Skip to main content

Understanding Health Center Reimbursements | Streamline Winter 2016

Understanding Health Center Reimbursements | Streamline Winter 2016

In the health center world, great ideas aren’t always easy to finance. Cash-strapped CFOs find it hard to approve even the best ideas, especially if they pull clinicians away from seeing patients, or if they require the health center to hire more staff. But how do clinicians push for transformative measures in a poorly capitalized health center? Robert Moore, MD, MPH, Chief Medical Officer of the Health Services Department for the Partnership HealthPlan of California and a member of Migrant Clinicians Network’s Board of Directors, encourages clinicians to learn how their health center receives its funding, so new ideas can fit in with the prevailing reimbursement structure. “Understanding the reimbursement methods is the key to talk the language of your CEOs and CFOs,” Dr. Moore noted in his recent MCN webinar, “Enhancing Clinical Services in Health Centers: Leveraging an Understanding of Health Center Reimbursement Methods.” Here, we review the predominant ways a health center covers costs, and methods for clinicians to pursue to get leadership on board with transformations.

How does your health center cover costs? Dr. Moore reviewed the most common ways a health center pays the bills, and provided the easiest avenues to build capital for transformations.

Low Medicaid population:

If a health center serves mostly uninsured patients -- either because the health center’s state did not accept Medicaid expansion with the Affordable Care Act, or because of a large patient population of people without authorization to live in the US who are thereby ineligible for coverage -- then the clinic is likely funded through grants and/or affiliations with larger, more financially stable nonprofits or other organizations like a religious group. “Financial margins are low” for such health centers, noted Dr. Moore, making it “hard to do any kind of practice transformation,” but certain strategies work best for this type of health center:

1. Cost-effective staffing: In some ways, grant-funded health centers have more freedom to rearrange patient visits to better meet their needs, because the patients do not need to see a billable provider in order for the health center to get paid. “Outreach workers could be cost effective over a clinician approach, when a clinician is not necessarily needed,” Dr. Moore offered. Examples include using community health workers to do prevention activities in the community, which would lower costs over time, or training Medical Assistants to perform basic counseling activities, freeing up the time of the clinician for new initiatives.

2. Increase outside revenue sources: Some health centers may be eligible for the 340B drug discount program. Health centers may also seek additional grants and funding from the local community or from national organizations focused on the transformative steps the health center is wishing to implement.

Prospective Payment System in a High Medicaid population:

Health centers with a large Medicaid population is likely reimbursed through the Prospective Payment System (PPS).  Under PPS, qualifying community health centers that see Medicaid or Medicare patients are reimbursed based on a per-visit rate, no matter how long or short the visit, if seen by an eligible clinician for a medically-necessary visit to a PPS-eligible provider. (See our sidebar for more on the history of PPS and how it works.)  Under the PPS, health centers are paid a set per visit rate, linked to the site, often called the “PPS rate.”  Many health centers have incentive payments outside of PPS as well, such as payments related to creating a Patient Centered Medical Home (PCMH).  Finally, these health centers may also receive grants or other funding from the community or from specific initiatives the health center pursues.

Health centers may have trouble adopting innovative care models that are key to becoming a PCMH under the PPS, Dr. Moore believes, because PPS incentivizes face-to-face visits with eligible providers and dis-incentivizes visits to non-eligible providers.  PPS makes it challenging to integrate new services like telemedicine, email or telephone care, or other modes of contact with patients, because the health center will not be reimbursed. 

Dr. Moore also notes that PPS “creates structural inequality,” with some health centers receiving a higher PPS rate than others, meaning patients going to health centers with a higher PPS rate will have more resources.  Health centers with a low PPS rate may find it challenging to adjust their PPS rate. While some health plans in a PPS setting pay a “global payment” to provide consistent funding despite patient visits, Dr. Moore notes that these changes are only cash-flow Band-Aids, as health centers will usually need to reconcile based on their actual visits, at the end of the defined period. 

Dr. Moore has several suggestions to integrate new measures in a health center under a PPS rate:

1. Apply for a change of scope, to cover additional services.  If you need a pharmacist, says Dr. Moore, integrate the position into the scope of services, incorporate it into the cost structure, and apply for an increase in the per-visit rate to cover the new position costs.

2. Alternatively, hire the needed position, have the patient see an eligible clinician for an abbreviated (but still medically meaningful) visit followed by a warm handoff for a longer visit with the non-PPS billable provider.  The health center will still be paid for the clinician visit, and the patient will receive the enhanced services he or she needs.

3. Seek quality improvement incentives like PCMH and invest the payments into enhanced services.

4. Seek new grants and other funding in the community or related to the specific improvement the health center wishes to take on.

Alternative Payment Methodology in a High Medicaid Population:

In some states like Oregon, health centers that previously worked under a PPS rate are now piloting an Alternative Payment Methodology. The federal government established PPS and its method of determining each health center’s unique PPS rate in 2000, with the passage of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act (BIPA).  The BIPA also provided an alternative: If health centers and their state agree, together they can establish a different payment system, as long as the state’s reimbursement to the health centers are not less than what they would have received under the federal PPS.  This is called the Alternative Payment Methodology (APM).  Because each state negotiates its own APM, how it exactly works will vary state to state, but the APM must be structured to pay at least as much as the PPS rate did. Therefore, the health center receives a monthly payment per member, but the payment is no longer tied to those face-to-face visits with an eligible provider.  By piloting an APM, health centers have the opportunity to increase care coordination and other transformative practices. (See our sidebar on APM for more on how it works.) 

Dr. Moore recommends that health centers prepare a strategy to launch transformations before the APM arrives at their health center, and concurrently with the APM implementation, to best take advantage of the payment structure changes.  Dr. Moore suggests identifying a team and building the internal commitment to transformation -- including, critically, clinical leadership buy-in.  Next, start doing some transformation activities before the APM is implemented: “Maybe it’s going to be on a small scale… because you can’t afford to do them across the board with the current payment system, but get some experience so you can take advantage of the new payment system when it comes to your area, and start doing that transformation,” Dr. Moore recommended. “It takes a while to build up the knowledge base and the experience base.”   

By Claire Hutkins Seda, Writer, Migrant Clinicians Network