2. FEDERALLY QUALIFIED HEALTH CENTERS (FQHC’s)

3. FQHC CERTIFICATION
FQHC’s are certified by Health Resources and Services Administration (HRSA) and must meet one of the following requirements:
1. Is receiving a grant under Section 330 of the Public Health
Service (PHS) Act
2. Is not receiving a grant under Section 330 the Act but is
determined by the Secretary of HHS to meet the requirements
meeting the requirements for receiving such a grant (look
alike)
3. Is a Tribal health facility operating under ISDEA or an urban
Indian health center operating under the IHCIA

4. Certification Requirements
For certification as an FQHC, the entity must meet all of these requirements:
● Provides comprehensive services and carries out, or arranges for, an annual evaluation of its total
program
● Meets other health and safety requirements and
● Is not concurrently approved as a Rural Health Clinic
FQHCs that receive a Section 330 grant or are determined to be an FQHC look-alike must meet all requirements contained in Section 330 of the PHS Act, including:
● Serve a designated medically-underserved area or medically-underserved population
● Offer a sliding fee scale to persons with incomes below 200 percent of the Federal poverty level and
● Be governed by a board of directors, of whom a majority of the members receive care at the FQHC

5. How are FQHCs paid? FQHCs were originally paid by reasonable cost
Reasonable cost was replaced by the Prospective Payment System in 2001

6. What is Medicaid PPS?
- PPS was established in 2000 by the Medicare, Medicaid and
SCHIP Benefits Improvements and Protection Act (BIPA)
- Single, bundled rate covers all services and supplies in single
visit with a designated provider type
- Unique to FQHCs
- Initial FQHC PPS rate established by averaging reasonable
costs
- Calculated at each health center
- Serves as a baseline payment

7. PPS RATE
FQHC prospective payment rates are determined based on two key components
PPS base rate and adjustments:
PPS base rate: States were required to set a per-visit payment rate for each
FQHC based on the average of the center's costs incurred during fiscal years
(FYs) 1999 and FY The base rate was composed of the allowable capital
cost per visit and the lesser of the allowable operating cost per visit or the peer
group operating cost ceiling per visit.
Payment rates for FQHCs that qualified for Medicaid payments after FY 2001 are
based at either the average of other clinics in the same or adjacent areas or
through cost reporting.

8. PPS RATE Continued
Adjustments: States use the Medicare Economic Index (MEI),
a measure of medical practice cost inflation, to adjust
payment rates annually. States are also required to adjust
FQHC payment rates for each clinic to reflect changes in
scope of services included in the encounter rate.

9. Alternate Payment Methodology (APM)
States have the option to use an Alternate Payment Methodology (APM), provided that the health center agrees to the method and that the alternative method pays at least what the health center would have received under the PPS.
If total payments under the APM are less than what would have been paid under the PPS rate, the state must pay the difference to the FQHC
Allows for state flexibility and FQHC innovation

10. COVERED SERVICES
Section 1905(a)(2) of the Social Security Act (the Act) specifies that state Medicaid programs must cover FQHC services and any other ambulatory services offered by an FQHC and which are otherwise included in the Medicaid state plan.

11. Managed Care Organizations (MCOs) and Wrap-arounds
CMS requires that rates of payment from an MCOs to FQHCs shall not be less than the amount of payment for a similar set of services with a non- FQHC.
When total MCO payments to an FQHC are less than what the center would have been paid under the PPS or APM amount, the state Medicaid agency must pay the difference (§ 1902(bb)(5) of the SSA. This payment is called a supplemental, or wraparound, payment. The state must pay up to the PPS rate irrespective of financial incentives or disincentives employed by the managed care entity.

12. Who Makes the Payment
States have the statutory responsibility for this payment.
Historically States were not allowed to delegate this responsibility to MCOs.
States now have the authority to delegate this responsibility to MCOs.
Some states require that MCOs make full PPS payments to FQHCs. States and FQHCs may prefer this approach because it reduces administrative burden and decreases potential delays in receiving supplemental payments.,
Alternatively, some FQHCs have expressed concern that this has created many complex issues under Medicaid managed care programs, including reconciliation disputes and complaints regarding the timeliness of supplemental payments.

13. Four Walls
FQHCs have the ability to contract with outside providers and have them treated as in house staff. FQHC’s are not bound by the “four walls.
For example: The health center can take an x-ray and send it out to be read by a radiologist. The contract with the radiologist is for a flat fee per read. The radiologist bills the health center and the health center bundle bills Medicaid for both the technical and professional components.
This does not require the use of the SHO letter.

14. Conclusion
FQHCs provide a great deal of flexibility in providing additional revenue streams, but it requires working closely with your State.