Health Law Daily FQHC and RHC supplemental payments and network sufficiency
Wednesday, April 27, 2016

FQHC and RHC supplemental payments and network sufficiency

By Harold Bishop, J.D.

CMS provided guidance to state health officials on federally-qualified health center (FQHC) and rural health clinic (RHC) payment methodologies under both Medicaid and the Children’s Health Insurance Program (CHIP) managed care delivery systems. The guidance also provides information on FQHC, RHC, and freestanding birth center (FBC) network sufficiency standards applicable to Medicaid managed care delivery systems. The guidance applies to all Medicaid and CHIP managed care arrangements that provide capitated payment for outpatient services, including comprehensive plans offered by managed care organizations and prepaid ambulatory health plans, and with respect to FBCs, it applies to prepaid inpatient health plans. (CMS Letters, SHO#16-006, April 26, 2016).

Previous guidance. CMS issued previous guidance on Medicaid payment requirements for FQHCs and RHCs in 1998 and 2000:

Previously, CMS provided guidance for CHIP on February 4, 2010 in State Health Official Letter (SHO #10-004). These four guidance letters are still valid regarding FQHC and RHC cost-based reimbursement. The three Medicaid guidance letters, however, were published before the enactment of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (P.L. 106-554), which changed the required payment methodology for FQHC and RHC services. As a result, further guidance is needed.

Supplemental payment requirements. Section 1902(bb)(5) of the Soc. Sec. Act requires that state plans provide for supplemental payments from states to FQHCs and RHCs equal to the amount or difference between the payment under the prospective payment system (PPS) methodology and the payment provided under the managed care contract. This is to ensure that FQHCs and RHCs continue to receive their full PPS reimbursement rate regardless of the Medicaid delivery system, in light of the traditional flexibility for capitated managed care plans to set provider payment rates.

CMS warns that consistent with section 1903(m)(2)(A)(ix) of the Soc. Sec. Act, managed care organizations that enter into contracts with FQHCs and RHCs must provide payments for services that are not less than the amount of payments that would be provided if those services were furnished by a provider that is not an FQHC or RHC. Taken together, sections 1902(bb)(5) and 1903(m)(2)(A)(ix) of the Soc. Sec. Act provide the requirements for FQHC and RHC reimbursement when outpatient services are furnished under a Medicaid managed care delivery system.

Alternative payment methodology. The supplemental payment requirements under section 1902(bb)(5) of the Soc. Sec. Act have created many complex issues under Medicaid managed care programs, including reconciliation disputes and complaints regarding the timeliness of supplemental payments. States have expressed an interest in alleviating these issues by requiring that managed care contracts provide FQHCs and RHCs the full PPS reimbursement rate for covered services.

To accomplish this goal, a state could amend its state plan to implement an alternative payment methodology (APM), which is an optional alternative to the PPS requirements, including the supplemental payment requirements as authorized by section 1902(bb)(6) of the Soc. Sec. Act. In order to use an APM to accomplish this goal, the state and FQHC or RHC must agree to use the APM, and the APM results in FQHCs or RHCs receiving at least their full PPS reimbursement rate from the managed care organization.

If a state chooses to implement the APM, the state would have to include in its managed care contracts a requirement that managed care plans pay contracted FQHCs and RHCs at least the full PPS payment rate for covered services. In turn, the state would include the full PPS payment rate in calculating the actuarially sound capitation rates paid to managed care plans. CMS believes that this could simplify the process of paying FQHCs and RHCs for services furnished under the managed care contract overall and eliminate the general need for states to provide supplemental payments to FQHCs and RHCs for such services.

CHIP. Section 503 of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (P.L. 111-3) amended section 2107(e)(1)(G) of the Soc. Sec. Act to require that separate CHIP programs use the Medicaid payment methodologies set forth in section 1902(bb) of the Soc. Sec. Act for all FQHC and RHC services provided on or after October 1, 2009, using one of three methods as described in SHO #10-004. The three methodologies were to (1) adopt the Medicaid PPS rates, (2) construct separate CHIP PPS rates, or (3) use an APM.

According to CMS, for states that provide CHIP benefits through managed care contractors, and for which the contractor includes one or more FQHCs or RHCs in its network, the requirements for supplemental payments apply in the same manner as they do in Medicaid. Therefore, states electing to contract with FQHCs or RHCs to provide CHIP-covered services, or in which a CHIP plan includes one or more FQHCs or RHCs in its network, may use the APM for Medicaid to require FQHCs and RHCs to receive the full PPS payment through the managed care organization, and must submit a state plan amendment to reflect this change.

Network sufficiency. States, managed care plans, and provider organizations have asked CMS to clarify the contracting requirements related to FQHCs, RHCs, and FBCs, as these benefit categories are considered both a service and a setting for services under section 1905(a) of the Soc. Sec. Act. Specifically, FQHC, RHC, and FBC services are mandatory Medicaid benefits. Additionally, section 1903(m)(1)(A)(i) of the Soc. Sec. Act requires a managed care organization to make the services it provides, within the area served by the managed care organization, accessible to the same extent as such services are made accessible under the Medicaid state plan to beneficiaries who are not enrolled in the managed care plan.

In the past, CMS has generally found provider networks to be sufficient as long as both states and managed care plans have assured adequate capacity and access to services for Medicaid managed care enrollees in at least one appropriate setting, and have required that at least one Medicaid managed care option available to enrollees includes FQHCs, RHCs, and FBCs.

To better ensure this access and to be consistent with the intent of sections 1905(a)(2)(B) and (C) and 1905(a)(28) of the Act, CMS has decided that, in order for a Medicaid managed care plan’s provider network to be sufficient, the managed care plan must include access to FQHC, RHC, and FBC services, if available, from FQHCs, RHCs, and FBCs. Therefore, for managed care contracts starting on or after July 1, 2017 that include FQHC, RHC, or FBC services, CMS will not approve the contracts unless each managed care plan includes at least one FQHC, one RHC, and one FBC in the provider network, where available, for the managed care plan’s contracted service area. In addition, when FQHC, RHC, and FBC services are not included under a state’s managed care contracts, the services must be provided or arranged by the state directly.

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