Medicare Payments to Federally Qualified Health Centers

To increase access to primary and preventive care services for individuals living in medically underserved communities, Congress authorized federally qualified health centers (FQHC) as a health care facility type and established requirements for Medicare coverage and payment as FQHCs under the Omnibus Budget Reconciliation Act (OBRA) of 1990. FQHCs are typically rural and urban safety net providers that provide primary and preventive care services to individuals regardless of their ability to pay. In general, a health center may qualify as a FQHC if it receives a federal grant under Section 330 of the Public Health Service Act; meets the requirements to receive such a grant; or is an outpatient health program/facility operated by certain tribal or urban Indian organizations. Currently, Medicare reimburses FQHCs for these services with an all-inclusive payment rate--resulting costs exceeding the maximum Medicare reimbursement under the upper payment limits every year from 1997 to 2004. The Medicare Improvements for Patients and Providers Act of 2008 required GAO to examine the payment structure that Medicare used to pay FQHCs for services provided to Medicare beneficiaries and to take into consideration the prospective payment methodology used by Medicaid to make payments to FQHCs. This correspondence examines the relationship between Medicare payments and the costs submitted by FQHCs for services provided to Medicare beneficiaries and provides information on how CMS established the Medicare FQHC payment structure. In this correspondence we also describe the preventive services added to or expanded within Medicare since the upper payment methodology was implemented in 1992 and the key features of the Medicaid PPS. We did not examine the PPACA prospective payment system or the impact it will have on FQHCs.