Medicaid and Permanent Supportive Housing for Chronically Homeless Individuals: Emerging Practices From the Field. 4.2. Understanding Health Centers and Federally Qualified Health Centers Medicaid Reimbursement


Nationwide, over 1,100 federally funded Health Centers served over 21 million patients in 2012.35 The majority of Health Center patients have incomes below the federal poverty level. Before 2014, more than one-third of Health Center patients were uninsured, and 40 percent of health center patients were Medicaid beneficiaries. Many patients who were uninsured were expected to qualify for Medicaid as of 2014 (if they live in states expanding coverage) or for federally subsidized insurance coverage through the exchanges.

While Health Centers play a large and important role delivering health care to millions of low-income people, and many Health Centers are now actively engaged in helping people enroll in coverage, they also face significant uncertainty about the ramifications of full implementation of the Affordable Care Act. In expansion states, many of their uninsured patients may gain coverage through Medicaid, and this will increase Medicaid revenues if these patients continue to receive care from the Health Centers. However, these patients are likely to have other choices about where to go for primary care when they gain coverage, and some may select other providers when they get the opportunity to do so. Health Centers are likely to continue to provide care for many people who will remain uninsured because of their immigration status, because of other barriers to enrollment and eligibility, or because they live in states that choose not to expand Medicaid eligibility. In addition, Health Centers' active role in helping people try to enroll in coverage has raised their visibility among uninsured residents in their service areas, which is expected to lead to an increasing number of those who are unable to obtain coverage seeking care at Health Centers.

The Affordable Care Act provided $11 billion in federal funding over five years to expand the Health Center program, with the goal of expanding access to health care services as more people in low-income communities obtain coverage. The volume of visits provided by Health Centers increased from 38 million in 2000 to 80 million in 2011, and Health Centers serve more than one in six low-income people nationally. Federal funding has expanded the number of Health Center medical staff, as well as staff who provide dental and mental health services. The number of Health Centers that offer some mental health services has grown significantly, from about 40 percent of health centers in 2000 to 75 percent in 2011 (Kaiser Commission 2013).36 While only 20 percent of Health Centers offer substance use disorder treatment services, all Health Centers that receive federal grants to work with homeless individuals are required to provide these services.

Health Centers vary widely in their capacity for delivering health care services connected to PSH or in tailoring their services to meet the needs of people experiencing homelessness. Some Health Centers are very engaged in delivering services to people who are homeless and to people with significant behavioral health challenges, and may receive federal grant funding targeted for this purpose. In contrast, other Health Centers have been much less engaged in serving these groups of patients. Leaders of some of the centers in the latter group say they face competing priorities as they prepare to respond to the challenges and opportunities related to implementing the Affordable Care Act and other changes in health care delivery systems. They say that they do not have the capacity to deliver the specialized, intensive, and time-consuming care needed by people experiencing chronic homelessness who have SMI or active substance use disorders. Nor do they feel they have the capacity to see people in their homes at a time when they are also seeking to greatly expand capacity in their centers to meet the increased demands for care and provide quality customer service to other newly insured patients. Other Health Centers have strengthened their commitment to serving the most vulnerable people, who are unlikely to receive care that addresses their complex health and social needs in other settings.

Health Care for the Homeless programs receive 8.7 percent of total federal funding for the Health Center Program. The more than 200 Health Care for the Homeless programs include grantees operating in all 50 states, the District of Columbia, and Puerto Rico. In addition to basic health services, HCH programs must also offer substance use disorder treatment services (directly or through referrals), establish referral linkages for mental health treatment, offer case management services and services that enable people to use other Health Center services (e.g., outreach, transportation, and translation services), and conduct patient education regarding the availability and proper use of health services. In 2012, HCH programs served more than 836,000 patients, almost 90 percent of whom had incomes below the federal poverty level.37

HCH programs are required to bill Medicaid for covered services provided to Medicaid enrollees, but currently most HCH patients are uninsured. In 2012, 61 percent of HCH adult patients in the United States did not have any public or private health insurance, and 28 percent were covered by Medicaid.38 In states that choose to implement the expansion of Medicaid eligibility under the provisions of the Affordable Care Act, most HCH patients are likely to become eligible for Medicaid coverage based on their low incomes, but barriers to Medicaid enrollment will likely persist for some people with histories of chronic homelessness who lack reliable contact information or required identification documents, or who find it difficult to navigate the application and eligibility determination process.39

Consistent with national data, HCH providers in the case study communities often reported that, until recently, the vast majority of their patients have been uninsured. As some states expanded Medicaid eligibility and others expanded coverage through Medicaid waivers in the years before the full expansion of Medicaid eligibility in 2014, HCH programs in these states experienced a significant decline in the percentage of uninsured patients, and they are increasingly receiving Medicaid reimbursement for covered services.

4.2.1. FQHC Medicaid Reimbursement

Since 2001, federal law has required State Medicaid agencies to pay Health Centers that are recognized as Federally Qualified Health Centers based on a prospective payment system (PPS). Under this system, FQHCs are paid an "all-inclusive" rate for each visit a Medicaid patient makes with certain types of health care providers, including physicians, mid-level practitioners (nurse-practitioners and physicians' assistants), licensed clinical social workers, and clinical psychologists. The rates also include all services and supplies that are "incident to" the services provided by covered providers. Each FQHC's rate is calculated by taking their reasonable costs for Medicaid-covered services during a base period and dividing them by the total number of visits. The PPS per-visit rates that are paid to Health Centers for visits provided to Medicaid patients often appear higher than Medicaid reimbursement rates paid to other types of providers that care for Medicaid beneficiaries; however, the fact that the PPS is a bundled rate precludes making direct comparisons.

Instead of paying FQHCs under a PPS, state Medicaid programs have the option to pay them using an alternative payment methodology (APM). By law, an APM must result in total payments being at least as high as they would be under a PPS, and each FQHC must agree to receive the APM.

The intent of the Medicaid FQHC payment methodology is to ensure that the costs of providing covered services to Medicaid patients are not shifted to federal grant funding from the Health Resources and Services Administration. Federal grants and other funding sources cover uninsured patients and activities not covered by reimbursement from Medicaid, Medicare, or private insurance.

Since 2001 the baseline PPS rate, which was established based on documented costs incurred during 1999 and 2000, is adjusted annually by a standard medical inflation factor. States must also adjust the PPS rate to take into account any increase or decrease in the scope of services provided by the Health Center. When Health Centers establish or expand services, such as when they establish a new team serving people who are homeless or a service site connected to PSH, this change in scope can trigger an adjustment to the Health Center's per-visit rate.

As many states are relying on Medicaid managed care plans to provide health care for a growing number of people, many Health Centers have become part of these health plans' provider networks. In many cases, the health plans make payments to the Health Centers on a capitated basis, meaning that the Health Centers receive a fixed amount of funding per-member per-month for health plan members who have selected or been assigned to the Health Center for receiving their primary care. States are required by federal law to give Health Centers additional "wraparound" Medicaid payments based on the gap between the health plans' per-member per-month payments and the revenues that would otherwise have been received by the Health Center using the FQHC prospective payment methodology based on the number of FQHC encounters.

Note that beginning in October 2014, FQHCs will begin receiving payments under a PPS system from Medicare for care provided to Medicare beneficiaries. There are substantial differences between how the Medicaid and Medicare PPS systems will function.

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