Strategies for FQHC and RHC Success in Community Health
A Two-Part Series in Honor of National Health Center Week
Last week, we posted our first blog article on National Health Center Week (NHCW), sponsored each August by the National Association of Community Health Centers (NACHC) to recognize the crucial role of community health centers in supporting the delivery of health care services to needy populations.
Members of our Rate Setting/Federal Compliance, Cost Report Attest, and Benefit/Program Integrity provided perspective on the reasons for the observance. They also evaluated the trends affecting these important facilities.
The team is back this week to share their insights and recommendations for states dealing with influential factors affecting Medicaid reimbursement policy for federally qualified health centers (FQHCs) and rural health clinics (RHCs).
FQHCs, along with RHCs, are a critical component of health care service delivery to the Medicaid and under-insured and uninsured populations. It is important that Medicaid reimbursement methods and levels facilitate access to care in an efficient and economic manner for Medicaid beneficiaries.
Since the passage of the Medicare, Medicaid, and State Children’s Health Insurance Programs (SCHIP) Benefits Improvement and Protection Act (BIPA) in 2000, states have been required to implement the federally prescribed prospective payment system (PPS) methodology or a permissible alternative payment methodology (APM) to reimburse FQHC and RHC providers.
While seemingly straightforward, in practice, these requirements have presented challenges to state Medicaid agencies to ensure FQHC and RHC reimbursements align with federal requirements relating to rate setting, rate adjustments, and payments through managed care delivery systems.
Our experts have helped state Medicaid agencies with FQHC and RHC policy, reimbursement, audit, and other support services for several decades. Together with our insight into state programs across the nation, we help our clients address existing and emergent challenges related to FQHC and RHC reimbursement. Important policy and reimbursement considerations for Medicaid agencies include the items below.
Establishing Initial and Final PPS Rates
States may use various methods to establish interim and final PPS rates for FQHCs and RHCs. Interim PPS rates can be established using the rates of other providers located in the same or adjacent area with a similar case load, or by using cost report information.
Typically, the interim PPS rate is used until a final PPS rate is established using the cost report(s) of the center or clinic. For final PPS rates, state policies vary, with some states using a single cost report, while other states use a two-cost-report model that mimics the original BIPA PPS rate method (1999 and 2000 cost reports). By understanding these methods and state-specific policies, Medicaid agencies can establish data-driven and sustainable interim and final PPS rates for FQHCs and RHCs.
Important State Considerations
- PPS rate setting data sources.
- Time period(s) of the base PPS rate cost reports.
Alternative Payment Methodologies (APMs)
The BIPA statute allows states the option to implement APMs to pay centers and clinics through a method other than the PPS rate. APMs provide flexibility in reimbursing FQHCs and RHCs and can be structured in a variety of ways, including cost-based reimbursement, per-member per-month (PMPM) payments, pay-for-performance models, and as a means of rebasing the PPS rate. By leveraging the flexibility provided by APMs, states can create innovative payment structures that support the sustainability of FQHCs and RHCs, incentivize high-quality care, and improve healthcare delivery.
It is important to note that the BIPA statute requires that APMs be agreed to by the state and the provider, and reimbursement must be at least equal to the amount paid under PPS. This means states must establish a PPS rate for each center and clinic and compare reimbursement under the PPS to the APM to ensure this requirement is met. Additionally, states must update the PPS rates annually for inflation, using the Medicare Economic Index, and for changes in the scope of services.
Important State Considerations
- Types of APMs that advance the state’s goals.
- Measurement of the APM against PPS to ensure compliance.
- Agreement between the state Medicaid agency and the provider.
Cost Reporting
Cost reports play a central role in calculating PPS rates. States may choose to use the Medicare cost report or develop a state-specific version tailored to Medicaid needs. Using the Medicare cost report allows states and providers to leverage information already filed with Medicare; however, this approach presents challenges. Medicare and Medicaid agencies serve different populations and cover different services.
For example, the Medicare cost report does not collect information regarding dental services, which are often covered by Medicaid. These differences in covered services require state agencies to develop procedures to obtain all costs and visits for Medicaid services not covered by Medicare, whereas a state-specific cost report enables each state to collect the specific information needed to accurately calculate PPS rates.
Regular cost report collection is also an important factor even after initial and final PPS rates have been established. There may be a perception that ongoing cost report collection is unnecessary, but collecting and maintaining an annual cost report from providers provides the state with valuable insight on the relationship between provider reimbursement and costs, facilitates rate adjustments for scope changes, and can inform policy changes such as APM development.
Important State Considerations
- Medicare cost report or state-specific cost report.
- Routine collection of cost reports.
Changes in Scope of Services
The BIPA statute mandates states to develop a process to account for increases or decreases in the scope of services provided by FQHCs and RHCs. States have broad flexibility in developing change-in-scope of service policies, including defining the type and nature of change-in-scope events and the numeric factors that apply to the rate adjustment formula. It is important to note that while most state change-in-scope policies involve provider-requested rate adjustments, states can initiate a review of a provider’s PPS rate and adjust the rate if a change in scope of service has occurred.
States that have not implemented a change in scope of service policy should consider implementing a policy that is BIPA compliant. States should determine if the process is retroactive or to be implemented prospectively. Retroactive application may be challenging as the requirement was effective January 1, 2001, and historical data may be difficult to obtain.
Important State Considerations
- Clearly define the change in scope-criteria process.
- States can adjust PPS rates – it does not require provider agreement.
- Consider implementing a BIPA-compliant process if one does not currently exist.
Reimbursement through Managed Care
Consistent with the BIPA statute, states are required to ensure the center or clinic receives reimbursement up to the PPS rate for services reimbursed through managed care delivery systems. The state may opt to make a supplemental payment for the difference between the PPS rate and the managed care organization (MCO) payment. Supplemental payments can be administered in real time through the state’s Medicaid Management Information System or issued as periodic lump-sum payments based on manual reconciliation. Alternatively, states may direct MCOs to pay the full PPS rate directly to the provider. In this case, the arrangement qualifies as an APM as described in CMS’ State Health Official (SHO) Letter 16-006.
Under both options, the state is responsible for ensuring the FQHCs and RHCs receive payment equal to the full PPS rate. States should develop a policy for monitoring MCO payments and compliance with the methodology selected.
Important State Considerations
- Methodology for making the PPS rate payment through managed care.
- APM implications for MCO direct payment method.
- Monitoring to ensure proper payments are made.
State Plans and Policy Documents
Policies related to the establishment of PPS rates, changes in scope of service, and APMs should be outlined in the Medicaid state plan. Additionally, states should consider including rate setting and reimbursement methodologies in detail in a publicly available policy document such as a policy or billing manual.
Important State Considerations
- Medicaid state plan and state policy/billing documents adequately and accurately describe state policies and processes.
Why Myers and Stauffer
Purpose driven. Exclusive focus. Government Programs.
Established in 1977, Myers and Stauffer is a nationally based consulting and certified public accounting firm. For nearly 50 years, we have worked exclusively with local, state, and federal government health and human-services agencies to help them accomplish their most critical goals for the nation’s most fragile people.
Our Rate Setting/Federal Compliance, Audit and Attest, and Benefit/Program Integrity teams provide full suites of services for these clinic and health center program areas.
Moreover, Myers and Stauffer’s teams integrate across the firm, providing significant benefits to our clients. Our structure of subject matter expertise-based teams under a common banner, each having a distinctive identity and a specific fluency across the full spectrum of compliance topics and government agency programs, gives us an edge.
This depth and breadth of knowledge and experience affords us the opportunity to provide our clients the best possible combination of talent, proximity, experience, and resources for any project. In practice, this means our teams collaborate to deliver superior results for clients seeking assistance with the varied dimensions of supporting FQHCs and RHCs.
We are here to answer any questions and help with any health and human services needs your agency may be encountering. Contact a member of our team today.
Authors
| Tim Guerrant, CPA
Member |
Johanna Linkenhoker, CPA
Member |
Berry Bingaman, CPA, CFE
Senior Manager |
| Bradford Johnson, HCISPP
Senior Manager |
Kasi Snow
Senior Manager |
Rob Rhoton, CPA
Senior Manager |
