Medicaid Medicare Supply of Medical Services

Providers for Underserved Populations: RHC and FQHC

What is an RHC? An FQHC? Using a research from Health Resources and Services Administration (HRSA), this post provides the answer.

Rural Health Clinic (RHC)

The Rural Health Clinics Act (P.L. 95-210) was passed by Congress and signed into law by President Carter in 1977. The goal of this Act was twofold. First, it encouraged the utilization of PAs and NPs by providing reimbursement for services these health professionals provided to Medicare and Medicaid patients, even in the absence of a full- time physician. Second, it created a cost-based reimbursement mechanism for services when provided at clinics located in underserved rural areas.

Because of subsequent changes in the Medicare law authorizing Medicare Part B coverage for PAs and NPs in all practice settings, not just RHCs, the original incentive for utilizing PAs and NPs was diminished. However, because an RHC gets reimbursed the same amount from Medicare and Medicaid regardless of whether the patient is seen by a mid-level provider (MLP) such as a PA, NP, CMN, or physician, the facility continues to have a strong incentive to utilize these practitioners whenever it is clinically appropriate.

There are significant differences between the way Medicare pays RHCs and how Medicaid does it.  Medicare reimburses RHCs for “core services” on the basis of an All Inclusive Reimbursement Rate (AIRR) reflecting the cost of the services.  Using cost report submissions from RHCs, Medicare calculates the AIRR as the total RHC allowable costs divided by the number of RHC visits.  In 2011, the reimbursement rate cap was $78.07 for RHCs.  Medicare pays 80 percent of the AIRR and the patient is responsible for 20 percent.

Although Medicaid paid RHCs on a cost-of-service basis before 2000, the Benefits Improvement and Protection Act of 2000 (BIPA) now permits Medicaid now pays RHCs using a prospective payment system (PPS).  The PPS methodology and payment rates vary by State.  For instance, some State Medicaid plans pay for other ambulatory and dental services in addition to RHC core services.

Federally-Qualified Health Center (FQHC)

The term “Federally Qualified Health Center,” or FQHC, refers to three different types of clinics:

  • Health Centers (HCs) including Community Health Centers (CHCs), Migrant Health Centers (MHCs), Health Care for the Homeless Health Centers (HCHs), and Public Housing Primary Care Centers (PHPCs) that are funded under Section 330 of the Public Health Service (PHS) Act,
  • FQHC “Look-Alikes,” or FQHCLAs, that have been identified by HRSA and certified by CMS as meeting the definition of “Health Center” under Section 330 of the PHS Act, although they do not receive grant funding under Section 330; and
  • Outpatient health programs/facilities operated by tribal organizations or urban Indian organizations.

CMS pays FQHCs similarly to the way it pays RHCs.  Medicare pays RHCs based on estimated cost (i.e., AIRR=Total Allowable Cost/FQHC Visits), and Medicaid pays FWHCs using a PPS methodology, based on the historical reasonable costs of the center.  The Medicare reimbursement rate cap for FQHCs is higher than for RHCs.  In 2011, urban FQHCs had a reimbursement rate cap of $126.22 and rural FQHCs had a reimbursement rate cap of $109.24.

It is possible for a practice to be certified as both an RHC and an FQHC, although only one payer status is available for either Medicare or Medicaid. The most likely option for dual certification will be RHC status for Medicare and FQHC status for Medicaid.

A summary of the differences between RHCs and FQHC can be found here.

Medicare Managed Care (Medicare Advantage)

Each FQHC and RHC must negotiate and sign individual contracts with the Medicare Advantage plans in which they wish to participate as a provider. There are no restrictions on the rates that Medicare Advantage plans must pay to RHCs…There are rules that govern the payment rates for FQHCs that choose to contract with Medicare Advantage plans. Medicare Advantage plans are required to pay FQHCs with which they contract for services at rates comparable to the rates that they pay other providers for similar services. FQHCs are then entitled to receive “wrap-around” payments from the Medicare program equal to the difference between the plan payment amount and their All Inclusive Reimbursement Rate (AIRR).


Medicaid Managed Care

Medicaid programs often link managed care with capitated payments, under which a fixed sum is paid for a specified set of services. Medicaid managed care plans are required to pay RHCs and FQHCs at rates comparable to the rates paid to other providers of similar services. States are then required to “wrap-around” that payment by making additional payments (if necessary) to the FQHC/RHC in an amount equal to the difference between the amount paid by the managed care plan and the amount of the clinic’s Medicaid PPS rate.


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