New Medicare Payment System to Boost Payments for Health Centers

FPs in Rural, Underserved Areas Could See 32 Percent Hike

May 14, 2014 06:07 pm Michael Laff Washington –

CMS issued a final rule late last month that establishes a new Medicare prospective payment system for federally qualified health centers (FQHCs). The rule is expected to increase payments and potentially improve access to care for an estimated 21 million patients.

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Beginning Oct. 1, FQHCs will receive a single payment, or encounter rate, for all services provided to each patient in a single day, with some exceptions. Under the new system, some facilities could receive as much as a 32 percent increase in payments for care provided to Medicare beneficiaries.

FQHCs are safety net institutions that are typically located in medically underserved areas such as impoverished urban neighborhoods or remote rural locations. A component of the Patient Protection and Affordable Care Act, the new payment model the rule implements is intended to support a more coordinated approach to medical care while moving away from the traditional fee-for-service payment method.

To help members understand the implications of the soon-to-be implemented system, the Academy has developed a "Summary of new prospective payment system for Federally Qualified Health Centers"(2 page PDF) document that breaks down the changes to come.

“At first, it looks like they’re going to pay less, but as you read through the guidelines, the bundled payment will be between 28 and 36 percent higher to counteract the change that does not allow fee-for-service billing,” said Domenic Casablanca, M.D, of Shelton, Conn., who is convener of the AAFP Working Group for Rural Health. “At the end of the day, the reimbursement will increase. On most visits, you will come out ahead.”

Story Highlights
  • A new Medicare payment system for federally qualified health centers (FQHCs) will take effect in October.
  • The new payment model represents a move away from fee-for-service and toward bundled payments.
  • Physicians said the new payment system represents an increase over what FQHCs have previously been receiving from Medicare.

Casablanca noted that rural FQHCs overall will receive lower payments than urban facilities, but he added that CMS will use a geographic scale to determine payments. CMS included a list of what it calls “geographic adjustment factors” for each area in its announcement. Some states, such as Alaska, will be paid above the median payment, while others, such as West Virginia, will not.

Despite the move to a bundled payment model, staff at each facility will still need to code each procedure accurately so CMS can determine if the pricing is fair before the new coding system is implemented. Of note: The mental health component will remain separate from primary care billing, a decision Casablanca fully supported.

The maximum payments in 2014 are $129 for urban centers and $112 for rural facilities. Payment limits will be adjusted annually according to the Medicare economic index, and, as noted, costs will be adjusted based on geographic location.

Under the new payment system, patients will be expected to pay coinsurance based on 20 percent of the facility’s charges, and they will not be subject to a deductible. Previously, patients could be charged a copayment greater than 20 percent.

Health centers were aware of the coming changes to the payment system.

“Overall, it’s a good thing,” said Cheryl Bettigole, M.D., chief medical officer for the CompleteCare Health Network in New Jersey. “It will help fund the care that we provide.”

Bettigole said her facility will make adjustments to avoid billing for two patient encounters on the same day. If a patient with a complex history is scheduled for a visit, the facility will carve out a longer time slot.

Many Medicare patients who visit CompleteCare are seniors who have, for example, both primary care and podiatry needs. Bettigole noted that the new payment system could penalize facilities that provide multiple services in a day, but she acknowledged that payment increases for complex care could compensate for any such losses.

“Most of that (complex) care is provided in a single visit,” she said.

Although there is some risk associated with the single payment approach, FQHCs could actually receive a higher payment for care provided to a new patient or a patient who is receiving an initial wellness exam or an annual physical. CMS will pay the facilities a rate that is 34 percent higher than the standard single encounter payment.

FQHCs treated an estimated 21 million people in 2012. Most of these facilities provide comprehensive primary care and preventive services. Medicare payments to FQHCs were an estimated $500 million in 2011, according to CMS. Inside the facilities, about 9 percent of services were billed to Medicare.

CMS is soliciting public comment on portions of the new rule until July 1. The agency is specifically requesting comments on the overall Medicare payment system, payments for multiple visits, and waiving the copayment for preventive services. The AAFP is reviewing the final rule, preparing additional summary information for members, and will send CMS a formal response to the portions open for additional comments.