates other than the $158.85 per diem rate. One is payment adjustments that will account for geographic factors using the FQHC geographic adjustment factor. The other will be an even greater increase in Medicare payments for first time services or for initial preventative physical examinations (IPPE). FQHCs are expected to receive a 34 percent rate increase in Medicare reimbursement for patients receiving an IPPE over the current average per diem rate. This is intended to encourage preventative care instead of emergency or critical care at FQHCs.

In a final rule published in the Federal Register in May 2014, CMS also announced changes to provider requirements for rural health centers and other FQHCs under the Medicare and Medicaid programs. Rural health centers will now be permitted to contract with non-physician providers, such as nurse practitioners and physician assistants, as long as certain employment and technical requirements for the facilities are met. In addition, CMS is easing the on-site requirements for providers at all FQHCs such that they are no longer obligated to physically “check-in” or maintain the same schedule requirements to maintain their practices at these locations. FQHCs may also face budgetary shortages in 2016. The ACA had provided two years of enhanced funding for 2014 and 2015. Congress had expected that all states would be expanding Medicaid such that the number of uninsured individuals coming to FQHCs for services would decrease greatly. As a result, the additional funding was only slated to be available for two years; however, given that half of the states have opted out of expanding Medicaid so far, it is likely that FQHCs will continue to treat a significant amount of uninsured individuals.

Current legislation

Now that CMS has provided the specific guidance on the Medicare PPS for FQHCs, there is significant legislative interest in loosening additional FQHC regulatory requirements. Although urban FQHCs have received Congressional attention in hearings in the past, much of the focus is currently on rural health centers. Additionally, in this election year, Congressional members that represent rural voting populations are looking for ways to garner electoral support as they face reelection and some have chosen to use advocacy for rural health centers as a way to obtain such support.

A bipartisan bill that was recently introduced by Senators Pat Roberts (R-KS), Al Franken (D-MN), John Barrasso (R-WY), and Tom Harkin (D-IA) is the most likely FQHC-related legislation to gain traction in the coming months. Not only does this bill have strong support from members of both parties, but one of the original sponsors, Senator Tom Harkin (D-IA), is the current chairman of the Senate Health, Education, Labor, and Pensions Committee, which has jurisdiction over the bill. Senator Harkin sets the agenda for this committee and could be instrumental in moving the bill along at a faster pace than other legislative proposals. The bill is titled the “Rural Hospital and Provider Equity Act” and is being coined the “R-HoPE” bill by its supporters.

R-HoPE is intended to provide increased Medicare funding for rural health centers with small patient populations. Specifically, if passed, the bill would equalize disproportionate share hospital (DSH) payments for rural FQHCs with DSH payment rates for urban FQHCs. It would also decrease the regulatory burden on rural critical access hospitals (CAH), specifically by striking the Medicare rule that requires CAH physicians to certify that a patient will be discharged or transferred within 96 hours of the patient’s admission.

CMS is accepting comments regarding certain aspects of the PPS model including improving access for chronic care patients and the use of Medicare specific payment codes for the per diem services at FQHCs. CMS will accept comments until July 1, 2014 and will publish a final rules based on that input later this year.

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