Health centers are private, nonprofit community-based organizations or, less commonly, public organizations such as public health department clinics. Section 330 of the Public Health Service Act, which authorizes the Health Center Program, requires health centers to provide a comprehensive set of primary health care services, including enabling services--such as language translation and transportation--that facilitate access to health care. Among other things, health centers are also required to have a sliding fee scale based on a patient's ability to pay and to be governed by a community board of which at least 51 percent of the members are patients of the health center. In 2010, nearly 93 percent of all health center patients had incomes at or below 200 percent of the federal poverty level, and nearly 72 percent had incomes at or below 100 percent.insured by Medicaid, and nearly 38 percent were uninsured. See figure 1 for more information on insurance coverage of health center patients. HRSA revised its New Access Point award process for fiscal year 2011 to increase the emphasis on need and on the designated special populations. As a result of these changes and HRSA's receiving less fiscal year 2011 funding than it had anticipated, a high proportion of grants went to health centers serving the designated special populations. HRSA revised the New Access Point grant application and award process for fiscal year 2011. According to HRSA officials, it did so to better target resources to communities with high need because it found that the previous process did not adequately factor need into the application score, and because past applicants and grantees expressed concerns about this issue. One step HRSA took was to increase the need score from 10 to 30 points, out of a maximum of 100 base points. (See table 2.) Twenty of the 30 points are available for applicant responses provided on an attached form that documents barriers to access to care and various health indicators in the proposed service area, and the remaining 10 points are available based on the applicant's narrative describing health care need. HRSA also revised its award process in fiscal year 2011 to award extra points, which HRSA calls priority points, over the maximum 100 base points to applicants seeking to serve the three designated special populations and sparsely populated areas. HRSA did this to help it continue to meet the Public Health Service Act requirements regarding these populations.applicants seeking to serve high-poverty areas to further increase the emphasis on need in the award process. This was the first time HRSA In addition, HRSA decided to award extra points to awarded such extra points, and the application guidance described how the points would be awarded, providing transparency for this aspect of the process. (See table 3.) HRSA officials applied the extra points to applicants' base scores out of 100; these adjusted scores were used to update and finalize the rank order list of all applicants. HRSA awarded from 5 to 10 extra points for serving one or more of the designated special populations, 5 extra points for serving a sparsely populated area, and up to 5 extra points for serving a high-poverty area. Health centers in the communities we studied collaborate with other providers in their service area. Health centers and other providers said they generally did not compete for patients, but we found greater potential for competition in rural areas. Health centers in the communities we studied collaborate with other providers to meet the health care needs of patients in the health center's service area. Officials we interviewed from each of the health centers described at least one collaborative relationship with another provider-- such as local hospitals and specialty care providers--to provide access to services not available through the health center. For example, officials from one of the health centers told us they collaborate with specialists such as a pediatric cardiologist, podiatrist, and ophthalmologist. In addition, officials from several hospitals said that collaborating with health centers is important because the centers help reduce the non-urgent use of hospital emergency departments. However, in some of the rural communities we studied we also found that the relationship between the health center and a nearby hospital was strained. For example, officials from a hospital in one community we studied told us that the health center did not always send the medical records of admitted patients in a timely way. HRSA has encouraged health centers to collaborate with other providers in their service area. HRSA issued a Program Assistance Letter in fiscal year 2011 that provides guidance to health centers on collaborating and establishing contractual agreements with other providers to maximize resources and efficiencies in their service area. For example, the letter includes a list of suggested resources to help health centers maximize collaboration with other safety net providers, such as the UDS Mapper tool, PCAs, and HRSA project officers, who are responsible for overseeing health centers and providing technical assistance. For fiscal year 2011, HRSA added a collaboration component to the New Access Point application scoring to encourage collaboration by health centers. The fiscal year 2008 and 2009 applicants had been required to include a written description of existing collaborative relationships with other providers and had also been encouraged to submit letters of support, but these were not scored separately. However, in fiscal year 2011, applicants could receive up to 10 points for submitting letters of support--from other providers or community organizations--and a written description of their existing and proposed efforts to establish collaborative relationships with other providers in their proposed service area. During the period included in our study, letters of support were written by, among others, neighboring health centers, local hospitals, private physicians, local government agencies, and PCAs. The letters of support generally included similar types of information--such as a description of the specific health care needs of the community and support for the applicant's efforts to care for underserved patients--regardless of the type of organization expressing support. A few letters included information about specific support the writer had provided or planned to provide to a health center, such as pediatric or obstetrical care to health center patients. PCAs often work with applicants and grantees to help them develop collaborative relationships. Officials from several PCAs told us they used applicants' requests to the PCA for a letter of support as an opportunity to assist them in developing relationships with other providers. For example, officials from one PCA told us that for the fiscal year 2011 New Access Point award cycle, they hosted over 20 town hall meetings in applicants' communities to facilitate community involvement, collaboration, and understanding of the Health Center Program. Several PCAs told us they also work with potential applicants to determine whether it would be better for them to combine efforts with an existing health center grantee or to establish a new health center. Officials from one PCA explained that it may be better for a new organization to become a satellite site of an existing organization because existing organizations already have the resources and infrastructure in place to operate a health center. Officials we interviewed identified various factors that contribute to successful collaboration between health centers and other providers. Officials from hospitals, other providers, and community groups said that leadership commitment to collaboration, community participation in developing a new health center, and other providers' understanding of the role of health centers are important factors that contribute to successful collaboration. For example, officials from one hospital and a community group in the same area noted improved collaboration as a result of a new director coming to a health center. They told us that the previous director was difficult to collaborate with and did not acknowledge the abilities of other primary care providers to serve the safety net population. These officials also said that the current relationship is much more collaborative and that the health center and hospital share a board member and a physician. In addition, officials from one PCA told us that a former state government official had, over many years, discouraged hospitals from collaborating on efforts to establish new health centers in their communities, warning the hospitals that they could lose patients to the health centers. Regarding the importance of community participation, officials from one hospital said that the hospital led the effort to develop the health center in its community, because previously physicians voluntarily provided services for low-income patients two evenings a week, and that effort was unsustainable. In the communities we studied, health centers and other providers in their service area generally do not compete for patients. HRSA and PCA officials told us that health centers typically serve patients not treated elsewhere, such as uninsured and Medicaid patients. Nationwide, 37.5 percent of health center patients are uninsured, and for the eight health centers we studied, the rate of uninsured patients averaged 30.4 percent. Similarly, Medicaid patients make up 38.5 percent of health center patients nationwide, and 35 percent in the health centers we studied. Officials from most of the PCAs we spoke with said health centers and other providers generally do not compete for uninsured patients; some also noted that other providers rarely provide care for uninsured patients. Similarly, officials from one health center told us that Medicaid patients in their area had difficulty finding other providers that would accept them. We have previously reported on the difficulties certain Medicaid patients, such as children, face in finding providers who are willing to serve them. HRSA's service area overlap policy is designed to help the agency avoid awarding grants for new delivery sites in areas where other safety net providers are already serving the population's need, and this may reduce competition between health centers and other safety net providers. The agency did not award grants to two applicants in fiscal years 2008 and 2009--one in each year--because awarding grants to these applicants would have resulted in overlap with existing providers that had the capacity to meet the needs of the area. HRSA officials told us that they did not find any significant service area overlap during the fiscal year 2011 award cycle. They also said that since the agency increased its emphasis on collaboration--and applicants have increased their outreach in their communities--it has received fewer complaints from other safety net providers about service area overlap than it received in prior years. See GAO, Community Health Centers: Adapting to Changing Health Care Environment Key to Continued Success, GAO/HEHS-00-39 (Washington, D.C.: Mar. 10, 2000). care if health centers did not offer these services, because some dentists are unwilling to serve Medicaid patients. Insurance coverage for patients served by the health centers we studied includes coverage by Medicaid, CHIP, Medicare, other public insurance (such as state insurance programs), and private insurance. receive grant funding for construction or renovations, which gives them a competitive advantage. They said the health centers might be better able to attract insured patients because of the improved facilities or might be able to attract staff because these grant funds free up resources that can be used for higher salaries. PCA and health center officials we interviewed more frequently raised concerns about the potential for competition between health centers and rural health clinics, in part because there are more similarities in the services they provide to patients in rural communities. For example, several PCA officials told us that while there is no competition between health centers and rural health clinics for serving uninsured patients, they do compete for patients with insurance, including Medicaid and Medicare. Although patients in rural areas often face access barriers because of a shortage of providers, HRSA officials said the addition of a health center to an area can increase competition for insured patients when such patients seek treatment from a health center that is more conveniently located than other providers. HRSA officials also told us that they may award grants in rural areas where there are other providers if those providers do not fully meet the needs of the safety net population. For example, existing providers may not offer a sliding fee scale or be willing to serve uninsured people. Health centers funded by HRSA's Health Center Program are a critical component of the nation's health care safety net, and New Access Point grants provide the agency with an important means for increasing access to health care for vulnerable populations--those who may have difficulty obtaining needed health care services because of financial or other limitations. To better target resources to communities with a high need for health center services, in fiscal year 2011 HRSA increased the weight of the criterion assessing the need for services in the New Access Point grant application. Certain populations--migrant and seasonal farmworkers, homeless people, and residents of public housing--are particularly vulnerable and often have specific health and access problems. In its 1996 consolidation of the Health Center Program, Congress began requiring that specific proportions of the program's funds be used to serve these populations. Over the years, HRSA has taken various actions to ensure it was meeting the required funding proportions. During its fiscal year 2011 New Access Point award process, HRSA for the first time gave extra points to applicants serving these designated special populations. Congress also requires HRSA to give special consideration to organizations serving sparsely populated areas, and in fiscal year 2011 HRSA also gave extra points to applicants serving sparsely populated and high-poverty areas. HRSA's approach of assigning these extra points--and its description in its application guidance of how the points would be awarded--increased the transparency of the grant award process compared to previous years. However, because the extra points were not sufficient to ensure that HRSA met its statutorily required funding proportion for migrant health centers, HRSA also moved applicants serving this population ahead of other applicants to ensure the required proportion was met, a step that was not specifically described in the application guidance. Although HRSA had used such an approach before, the effect in fiscal year 2011 was magnified by the combined effect of the reduction in program funding and HRSA's need to increase the share of funding awarded to the designated special populations as a result of not applying the proportions when awarding grants with Recovery Act funds in fiscal year 2009. HRSA has periodically needed to take actions to meet its statutory obligations and may face such a situation in the future. Evaluating the effectiveness and transparency of the New Access Point grant award process it used most recently could help HRSA identify lessons learned and possible improvements that it could apply to future funding cycles to ensure the most effective use of limited Health Center Program resources. To ensure that in the future HRSA can effectively target limited Health Center Program resources through a transparent grant award process, the Secretary of HHS should direct the Administrator of HRSA to evaluate the fiscal year 2011 New Access Point grant award process to identify lessons learned and potential improvements for future funding cycles, including consideration of (1) the effect of the change in the need score on targeting grants to communities with demonstrated need, (2) the effect of actions taken to target grants to applicants proposing to serve the designated special populations and sparsely populated and high-poverty areas, and (3) the transparency of the process to applicants, Congress, and the public. The Secretary should also direct the Administrator of HRSA to complete the evaluation before the next New Access Point funding opportunity is announced, make the results of the evaluation publicly available, and incorporate any improvements identified into the award process for that funding opportunity. We provided a draft of this report to HHS for review, and HHS provided written and oral comments. (HHS's written comments are printed in app. III.) HHS agreed with our findings and recommendation. In its general comments, HHS restated and provided additional information on our discussion of the Health Center Program and the New Access Point grant process. HHS said that the increased score for need and use of extra points improved the agency's awarding of New Access Point grants in fiscal year 2011 by targeting resources to higher need communities and populations while still ensuring that organizations with sound health center service delivery plans were funded. HHS also noted that increased emphasis on collaboration contributed to health centers and other area providers maximizing available resources while enhancing the service delivery system to better address the community's primary health care needs. HHS said that these factors support HRSA's goal to expand the current safety net on a national basis by creating new delivery sites in areas not currently served by federally funded health centers. Regarding the GAO recommendation, HHS said HRSA is taking steps to evaluate the effects of the change in the need score and other actions taken to target grants, including for special populations. According to HHS, HRSA plans to use the findings from its evaluation to improve the New Access Point application guidance and will make its findings available to the public. In its oral comments, HHS suggested that the title of the draft report did not fully reflect the contents of the report, which provides a detailed discussion of the changes HRSA made to its fiscal year 2011 New Access Point grant award process, including increased weight given to need. We revised the report title to reflect this. HHS also provided technical comments, and we incorporated information from its general and technical comments as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of HHS and the Administrator of HRSA. The report also will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IV. Table 5 shows the distribution of New Access Point grants awarded to applicants in each state and territory in fiscal years 2008 through 2011. It also shows the number of grantees in each state and territory and the percentage of total grantees in each state and territory in 2010. We calculated the ratio of total health center grantees to the population living in poverty for every state, a measure of the availability of care for the medically underserved. We then ranked them in order from highest to lowest ratio. (See table 6.) In addition to the contact named above, Helene F. Toiv, Assistant Director; Giselle Hicks; Coy J. Nesbitt; Roseanne Price; Julie T. Stewart; E. Jane Whipple; Jennifer Whitworth; and Monique Williams made key contributions to this report. Health Center Program: Improved Oversight Needed to Ensure Grantee Compliance with Requirements. GAO-12-546. Washington, D.C.: May 29, 2012. Hospital Emergency Departments: Health Center Strategies That May Help Reduce Their Use. GAO-11-643T. Washington, D.C.: May 11, 2011. Hospital Emergency Departments: Health Center Strategies That May Help Reduce Their Use. GAO-11-414R. Washington, D.C.: April 11, 2011. Health Resources and Services Administration: Many Underserved Areas Lack a Health Center Site, and Data Are Needed on Service Provision at Sites. GAO-09-667T. Washington, D.C.: April 30, 2009. Health Resources and Services Administration: Many Underserved Areas Lack a Health Center Site, and the Health Center Program Needs More Oversight. GAO-08-723. Washington, D.C.: August 8, 2008. Health Centers: Competition for Grants and Efforts to Measure Performance Have Increased. GAO-05-645. Washington, D.C.: July 13, 2005. Community Health Centers: Adapting to Changing Health Care Environment Key to Continued Success. GAO/HEHS-00-39. Washington, D.C.: March 10, 2000.

Summary:
Health centers funded in part by grants from HRSA's Health Center Program, under Section 330 of the Public Health Service Act, provide comprehensive primary care services for the medically underserved, including many poor, uninsured, and Medicaid patients. Legislation enacted in 2009 and 2010 provided additional funding that could significantly expand health center capacity over the next several years. GAO was asked to review HRSA's process for awarding grants for new delivery sites and possible effects of health centers, such as competition, on other providers. This report examines (1) the actions HRSA has recently taken to target its grants for new delivery sites to health centers in communities with demonstrated need and the outcome of HRSA's award process in recent years, and (2) the extent to which HRSA-funded health centers collaborate and compete with other health care providers in their service area. GAO focused its work on NAP grants, HRSA's primary means of establishing new health centers and delivery sites, during fiscal years 2008 through 2011. GAO analyzed HRSA documents and interviewed HRSA officials, and interviewed officials from 11 health centers and providers and officials in their service areas. The Department of Health and Human Services' (HHS) Health Resources and Services Administration (HRSA) revised its New Access Point (NAP) competitive award process in fiscal year 2011 to increase the emphasis on the need for services in the applicant's proposed service area, and on the three special populations--migrant and seasonal farmworkers, homeless people, and residents of public housing--designated by the Public Health Service Act. The act requires that certain proportions of Health Center Program funding go to health centers serving the special populations. To increase the emphasis on need, HRSA increased the weight given to need in the application review process. To target health centers serving special populations, HRSA gave extra points in the application process to applicants proposing to serve them. When this was insufficient to meet the required proportions, HRSA moved some applicants ahead of others in the award rank order list, a method it had used in the past. The effect of HRSA's actions on the award outcome was magnified in fiscal year 2011 because (1) HRSA received less program funding than it had anticipated, and (2) it needed to increase the share of grants going to health centers serving the special populations because HRSA had not applied the statutory proportions when it used American Recovery and Reinvestment Act funding to award grants in fiscal year 2009. As a result, HRSA awarded 67 NAP grants in fiscal year 2011, 57 of which went to applicants proposing to serve at least one special population; 13 of the 57 received grants by being moved ahead of other applicants with equal or higher review scores. HRSA announced the extra points in application guidance, but not the potential moving of some applicants ahead of others. As HRSA has periodically needed to take actions to meet its statutory obligations and may need to do so again, evaluating the effectiveness and transparency of its most recent New Access Point grant award process could help it identify lessons and possible improvements for the future. Health centers in the communities GAO studied collaborate with other providers and generally do not compete with them for patients, but GAO found greater potential for competition in rural areas. Health center officials described collaborative relationships with other providers that give patients access to services not available through the health center. Health centers and other providers told GAO they generally do not compete for patients; health centers typically serve patients not treated elsewhere, such as uninsured and Medicaid patients. However, because the health center grant covers, on average, about 20 percent of a center's budget, other funding must also be secured, such as by serving insured patients, for the center to be financially sustainable. This can result in competition with other providers in its service area. During the award process, HRSA takes steps to reduce competition by identifying nearby safety net providers and assessing whether the level of unmet need in the area warrants a grant for a new health center or delivery site. Greater potential for competition exists in rural areas because patients there are more likely to be insured and rural health clinics and certain hospitals might seek to serve some of the same patients as health centers, although they may not offer all of the services required of health centers. The Secretary of HHS should direct the Administrator of HRSA to evaluate the fiscal year 2011 NAP grant award process for effectiveness and transparency, identify lessons learned, and incorporate any improvements for future funding cycles. HHS agreed with GAO's findings and recommendation and said HRSA has begun to take action.