Federal Health Centers
Released: 2014-04-01T00:00:00

Introduction

The federal health center program awards grants to support health centers: outpatient primary care facilities that provide care to primarily low-income individuals. The program is administered by the Health Resources and Services Administration (HRSA)—specifically by its Bureau of Primary Care—within the Department of Health and Human Services (HHS). The federal health center program is authorized in Section 330 of the Public Health Service Act (PHSA) and supports four types of health centers: (1) community health centers; (2) health centers for the homeless; (3) health centers for residents of public housing; and (4) migrant health centers.

According to HRSA data, over 9,400 unique health center sites (i.e., individual health center facility locations) exist; the majority are community health centers (CHCs). CHCs serve the general low income or otherwise disadvantaged population, whereas the remaining three types of health centers provide care to more targeted low income or otherwise disadvantaged populations (e.g., migrant health workers). Regardless of type, health centers are required, by statute, to provide health care to all individuals regardless of their ability to pay and are required to be located in geographic areas that have few health care providers. These requirements make health centers part of the health safety net—providers that serve the uninsured, the underserved, or those enrolled in Medicaid. Data compiled by HRSA demonstrate that health centers serve the intended safety net population as the majority of patients are uninsured or enrolled in Medicaid.

This report provides an overview of the federal health center program including its statutory authority, program requirements, and appropriation levels. The report then describes health centers in general, where they are located, their patient population, and some outcomes associated with health center use. It also describes the federal programs available to assist health center operations including the federally qualified health center (FQHC) designation for Medicare and Medicaid payments. The report concludes with a brief discussion of issues for Congress such as the potential effects of the Patient Protection and Affordable Care Act of 2010 (ACA) on health centers (both the program and individual health centers), the health center workforce, and financial considerations for health centers in the context of changing federal and state budgets. Finally, the report has two appendices that describe (1) FQHC payments for Medicare and Medicaid beneficiaries served at health centers; and (2) programs that are similar to health centers but not authorized in Section 330 of the PHSA.

What Is the Federal Health Center Program?

The federal health center program awards grants to support outpatient primary care facilities that provide care to primarily low income individuals. The program is authorized in Section 330 of the PHSA, which also includes definitions of the four types of health centers and program requirements. This section of the report describes the statutory authority for the federal health center program (also called the health center program), program requirements, types of grants awarded in support of the health center program, the health center program's appropriation, and other funding/revenue that health centers receive.

Statutory Authority and General Requirements9

Section 330 of the PHSA authorizes grants for health centers and includes the requirements for entities to receive a health center grant. Section 330 requires health centers to provide services to the entire population of their service area regardless of ability to pay. Health centers are also required to document the health needs of the residents in their service area and to update their service area if needed. Health center grantees must (1) be located in specific geographic areas, (2) have an established fee schedule that meets certain requirements, (3) collect reimbursements for individuals enrolled in public or private insurance programs, (4) have appropriate governance, (5) offer specific health services, (6) meet certain reporting and quality assurance requirements, and (7) license providers and seek accreditation. HRSA is required to determine whether health center grantees meet these requirements; the Government Accountability Office (GAO) raised some concerns that the agency may not be providing sufficient oversight of the program and that some health centers may not be meeting these requirements. This report does not evaluate whether health centers meet program requirements; rather, it describes the program's requirements.

Location Requirements

PHSA Section 330 requires that a health center be located in an area that is designated as medically underserved or as serving a population designated as "Medically Underserved" (see text box ).

Fee Schedule Requirements

Health centers must establish their own fee schedules that take into account local rates for health services and the costs that the health center incurs providing services. The health center is then required to establish a separate discounted fee schedule, which is then further discounted or waived based on a patient's ability to pay. Ability to pay is determined by the patient's income relative to the federal poverty level. The statute requires that individuals whose income is above 200% of the federal poverty level pay full charges, while individuals whose incomes are at, or below, 100% of the federal poverty level pay only nominal fees.

Medicaid Coordination and Reimbursement Requirements

Health centers are required to coordinate with state Medicaid and CHIP plans to provide services to beneficiaries enrolled in these programs. They are also required to seek reimbursement from third party payers such as private insurance plans, Medicare, Medicaid, and CHIP. Health centers are further required to have systems to obtain reimbursements including those used for billing, credit, and collections. These collections provide nearly two-thirds of the health center program's revenue (see Table 4 ).

Although health centers collect reimbursements, GAO found that Medicare payments did not cover the full cost of health center services in nearly two-thirds of the visits they examined. Similarly, the National Association of Community Health Centers (NACHC)—the advocacy group for health centers—reports that the amount received in reimbursements is not sufficient to cover the cost of the health services provided. They found that Medicaid reimbursements covered 81% of the cost of providing services, while Medicare and private insurance reimbursements cover approximately two-thirds. The NACHC also found that the PHSA Section 330 grant amount received per uninsured patient—$312—was less than half the average health center cost per patient of $654.

Governance Requirements

Health centers are required to have a governing board that is primarily made up of health center patients. The governing board provides input on center operational issues including the center's budget, operating hours, management, and oversight. It is required to meet monthly, and must approve the center's director and must approve grant applications submitted by the center.

Health Service Requirements

Health centers are required to provide primary care services (as defined in Section 330 of the PHSA and discussed below) and may also provide behavioral health services, case management, and specialty care services. This report section discusses the required services, as well as certain optional services, and then presents some data on services provided at health centers in 2012 (see Table 1 ).

Health centers are required to provide primary health services and preventive and emergency health services. In addition to these three types of services (primary, preventive, and emergency), health centers must provide diabetes self-management training for patients with diabetes or renal disease. Primary health services are those provided by physicians or physician extenders (physicians' assistants, nurse clinicians, and nurse practitioners) to diagnose, treat, or refer patients. Primary health services include relevant diagnostic laboratory and radiology services. Preventive health services include well-child care, prenatal and postpartum care, immunization, family planning, health education, and preventive dental care. Emergency health services refer to the requirement that health centers have defined arrangements with outside providers for emergent cases that the center is not equipped to treat and for after-hours care.

Health center providers must also have admitting privileges at one or more hospitals located near the health center. This requirement is intended to ensure care continuity for hospitalized health center patients. In instances where a health center physician does not have admitting privileges at a nearby hospital, the health center is required to establish other arrangements to ensure care continuity.

Health centers are also required to provide enabling services such as transportation for individuals residing in each center's service area who have difficulty accessing the center, translation services, and health education. Health centers may also provide supplemental services such as additional dental care, mental health services, or substance abuse treatment. Table 1 identifies some specific services tracked in the Uniform Data System (UDS) 2012, the HRSA- required health center grantee reporting system.

Reporting and Quality Assurance Requirements

Health centers are required to report to HRSA certain information and to have quality improvement and assurance plans in place. First, health centers are required to report patient demographics, services provided, staffing information, utilization rates, costs, and revenue to HRSA's UDS. Second, within the UDS, health centers must report on certain clinical outcomes to assess quality. These outcomes are similar to those examined in other health care settings. They include, for example, the percentage of children receiving recommended immunizations by the age of two, the percentage of women who were screened for cervical cancer, and the percentage of patients whose body mass index was assessed and who were referred to appropriate services if found to be obese. Finally, health centers are required to have quality improvement systems in place that include clinical services, management, and patient confidentiality assurances. To meet this requirement, health centers must have a clinical director who reports on quality improvement and assurance activities and conducts periodic assessments of the health center's services to evaluate the quality and appropriateness of services provided. The HHS Inspector General found that more than two-thirds of the health centers they examined conducted quality assessments. HHS has also awarded grants to health centers to implement quality initiatives such as care coordination through mechanisms like medical homes.

Licensing and Accreditation Requirements

Health center providers must be properly licensed in the state in which they practice. They must also have admitting privileges at hospitals that health center patients would likely be referred to (see " Health Service Requirements "). Furthermore, they must maintain proper credentials during their health center employment.

Health centers are not required to be accredited by a national accreditation agency, but HRSA encourages health centers to seek accreditation. Specifically, the agency encourages health centers to seek accreditation from either the Accreditation Association for Ambulatory Health Care (AAHC) or The Joint Commission (TJC). HRSA pays some of the costs of seeking and maintaining accreditation from one of these two accrediting entities.

Grants that Support Federal Health Centers

HRSA awards five types of Section 330 authorized grants to support health centers: (1) grants for new health centers; (2) grants to expand services at existing health centers; (3) grants for construction and renovation; (4) planning grants; and (5) grants to reduce infant mortality. This section describes these types of grants, the entities that are eligible to receive grants, and the factors taken into consideration when awarding grants.

Types of Grants Available to Support Health Centers

Five types of grants support health centers. New Access Point (NAP) grants permit existing grantees to establish new sites or new grantees to establish new health centers. ACA funds were used to support these grants in FY2013. Increased Demand for Services (IDS) or Expanded Service (ES) grants are for health centers to expand the number of patients they serve or to provide additional types of services. The Capital Improvement Program (CIP) provides funding for the construction and renovation of health centers. These grants were supported with ARRA appropriated funds and with ACA appropriated funds in FY2011 and FY2012. The fourth type of grants is for entities that are not health centers, to plan and develop health centers. Funds awarded may be used for assessing the health needs of the proposed service population and developing linkages with the community and with health providers in the proposed service area. ACA funds supported these grants in FY2011. The fifth grant program supports activities that aim to reduce infant mortality. These grants have not been awarded in recent years; instead, HRSA supports other infant mortality reduction programs.

Grant Eligibility and Awarding Criteria

Public and non-profit entities are eligible to apply for Section 330 grants to operate health centers. The majority of health center grantees operate facilities at more than one site and some operate more than one type of health center. Grants are awarded competitively based on an assessment of the need for services in a given area and the merit of the application submitted. Grants may also be awarded based on certain funding priorities such as creating a rural-urban balance in health center locations. Under statute, HRSA must allocate certain percentages of the health center program's budget to grants that support health centers serving special populations (migrant workers, the homeless, residents of public housing). Specifically, the health center program's budget must be allocated as follows:

at least 8.6% for grants to centers serving migrant or farmworkers, at least 8.7% for grants to centers serving homeless individuals, and at least 1.2% for grants to centers serving residents of public housing.

A health center may be of more than one type, for example, a community health center may also operate a migrant health center, but must devote at least 25% of its HRSA grant funding to migrants to be considered to be serving a "special population." In addition to these funding requirements, HRSA is also required to give special consideration, within the competitive grant process, to applications for centers that would serve sparsely populated areas, defined as areas with seven or fewer residents per square mile. GAO found that in order to ensure that these percentages are met, HRSA may adjust funding criteria, thereby funding some applications that may not have scored as high in the competitive process.

Grant recipients are not required to provide matching funds, but are required to use grant funds to supplement and not supplant funding that had been available prior to the grant. Grant amounts awarded are determined based on the cost of proposed grant activity (see Table 2 ). An entity may receive funding for multi-year projects, but amounts awarded in subsequent years are contingent on (1) congressional appropriations and (2) the entity's compliance with applicable statutory, regulatory, and reporting requirements. At the end of the application period, health centers are required to compete for continued funding.

What Is the Health Center Program's Appropriation?

The health center program's appropriation has increased over the past decade, resulting in the establishment of more centers and the ability to serve more patients. From FY2004 through FY2014 (the last year of final appropriation information available), the health center appropriation increased by 119%, from $1.6 billion to $3.5 billion. Over this same time period, the number of health center sites also increased. Beginning in 2002, the George W. Bush Administration began a multi-year effort to expand the health center program by providing funding for new or expanded health centers for 1,200 communities. The program's expansion has continued during the Obama Administration. In FY2009, under the Obama Administration, the health center program received $2 billion under the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ). Specifically, ARRA provided $500 million for new sites and expanded services at existing sites. It also provided $1.5 billion for construction, renovation, equipment, and health information technology. The program's expansion may continue under the Patient Protection and Affordable Care Act of 2010 (ACA). ACA, which permanently authorized the health center program, appropriated a total of $1.5 billion for health center construction and repair, and created the Community Health Center Fund (CHCF), which included a total of $9.5 billion for health center operations to be appropriated in FY2011 through FY2015. However, it is not likely that these funds will be used to expand the health center program because in FY2011, FY2012, FY2013, and FY2014, these funds were or will be used to augment reductions to discretionary appropriations to the health center program. The ACA also appropriated funding for health centers to train medical residents and provided funding for care coordination initiatives. Although the program's appropriations increased by 119% since FY2004, the additional appropriated funds have generally been used to expand the number of centers—which increased by 152% —while funding awarded to individual centers increased less rapidly over the time period.

Table 3 presents the health center program's appropriations from FY2004 through the FY2015 President's budget request. The table also includes amounts appropriated under ARRA and the ACA and the number of grantees in each fiscal year.

What Are the Other Sources of Funding for the Health Center Program?

In addition to amounts received from grants authorized under the program's annual appropriation (i.e., Section 330 grants), health centers receive funding from reimbursements and funding from other sources (e.g., state and local grants). The relative contribution of each of these sources to an individual health center's budget varies by center. However, HRSA compiles this information for the health center program. Table 4 presents data for FY2013, the most recent year of final data available. Medicaid is the largest source of health center revenue (38.5%) and Section 330 grants provide 18.2% of the program's revenue. Amounts received from grants and contracts from state, local, and private foundations provided 16.9% of the program's total revenue in FY2013. (See Table 4 .)

What Are Health Centers?

This section describes health center facilities funded under the health center program appropriation. It includes a discussion of the four types of health centers funded and compares the services offered and populations served by each center type. The section also describes where health centers are located and outcomes associated with health center use.

What Types of Health Centers Exist?

Four types of health centers exist: (1) community health centers; (2) health centers for the homeless; (3) health centers for residents of public housing; and (4) migrant health centers. The majority of health centers are community health centers (CHCs), which serve a generally underserved population. The other three types of health centers serve more targeted populations. Below describes each type of health center, the population targeted by these centers, and the specific services that each type of center must provide.

Community Health Centers

The majority of health centers are CHCs because these facilities serve the general population with limited access to health care. CHCs are required to serve all residents who reside in the area that the CHC serves (this is also known as the catchment area). CHCs are required to provide "primary health services" (see " Health Service Requirements "). The CHC-required services are the baseline services that all types of health centers are required to provide. The other three types of health centers may be required to provide certain supplemental services that aim to meet the specific needs of the population they serve. The majority of health center program grant funding is allocated to support CHCs. By statute, 18.5% of the budget must be reserved for grants that support health centers serving special populations; this means that a maximum of 81.5% of the health center program budget may be used to support CHCs.

Health Centers for the Homeless

Health Centers for the Homeless (HCHs) provide services to homeless individuals; it is the only federal health program that targets this generally uninsured population. Section 330 defines homeless individuals as those who lack permanent housing or live in temporary facilities or transitional housing. In addition to the services required of all health centers, HCHs are required to provide substance abuse services and supportive services that aim to meet the health needs of the homeless population. HCHs may also provide mobile services and aim to connect homeless individuals with supportive services such as emergency shelter, transitional housing, job training, education, and some permanent housing. Grants are also available for innovative programs that provide outreach and comprehensive primary health services to homeless children and children at risk of homelessness. By statute, HRSA must allocate at least 8.7% of its budget to support these centers.

Health Centers for Residents of Public Housing

Health centers for residents of public housing are located in public housing and aim to provide primary care to individuals who reside in public housing. These centers provide the services required of CHCs and are not required to provide specific supplemental services. These centers were authorized in 1990 because of congressional concern that public housing residents had worse health than similar (by demographic and economic status) individuals who did not reside in public housing. By statute, HRSA must allocate at least 1.2% of its budget to support these centers.

Migrant Health Centers

Migrant health centers provide care to migrant farm workers (persons whose principal employment is in agriculture on a seasonal basis and who establish temporary residences for work purposes) and seasonal farm workers (persons whose principal employment is in agriculture on a seasonal basis, but do not migrate for this work). HRSA estimates that they provide care to more than one-quarter of all migrant and seasonal farmworkers. In addition to the general health center requirements, migrant health centers are required to provide certain services specific to their service population's health needs such as supportive services, environmental health services, accident prevention, and prevention and treatment of health conditions related to pesticide exposure. Migrant health centers may be exempt from providing all required services, and may only operate during certain periods of the year. By statute, HRSA must allocate at least 8.6% of its budget to support these centers.

Comparison of Health Center Types

Table 5 describes the four types of health centers, their target populations, the services they are required to provide, and the populations they serve. Additional services are assessed relative to the CHC service requirements (see " Health Service Requirements ").

Who Uses Health Centers?

According to HRSA, health centers served 21.1 million patients in 2012. These patients were generally socioeconomically disadvantaged and uninsured or underinsured. The majority of health center patients have incomes at or below the federal poverty level. Nearly a quarter of patients are treated in a language other than English and the majority of health center patients are racial or ethnic minorities. In 2012, nearly one-third of health center patients were identified as African-American and/or Hispanic/Latino. Both of these rates are more than double the proportion of these groups in the overall U.S. population. Table 6 presents some demographic characteristics of the health center patient population in 2012 including age, race, ethnicity, and insurance status.

Figure 1 and Figure 2 show the locations of health centers funded with PHSA Section 330 grants. These include some school-based health center locations because some grantees use Section 330 funds to support this health center type. Figure 1 shows that community health centers are distributed throughout the country, Figure 1 compared to Figure 2 also shows that community health centers are the most numerous type of sites and that a number of health centers receive grants to operate multiple health center types in the same geographic area.

What Outcomes Are Associated with Health Center Use?

Researchers have found that access to health centers can improve health outcomes and reduce costs for the populations and areas they serve. Research has also found that health centers may increase access to health care for generally underserved populations such as those enrolled in Medicaid and racial and ethnic minorities. This section briefly summarizes the research on the effects of health centers on health, costs, access, and quality.

Health Outcomes

Health centers focus on preventive care and attempt to manage patients' chronic conditions. This focus may improve health by preventing disease and disease-related complications. Research has found that health center patients are more likely to receive preventive health services—including pap tests and influenza vaccinations—and more likely to receive preventive screenings—including mammograms and colonoscopies—when compared to non-health center patients of similar socioeconomic status. Health center patients are also more likely to have their chronic conditions—like diabetes—managed. Finally, health centers aim to increase prenatal care use in low income pregnant women to reduce outcomes associated with infant mortality such as low birth weight. HRSA has found that health centers have made progress in this effort because an increasing number of health center patients initiate prenatal care in their first trimester. This has resulted in fewer health center patients—when compared to the national average—having low birth weight babies—a major cause of infant death.

Cost Outcomes

Researchers have found that health centers may lower health care costs by reducing more costly emergency department visits. GAO found that, on average, treatment at health centers is nearly one-seventh the cost of treatment of the same condition in an emergency department. Given these differences in cost, health centers that are successful at reducing emergency department use may reduce health care costs. One study found that counties with health centers have lower emergency room use and that individuals who live near health centers use emergency rooms less. In addition, GAO found that health centers attempt to lower emergency department use in the communities in which they operate by educating patients about services offered at health centers and by offering same day and afterhours appointments.

Health centers may also reduce health care costs by preventing unnecessary hospitalizations. A number of studies have examined "ambulatory sensitive conditions," which are conditions that potentially can be treated in an outpatient setting thus avoiding a hospitalization. These studies have found that in communities with health centers, individuals with these conditions were less likely to be hospitalized. Health center patients enrolled in Medicaid were also less likely to be hospitalized and less likely to have an emergency room visit, relative to Medicaid beneficiaries who did not use health centers.

Researchers have also found that patients who receive the majority of their care at health centers have lower medical costs (41% lower on average) than those who receive the majority of their care through another source. Another study found the difference to be 24%, while a North Carolina study found that health center users' annual health care spending was 62% less than similar patients (matched by demographic characteristics and health status) who were served in other outpatient settings. Regardless of the magnitude of the difference, there appears to be consensus that health centers provide less costly health care than other outpatient settings.

The reasons that health centers provide less costly care are debated. The authors of the North Carolina study suggest that health centers provide health care at a lower cost because they can offer discounted services through federal programs (see " Which Federal Programs Are Available to Health Centers? "). They also suggest that health centers may provide less overall costly care because their providers work on a salaried basis, and so do not have financial incentives to order additional tests or procedures. In other outpatient settings this may not be the case because providers generally work under a fee-for-service model where they may receive additional remuneration for providing more services. Other studies note that differences in the cost of services (i.e., the cost for a particular procedure or visit) do not explain the difference because health centers are paid the FQHC rate, which should likely be comparable to, or higher than, the rates reimbursed in other outpatient settings. Given differing explanations of how health centers may reduce health care costs, the researchers state that health center costs may be lower because they avert more costly emergency room visits, specialty care, or hospital stays.

Access to Health Care

Health centers aim to provide care to underserved populations and, in doing so, may increase health care access. By definition, health centers are located in areas with few providers including rural and inner city areas. These locations may provide access for populations that are otherwise underserved, for example, because of geography or income. Health centers also serve a more diverse population than do office-based physicians; results from one study indicate health center patients were more likely to be Hispanic or African American. Health centers may also increase access for specific racial and ethnic groups. For example, one study found that health centers increase health care access for Asian Americans, Native Hawaiians, and other Pacific Islanders. Some research has suggested that health centers may reduce health disparities because they provide care to a population that might otherwise have difficultly accessing health care.

Relative to other providers (such as office-based physicians) health centers are more likely to accept new patients and patients who are unable to pay for services (i.e., charity patients). Health center patients are also more likely to be enrolled in Medicaid or CHIP. As noted, health centers are required to coordinate with Medicaid and CHIP plans and are required to accept all patients regardless of their insurance status or ability to pay. Some researchers have found that private providers may not accept Medicaid patients because of the program's administrative requirements or low reimbursements rates. Given this possibility, health centers may provide access to Medicaid and CHIP patients who would otherwise have difficulty finding care.

Quality

Recent evaluations have compared the quality of care provided at health centers to that provided in physician offices. One study examined 18 quality measures and found that health centers performed better on 6 measures (related to treatment for congestive heart failure, coronary artery disease, depression, and screening), no differently on 11 measures, and worse on 2 measures (related to diet counseling for at risk adolescence). This was observed despite the study's finding that health centers treat a population with higher rates of comorbidities that may make it more difficult to provide care that meets the criteria required by the quality measures examined. Other studies have examined how health centers manage chronic conditions; for example, one study found that health centers that implemented quality improvement teams to manage asthma succeeded in reducing hospitalizations and emergency department visits due to asthma.

Another study compared the quality of health center care to that of Medicaid managed care organizations (MCOs) on selected quality measures, including diabetes and blood pressure control. The study found that there were two groups of health centers: those that exceeded Medicaid MCOs in the selected quality measures (called "high performing health centers") and those that were below the Medicaid MCOs (called "low performing health centers"). The researchers found that more health centers were considered "high performing" (12%) and that relatively few health centers (4%) were considered "low performing." The authors observed that there were differences in the population served by high- and low-performing health centers and that it is possible that these population differences resulted in the quality differences observed. Specifically, "low performing health centers" were more likely to serve individuals who were uninsured or homeless and had less revenue from Medicaid. There were also geographic differences in the quality of health center with "high performing" health centers mostly located in California, New York, and Massachusetts and with "low performing health centers" more often located in southern states.

Which Federal Programs Are Available to Health Centers?

Section 330 grants, on average, cover approximately one-fifth of the cost of operating a health center; the federal government provides other assistance—for example, provider recruitment and financial assistance—that may support individual health center operations. To assist with operations, health centers may employ members of the National Health Service Corps (NHSC), a program that provides scholarships and loan repayments in exchange for a period of service at a health center. The federal government also provides financial support to health centers. For example, it designates health centers as Federally Qualified Health Centers (FQHCs), thereby making these facilities eligible for higher Medicare and Medicaid reimbursement rates. Medicaid is the largest source of reimbursements, providing nearly 39% of all revenue for the health center program (see Table 4 ). The amount received by an individual health center varies by the percentage of the patient population that is enrolled in Medicaid; however, the NACHC estimates that the average health center receives 38.1% of its revenue from Medicaid reimbursements. Health centers are also eligible for discounted prescription drugs and vaccines, and may also receive additional support from grants and loans offered through other federal programs.

National Health Service Corps Providers

Health centers are automatically designated as health professional shortage areas (HPSAs) and are therefore eligible for National Health Service Corps (NHSC) providers. The NHSC provides scholarships or loan repayments to health professionals working at specific facilities in HPSAs. About half of Corps members serve in health centers, making the program an important mechanism for health centers to recruit providers. In addition to the NHSC, some states may operate loan repayment programs for health professionals providing care in state designated shortage areas.

J-1 Visa Waivers

Health centers may also be able to obtain providers temporarily through special waivers for J-1 visa physicians. In general, foreign medical graduates who entered the country on a J-1 student visa must return to their home country for two years after they have completed their medical training (medical school and residency). J-1 visa waivers permit the two year foreign residency period to be waived if the J-1 visa holder practices primary care in a HPSA. Because health centers are designated as HPSAs, a number of centers may rely on this program to recruit physicians.

Federally Qualified Health Center Designation95

Health centers are eligible to be designated as Federally-Qualified Health Centers (FQHCs), but must enroll as a provider in the Medicare and/or Medicaid programs to receive the higher reimbursement rates for services provided to patients enrolled in these programs. This higher reimbursement rate is an important source of health center revenue because more than one-third of the patients seen at health centers are enrolled in Medicaid. Specific FQHC Medicare and Medicaid reimbursement methodology, including recent payment changes, are described in Appendix B .

340B Drug Pricing Program100

Federal health centers are eligible to participate in the 340B Drug Pricing program, which requires drug manufacturers to provide drug discounts or rebates to 340B eligible facilities. The program is free for health centers and provides drugs at discount prices—ranging from 13% to 17% below average manufacturer price depending on the type of drug. HRSA reports that 340B eligible facilities, between FY2013 and FY2014, will receive an estimated $3 billion in drug discounts through the program.

Vaccines for Children Program102

Health centers are eligible to participate in the Vaccines for Children Program (VFC), which provides vaccines for low income children who may not be vaccinated because of costs. The program is administered by the Centers for Disease Control and Prevention (CDC) and partially funded by Medicaid. The CDC buys the vaccines and distributes them to health departments that, in turn, distribute them to VFC providers including health centers. VFC provides free vaccines to Medicaid enrolled children and VFC eligible children (those who are uninsured, underinsured, or those who are American Indian or Alaska Native). Health centers are a VFC eligible provider, and provide vaccinations as part of their mission to provide primary and preventive services. The VFC program enables health centers to provide these vaccines at a lower cost to the patients and to the health center.

Federal Torts Claims Act Coverage

Health center employees and board members do not need to carry medical malpractice coverage because they are covered under the Federal Tort Claims Act (FTCA). Under the FTCA, health center employees and contractors cannot be sued for medical malpractice for care they provided that was within the scope of their health center employment. According to HRSA, in FY2012, 107 claims were paid through the FTCA program totaling $68.1 million. This program provides financial support to health centers because the center would otherwise have to pay for this coverage and would be responsible for payment and rate increases that may accompany claims made against health center providers.

Ryan White HIV/AIDS Treatment Grants107

Health centers are eligible to receive grants authorized under parts A and C of the Ryan White AIDS program. Part A authorizes grants for primary care, access to antiretroviral therapies, and other health and supportive services. These grants are awarded to certain metropolitan areas and are used to provide care for low-income, underserved, uninsured, or underinsured individuals living with HIV/AIDS. Part C grant funds are awarded to entities to provide medical services such as testing, referrals, and clinical and diagnostic services to underserved and uninsured people living with HIV/AIDS in rural and frontier communities.

Other Federal Grant Programs108

Health centers are eligible to apply for a number of federally funded grant programs including programs that seek to improve rural health and health care, increase mental health and substance abuse services availability, provide services to high-risk pregnant women and their infants, increase health professional training at health centers, and increase access to family planning services for low income families. The majority of these programs are funded by discretionary appropriations and are competitive grant programs authorized in the PHSA. Programs specific to rural areas may also be administered by the U.S. Department of Agriculture (USDA) and are authorized in other acts. For example, health centers in rural areas may be eligible for USDA programs that may assist facilities with acquiring equipment or space through loan guarantees and with acquiring broadband access. Health centers may also use General Services Administration resources to acquire real estate and dispose of property and may use the Department of Housing and Urban Development's insurance program to finance facility repair and improvement.

Issues for Congress

Health centers face a number of issues that may be of concern to Congress. These include (1) the role of health centers in health insurance expansions under the ACA, (2) the adequacy of the health center workforce, and (3) financial challenges that health centers may face. These challenges may also be interrelated. For example, health centers may be affected by the mandatory budget reductions that may be required as part of the Budget Control Act ( P.L. 112-25 ), and such budget reductions may impact the ability of health centers to provide access to care for the newly insured when the ACA is fully implemented. This section briefly summarizes these issues and discusses how some ACA changes may alleviate or exacerbate health center concerns.

Health care access has traditionally been an issue of congressional concern. For example, GAO, at congressional request, has examined Medicare and Medicaid beneficiary access to health care providers. In addition, one of the purposes of ACA Title V was to improve access to and the delivery of health care services for all individuals, particularly low income, underserved, uninsured, minority, health disparity, and rural populations. The health workforce and its role in providing access to traditionally underserved populations has also been an area of congressional interest. For example, one of the four mechanisms that Title V of the ACA included to improve health care access was to "increase the supply of a qualified health care workforce." The title also reauthorized a number of programs in Titles VII and VIII of the PHSA, both of which focus on the workforce.

Congress, through the appropriations process for the health center program and for programs that support health centers, has an interest in the financial circumstances that health centers face. Congress may also be interested in how deficit reduction efforts and other policy changes (for example, changes in Medicare and Medicaid payments or eligibility) may affect the health center program and the financial circumstances of individual health centers. Finally, Congress may consider program changes—such as making changes to granting preference or program requirements—as a way of addressing some of the challenges that health centers face.

Health Centers and Health Insurance Expansion in the ACA

The ACA aims to expand insurance coverage to the uninsured, which may have a number of effects on health centers. Specifically, the law aims to reduce the number of uninsured by expanding the Medicaid program and by providing subsidies for certain low-income individuals to purchase health insurance coverage. These health insurance expansions may increase the number of health center patients and may increase reimbursements received for providing this care. Although health centers are available to the uninsured and to Medicaid patients prior to the full implementation of the ACA, patients are required to pay for services based on their income (see " Fee Schedule Requirements "). Individuals who obtain private health insurance or Medicaid coverage under the ACA may have lower out of pocket costs for services received at health centers. These lower costs could increase the number of health center patients. There is also evidence that individuals use more health services after obtaining insurance coverage. If this occurs after the ACA is implemented, it would also increase health center use. Evidence from Massachusetts, which implemented health insurance expansions similar to those included in the ACA, suggests that health center use will increase after implementation. Massachusetts health centers reported that their patient case load increased by 7% after the state's health insurance expansions were implemented. The ACA health insurance and Medicaid expansion, by potentially increasing the health center patient base, may also strain health centers' capacity to provide services. These changes may affect health care access in general and health care access for Medicaid beneficiaries in particular. This section discusses the potential impacts of Medicaid and private insurance expansion on health centers.

Health Centers and Medicaid Expansion

As noted, Medicaid beneficiaries may seek care at health centers because they are required to accept Medicaid patients. In contrast, some private providers may not accept Medicaid because of low reimbursement rates or administrative requirements. The ACA aims to increase health insurance coverage, in part, by expanding Medicaid enrollment. However, under the United States Supreme Court's decision in National Federation of Independent Business v. Sebelius , states have the option to implement the Medicaid expansion, and some state governors have indicated that they will not to do so. This state variation in Medicaid eligibility will affect health center patients and the finances of the health centers where they seek care. Health centers may benefit if their currently uninsured patients enroll in Medicaid eligible because they would be able to bill Medicaid for the services they provide to these patients. In general, health centers use sliding scale fees to serve uninsured patients and may supplement these patient payments with grant or other funds. An increased patient share enrolled in Medicaid would mean higher collections from Medicaid, which is currently the largest source of health center reimbursements.

One study attempted to quantify the effect of Medicaid expansion on health centers. This study estimated that under a full Medicaid expansion, an estimated 5 million health center patients would have been eligible for Medicaid; however, given that some states have opted out of the Medicaid expansion, they expect that only 4 million of the estimated 5 million health center patients will become Medicaid eligible. This would leave 1 million health center patients not eligible for Medicaid. The authors estimate that health centers in states where the state intends to expand its Medicaid program will see more than $2 billion in additional reimbursements. These increased reimbursements are expected to allow these centers to expand or improve services. It is also possible that the increased revenue base may improve the quality of care that health centers provide. Conversely, health centers in states where Medicaid is not expanded will not realize this additional revenue and will continue to use grant funds or other sources to provide care to the uninsured. Given that current grant funding does not equal the cost of providing services to uninsured patients, health centers located in states that do not expand their Medicaid program may be strained to provide services to the population that remains uninsured. The extent to which this will occur and its effect on individual health centers is not yet known and will vary by state and by health center.

Health Centers and ACA Private Insurance Expansions

Health centers are also a source of care for the uninsured, some of whom may obtain private insurance coverage under the ACA. Some suggest that once health center patients who were previously uninsured gain insurance coverage, they may seek private providers, which may in turn reduce the health center service population. However, evidence from Massachusetts, which has already expanded insurance coverage, does not suggest that this may occur. Researchers found that Massachusetts health centers retained their patients after Massachusetts's insurance expansion was implemented. Should this occur after the ACA insurance expansions, it would likely benefit health centers because more health center patients would likely have services reimbursed by private insurance, which should increase health center revenue. Experts project that 9.2% of health center patients will be covered by a private insurance plan offered through the new health insurance exchanges and that this percentage should grow over time.

The ACA also requires that private insurance policies offered through the newly created exchanges include access to "essential community providers"—providers that serve predominately low-income and medically underserved individuals—including health centers. This means that health insurance plans offered through the exchanges must have providers in their plan's networks that serve the population that health centers typically serve. It does not require that these insurance plans offer health center contracts. This distinction concerns some health centers; they fear that their current patients will enroll in exchange plans where health centers are not part of the provider network. If this were to occur, health centers would not be able to receive reimbursements for these patients, which might create financial strain for the health centers or require health center patients to choose different providers. In addition to concerns about being included in exchange plans, health centers are also concerned that they may not receive reimbursement rates high enough to cover the cost of care for patients enrolled in these plans because they believe that they may have little leverage to negotiate rates.

The impact of the ACA on the health center patient base and revenue is not yet known. Furthermore, as will be discussed below, health centers face other challenges that may make it difficult to provide care to an expanded population. For example, an expanded patient base could strain health centers' capacity to provide care because some health centers have provider shortages. It is also possible that an expanded patient base may exacerbate some of the financial challenges that health centers face as reimbursements may not cover the cost of providing care and some patients will remain uninsured.

Health Center Workforce

One of the major challenges that health centers face is employing and retaining health care providers. The National Association of Community Health Centers (NACHC)—the advocacy group for health centers—estimates that, in 2008, health centers had 1,800 too few primary care providers (physicians, nurse practitioners, and certified nurse midwives) and 1,400 too few nurses. The organization further estimates that staffing needs will increase with health center expansion resulting in a shortage of between 15,000 and 19,000 primary care providers and between 11,000 and 14,000 nurses in 2015. Health centers may have challenges recruiting and retaining staff because they are located in rural and remote areas, because there are generally declining numbers of primary care providers, and because private practice options are generally more lucrative for providers. Health centers have traditionally relied on the National Health Service Corps (NHSC) to recruit providers; this section discusses some of the advantages and disadvantages of that strategy. The section also discusses the advantages and disadvantages of a new ACA-authorized program—teaching health centers—to increase provider training at health centers.

National Health Service Corps Providers

To lessen the health center provider shortages, the federal government makes NHSC providers available to health centers. The ACA includes mandatory funding for the NHSC from FY2011 through FY2015. This money was used to expand the program in FY2011 but has since been used in lieu of the program's discretionary appropriation. That mandatory funding has made up the entirety of the NHSC's appropriation since FY2012 has some program advocates concerned about the program's funding after these mandatory appropriations end in FY2015. The President's Budget for FY2015 requests both new discretionary funding for the NHSC and a new $8.1 billion mandatory funding source that would begin in FY2015 and continue to FY2020. As more than half of all NHSC providers fulfill their service commitment in health centers, this program is viewed as many as a central component of the health center workforce, and the future funding of the program may be a concern for health centers. In addition to future funding uncertainty, there may be concerns that reliance on the NHSC may create instability in the health center workforce because the NHSC offers scholarships and loan repayments in return for a service commitment for a defined period of time. Some NHSC providers will likely stay beyond their service commitment; however, not all will, which could mean high turnover among health center providers. This can lead to discontinuity in care, and additional costs for health centers because of the need to continuously recruit and train providers.

Teaching Health Centers

The ACA authorizes a new program to increase medical residency training at health centers, which may help health centers recruit physicians, but may also challenge the health centers that operate these programs. The ACA authorizes teaching health centers: medical residency training programs that are located at outpatient facilities including health centers. Prior research has found that medical residents who train at health centers are more likely to be employed at health centers after they complete their training. Teaching health centers may help health centers recruit physicians; however, health centers may face a number of challenges when operating residency programs. Case studies of pre-ACA teaching health centers found that operating a training program requires provider time and may reduce the number of patients a health center can see, thereby reducing health center reimbursements. These case studies also found that health centers do not receive graduate medical education payments in amounts that are high enough to support the full costs of the resident training and supervision. These case studies did show some benefits from operating training programs. For example, teaching health centers were, as the researchers expected, an important recruitment tool for health centers. These programs also connected non-primary care providers (i.e., medical specialists) with health centers because some specialists may supervise health center residents in other settings. The involvement of medical specialists in the health center may expand available health center services.

The ACA appropriates funding for teaching health center graduate medical education payments through FY2015. This funding may assist health centers in operating residency training programs, because programs have stated that graduate medical education payments are generally not high enough to support the cost of residency training. However, these payments are time-limited (through FY2015). In addition, although the ACA authorizes funding for grants to develop teaching health centers, no funds have been appropriated. Given that funding for teaching health center graduate medical education payments is limited and uncertain, the ACA's teaching health center program may have limited effects on health center provider recruitment and retention.

Financial Considerations

Individual health centers may have a number of financial considerations including current and future program appropriations which, in turn, affect the size of the individual health center's grant and the individual center's ability to receive continued grant funding, the impact of federal deficit reduction efforts on health centers, changes in state funding available for health centers, the costs of implementing electronic health records, and the potential effects of ACA care coordination efforts on health centers. Between 2000 and 2014, the health center program's appropriation increased; however, given recent focus on deficit reduction, it is unclear whether these expansions will continue. Whether the health center program should be expanded or contracted is difficult to assess. Further, assessments about the appropriate size of the health center program may also change depending on ACA implementation, economic conditions in general, and a number of other factors. Given these challenges, it is beyond the scope of this report to assess whether the size of the health center program is appropriate. Instead, this section discusses changes in federal funding for health center program and state funding for individual health centers and how the ACA may affect individual health center finances. Specifically, state and local funding is a large source of support for health centers (see Table 4 ), although the amount of funding an individual health center receives varies. A number of states face fiscal challenges and have reduced their financial support of health centers, but the ACA may provide additional support to health centers in the form of increased reimbursements for health services provided and reimbursements for care coordination, which many health centers currently provide, but without reimbursement.

Health Center Appropriations and the Community Health Center Fund

The ACA established the CHCF, but it is unclear whether this will increase health center appropriation levels. As shown in Table 3 , the health center program has grown in the past decade. This growth included funding increases for individual centers and funding for more centers. ARRA continued these expansions, as did the CHCF. As discussed, the ACA appropriated CHCF may be used in place of the amounts that had been appropriated for the health center program through the annual appropriations process. To a certain extent this has occurred since FY2011 when, as part of deficit reduction efforts, funds from the CHCF monies were used as part of the health center appropriation. Advocates note that this phenomenon resulted in fewer New Access Point grants (i.e., grants to establish new health centers) being awarded as HRSA used appropriated funds to support health centers already in existence including those created using ARRA funds. This may indicate that the federal government's focus has shifted to maintaining the program—rather than continuing program expansions—as congressional concern has increasingly focused on deficit reduction. However, the FY2014 appropriations law indicates that Congress may be attempting to balance the competing priorities of maintenance and expansion. Specifically, the FY2014 appropriations law required that funds be used to increase grant amounts (called base grant adjustments) and that funds also be used to award new access point and expanded medical services grants.

Another concern that some advocates have raised is that the time-limited CHCF makes up a large fraction of the overall health center program budget (60.5% in FY2014). Consequently, some are concerned that after the CHCF ends in FY2016 overall funding for the program could decrease significantly unless the CHCF is extended or its funds are replaced from another source. Such concerns may be mitigated by the President's Budget Request for FY2015, which requests a new mandatory funding source for health centers that would begin in FY2016, continue through FY2018, and would provide $2.7 billion annually (or $8.1 billion total).

Health Center Appropriations and the Budget Control Act

Health center appropriations were also affected by annual spending reductions triggered by the Budget Control Act (BCA, P.L. 112-25 ), beginning in FY2013. Although the reduction of the CHCF allocated to community health centers and migrant health centers was limited to 2%, the discretionary health center appropriation was subject to the full percentage—5.0% —of the sequester. As a result more than $60 million was reduced from the program. In addition, the sequester reduced the budgets of some of the programs that provide financial or in-kind support to health centers, such as the NHSC and the Ryan White HIV/AIDS Program. In FY2014 and FY2015, the CHCF will be reduced by 2% for the amount allocated to community health centers and migrant health centers and by 7.2% in 2014 and 7.3% in 2015 for the CHCF funds allocated to health centers for the homeless and health centers for residents of public housing.

Health Center Funding and ACA Care Coordination Initiatives

The ACA may provide additional reimbursements to support care coordination. Health centers may coordinate care in ways that reduce health care costs to the system overall, but may have little or no monetary benefit to the health center doing the care coordination. For example, GAO found that health centers employ a number of strategies to reduce emergency department use, which, as noted above, is more expensive than care provided in a health center. Reduced emergency department use may yield savings to third party payers or hospitals, but would not yield savings to health centers. It is also possible that health centers may employ strategies such as care coordination and case management, which may not be reimbursed by third party payers. Some health centers are concerned about sustaining these efforts, and funding constraints may make it more difficult for health centers to provide these services. However, the ACA may make it more feasible for health centers to sustain these efforts because the law includes programs that may provide additional reimbursements for care coordination activities. Specifically, health centers are eligible for increased reimbursements under Medicare to increase primary care and care coordination and may participate in accountable care organizations that aim to increase care coordination across health providers.

Health Center Funding and State Funding Availability162

As discussed above, future federal funding for health centers is in flux; in addition, a number of states are reducing their funding for health centers because of state-level fiscal constraints. As shown in Table 4 , state funding is an important source of revenue for health centers; however, state funding available for health center varies by state and is declining. Specifically, in November of 2010, the NACHC, in a letter to the Secretary of HHS, noted that state funding for health centers had declined 42% since 2008. The organization also noted that some state policymakers have argued that less state funding is needed for health centers because of the federal government's investment in the program through ARRA and ACA appropriations. In contrast, advocates argue that such state funding is still needed and that these state funding reductions coupled with the uncertainty of the CHCF may mean reductions in the services that health centers can provide. A November 2011 report indicates that states continue to reduce their funding for health centers. The report surveyed state funding levels for state FY2012 and found a 15% decline from state FY2011. In addition, some states that have historically supported health centers have, because of state budget concerns, withdrawn this support. Advocates argue that these recent declines in state funding for health centers may continue and, when coupled with decreasing federal appropriations for health centers, may strain health center finances.

As Medicaid is a joint federal and state program, states are providing support to health centers through reimbursements that health centers receive for providing services to Medicaid patients. Health center program advocates argue that much of the reduced health care costs attributed to health center usage are realized as Medicaid (such as through reduced emergency department use), which would justify states providing separate—non-Medicaid—funding to health centers because states will realize these investments as Medicaid cost savings. Despite this, states may choose to limit their separate funding for health centers or may choose to augment their support of health centers using Medicaid funds, which will be partially matched by the federal government.

Health Centers and Cost of Electronic Health Records165

HRSA awarded grants to networks of health centers to acquire and implement electronic health record systems (EHR). These five-year grants began in 2007 and were intended to enable health centers to be able to meet the requirements for CMS's meaningful use program. Meeting such requirements entitles health centers to incentive payments from the Medicare or Medicaid programs. The HHS Office of the Inspector General examined EHR adoption by health centers that had received grants. They found that some health center EHR grantees had difficulty meeting the meaningful use requirements, but most of the grantees (72%) were able to do so. They also found that approximately 76% of grantees reported that they were concerned about the costs of maintaining EHR systems (particularly after the time-limited grant had ended). Some grantee centers, like other health providers who have implemented EHRS, were also concerned that the EHR system had decreased provider productivity and thereby reduced the heath center's revenue. Given the financial constraints under which some health centers operate, the need to acquire and maintain EHR, and the potential loss of CMS incentive payments for failing to meet these requirements may be another source of financial strain these facilities.

Concluding Observations

Health centers serve a predominantly low-income medically underserved population with limited or no access to health care. Research has shown that health centers improve health care access and improve health for the underserved populations they target. In doing so, health centers may reduce the use of more costly emergency department services thereby reducing health care costs. The federal government supports health centers through the health center program that awards grants to plan, operate, and expand health centers and through programs that provide recruitment and financial incentives including increased reimbursements through the Federally Qualified Health Center (FQHC) designation. Health center appropriations have increased over the past decade, but it is unclear whether these increases will continue. A number of issues facing both the health center program and individual health centers may be of concern to Congress. On the program side, Congress may be concerned about the program's appropriation level and the impact of federal deficit reduction efforts on the health center program. For individual health centers, Congress may be concerned about provider vacancies and the role that individual health centers may play in providing health access when the ACA is fully implemented.

Appendix A. Other Federal Programs that May Provide Primary Care to the Underserved

The federal government supports facilities that provide primary care to low-income or otherwise medically underserved populations through a number of facilities that are similar to health centers, but are not authorized in PHSA Section 330. For example, the ACA authorized funding for school-based health centers and nurse-managed health clinics. Both of these facilities serve underserved populations, but have different requirements than facilities authorized in PHSA Section 330. The federal government also provides support for facilities that provide care to targeted populations such as American Indians, Alaska Natives, and Native Hawaiians, facilities located in rural areas, facilities that provide mental health services, and facilities that provide free care. This appendix describes these types of facilities, their authorization, and program requirements.

School-Based Health Centers

School-based health centers (SBHCs) are facilities located on or near school grounds that provide age-appropriate comprehensive primary health care services to students regardless of their ability to pay. SBHCs may be located at public, private, charter, or parochial schools and must open, at a minimum, during school hours. Prior to the ACA, HRSA funded SBHCs through its Section 330 appropriation. The ACA authorized separate SBHC grants in Section 339Z-1 of the PHSA and appropriated $200 million ($50 million annually) from FY2010 to FY2013 to support grants for SBHC construction and renovation. Although the ACA authorized grants for SBHC operation, funding has not yet been appropriated for these grants. Despite the lack of an explicit SBHC operating grant program, some Section 330 grantees may operate SBHCs. HRSA estimates that there are 1,152 SBHCs.

Nurse-Managed Health Clinics

Nurse-Managed Health Centers (NMHCs) are centers that provide comprehensive primary care and wellness services to underserved populations where nurses provide the majority of health services. NMHCs are required to serve the entire population in the area in which they are located and must have an advisory committee similar to those required for Section 330 health centers. NHMCs provide wellness services, prenatal care, disease prevention, management of chronic conditions like asthma, hypertension and diabetes, and health education. Some also provide dental and mental health services. ACA authorized grants to support NMHCs in PHSA Section 330A-1. In FY2010, HHS awarded $15 million to provide three years of support for 10 NHMCs. Grantees were required to submit a sustainability plan for operation after the federal grant period is complete in 2013. No funding has been awarded since FY2010.

Community Mental Health Centers

Community mental health centers (CMHC) are licensed facilities that provide mental health services. These facilities are required to provide mental health services that are tailored to the needs of children and adults (including the elderly) who have a serious mental illness. These facilities are also required to provide services to individuals that have been discharged from inpatient treatment at a mental health facility. Among the required services, CMHCs must provide emergency services; day treatment or other partial hospitalization services; psychosocial rehabilitation services; and screening for admission into state mental health facilities. The ACA required that CMHCs provide less than 40% of its services to Medicare beneficiaries.

CHMCs received funding from Substance Abuse and Mental Health Services Administration (SAMHSA) block grants. These include SAMHSA substance abuse prevention and treatment block grants and community mental health services block grants. They are also eligible for HHS grants awarded through the Social Service Block Grant. CMHCs also receive reimbursements from Medicare and Medicaid for covered services provided to beneficiaries enrolled in these programs.

Native Hawaiian Health Care

The federal government supports the Native Hawaiian Health Care System (NHHCS), which is composed of five grantees and the Papa Ola Lokahi, a consortium of health care organizations that provide primary care, health promotion, and disease prevention services to Native Hawaiians. This population often faces cultural, financial, and geographic barriers to accessing health care services. The NHHCS was originally authorized under the Native Hawaiian Health Care Act of 1988 ( P.L. 100-579 ), which was reauthorized through FY2019 in the ACA. The NHHCS is not a grant program under Section 330 of the Public Health Service Act, but the system receives funding through the health center appropriation. In FY2011, NHHCS provided medical and enabling services, such as transportation and translation services, to more than 8,400 people.

Tribal Health Centers

Indian Tribes (ITs), Tribal Organization (TOs), and Urban Indian Organizations (UIOs) may receive funds from the Indian Health Service (IHS) to operate health centers for American Indians or Alaska Natives. Although tribal health centers may be similar to health centers funded under Section 330 grants they are not subject to Section 330 requirements. For example, they are not required to provide services to all individuals in their service area. They are also not required to seek payments or reimbursements on behalf of the clients they see because IHS provides services to all eligible American Indians and Alaska Natives free of charge. Tribal health centers—those operated by an IT, a TO, or a UIO—may be designated as Federally Qualified Health Centers (FQHCs) and receive the Medicare and Medicaid FQHC payment rate (See Appendix B ).

ITs, TOs, and UIOs may also apply for and receive funds under Section 330 of the PHSA; however, should an entity receive Section 330 funds it would be subject to all Section 330 requirements (i.e., would be require to provide services to non-American Indians and Alaska Natives). Tribal health centers that receive Section 330 grants are also required to ensure that funds received from IHS are only used to provide services to IHS-eligible individuals.

Rural Health Clinics

Rural health clinics (RHCs) are outpatient primary care facilities located in rural and medically underserved areas. These facilities receive higher Medicare and Medicaid payments—similar to the FQHC payment rate—for services provided to beneficiaries enrolled in the Medicare and Medicaid programs. RHCs are similar to health centers except that they (1) do not receive federal grants, (2) may be operated by for-profit entities, (3) are not required to provide services to individuals regardless of ability to pay, and (4) are not required to offer a sliding scale fee schedule.

Free Clinics

Free clinics are outpatient facilities that provide medical, dental, and behavioral health services to underserved populations that are primarily uninsured. Free clinics are tax-exempt organizations that provide health care to individuals regardless of their ability to pay and are not permitted to charge for services. In general, free clinic funding comes from donations (both monetary and in-kind), religious groups, foundations and corporations. There are more than 1,200 free clinics that provide services to a population that is similar to that served by health centers. Free clinics do not receive funding from HRSA, but may participate in the Free Clinics Medical Malpractice Program administered by HRSA that provides liability coverage to health care providers at free clinics.

Federally Qualified Health Center (FQHC) Look-Alikes

FQHC look-alikes are facilities that meet the criteria to receive a health center grant, but do not receive a grant because Section 330 funding is not available. The FQHC look-alike program was authorized in 1990 to support the demand for new health centers. HRSA and CMS can designate certain facilities as "FQHC look-alikes," making these facilities eligible for certain federal programs (e.g., the NHSC and the 340B drug discount program) available to health centers and for the FQHC payment rate. To be designated as an FQHC look-alike, a facility submits an application to HRSA, the agency reviews the application and then recommends to CMS which facilities should be designated as FQHC look-alikes. As of November 2013, HRSA reported that there were 316 FQHC look-alikes.

Appendix B. Medicare and Medicaid Payments and Beneficiary Cost Sharing for Health Center Services

All health centers can be designated as federally qualified health centers (FQHCs) upon enrolling as a provider in the Medicare and Medicaid programs. The FQHC designation makes Section 330 grantees (among others, see text box) eligible for Medicare and Medicaid reimbursements rates that are generally higher than the reimbursement rates for comparable services provided in a physician's office. The FQHC designation was created to ensure that Medicare and Medicaid reimbursements cover the costs of providing services so that Section 330 grant funds are not used to subsidize these costs. This appendix describes Medicare and Medicaid payments to FQHCs and ACA-required changes to Medicare FQHC payments.

Medicare Payments to Health Centers

Health centers are paid an all-inclusive payment rate for most services provided to Medicare beneficiaries. It is intended to reflect the cost of all services provided to a beneficiary during a "covered visit" regardless of the specific services provided (see text box). The all-inclusive payment rate is calculated by dividing the total estimated allowable costs (with certain limits that take into account the reasonable costs for providing a service, productivity, and payment limits) by the number of total number of visits for services (see text box for definition of visits). The rate includes services provided by physicians and other providers and the supplies used to provide these services. The all-inclusive rate does not apply for certain preventive services including pneumococcal and influenza vaccines and their administration; instead these services are billed separately and reimbursed at 100% of the reasonable cost of providing the service. The all-inclusive payment rate also does not include certain diagnostic tests such as x-rays and laboratory tests, which are billed separately. FQHCs are reimbursed based on estimated costs; this payment is then adjusted at the end of the year to account for the actual costs of providing services. These reconciled amounts are subject to payment limits, which are updated each year by a measure of price inflation. The all-inclusive payment rate is also updated annually and is adjusted to take into account urban and rural differences in the costs of providing care.

Medicare beneficiaries are subject to different deductible and cost sharing requirements for services provided at FQHCs. Specifically, the Medicare Part B deductible does not apply for FQHC services. Beneficiaries—with some exceptions —must pay the 20% copayment for Medicare services.

ACA Payment Changes

Recent studies have indicated that Medicare reimbursements may not be sufficient to cover the costs of providing services; therefore, the ACA requires changes to how FQHCs are paid for services provided to Medicare beneficiaries. Specifically, the ACA required that Medicare develop a prospective payment system (PPS) for FQHCs that would eliminate the all-inclusive payment rate and may better align Medicare payments with the cost of providing services. To implement the new PPS system, CMS issued a proposed rule that proposes to establish a national encounter-based rate for all FQHCs. This encounter rate would be calculated using Medicare cost report and claims data to assure that the rate reflects the cost of providing services. The rate would also be adjusted for several factors including geographic differences costs, more intensive services that may be provided during the annual wellness visit, and more time or services that may be provided during a Medicare beneficiary's first visit to an FQHC. The new rule would also eliminate payments for multiple visits on one day, which CMS determined are rare among Medicare beneficiaries who receive services at FQHCs.

The ACA also required that Medicare preventive services and the initial exam for new Medicare beneficiaries be provided without copayments. This differs from the general Medicare beneficiary copayment of 20% of the fee charged by the health center.

Mental Health Service Payment Changes

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275 ) also changed Medicare reimbursement for mental health services at FQHCs. Previously, Medicare reimbursements were limited at 62.5% of the reasonable costs for outpatient mental health services; however, this limit will be phased out by January 1, 2014.

Medicaid Payments

Medicaid uses a PPS to reimburse FQHCs for services provided to Medicaid beneficiaries. The PPS establishes a predetermined per-visit payment rate for each FQHC based on costs of services. The PPS was established based on cost report data in FY1999 and FY2000 and is updated annually for medical inflation. The state, in turn, receives the appropriate federal matching amount. States are also required to adjust PPS payment rates based on any changes in the scope of services provided at the FQHC. States are not required to use the PPS to reimburse FQHCs, but they may not reimburse an FQHC less than it would have received under the PPS. In 2011, approximately 20 states and Puerto Rico used the PPS, 12 states used an alternative payment methodology (APM) to reimburse FQHCs under Medicaid, and the remaining states used a combination of both methods. States are also required to supplement FQHCs that subcontract (directly or indirectly) with Medicaid Managed Care Entities (MCEs). These supplemental payments are supposed to make up the difference, if any, between the payment received by the FQHC from the MCE and the Medicaid payment that the FQHC would be entitled to under the PPS or the APM. The ACA did not include changes in Medicaid FQHC reimbursement policy.