State Medicaid Agencies Venture into Value-Based Purchasing with Federally Qualified Health Centers

State Medicaid agencies have generally found it challenging to include federally qualified health centers (FQHCs) in value-based purchasing initiatives because of a federal law passed in 2000 that regulates how state Medicaid programs pay FQHCs for the care they provide. State Medicaid agencies are required to reimburse FQHCs through the Prospective Payment System (PPS), a volume-based, per-visit payment rate, or through an alternative payment methodology (APM). Increasingly, states are demonstrating that value-based purchasing through APMs is not only possible, it can be beneficial for both state Medicaid agencies and FQHCs.

How States Work with FQHCs to Promote High Quality, Efficient Care
The nation’s 1,400 community health centers, including FQHCs, provide primary care to 24.3 million low-income residents.Federal law, now incorporated into section 1902(bb) of the Social Security Act, requires state Medicaid programs to reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit payment rates for individual clinics. PPS rates can vary by clinic location.State Medicaid agencies may reimburse FQHCs through an alternative payment model (APM) that provides financial incentives for quality and efficient care if a FQHC agrees to participate and its total payments equal what it would have received under PPS.NASHP is creating a toolkit to help state Medicaid agencies develop value-based APMs for FQHCs. For more information visit www.nashp.org and subscribe to NASHP’s weekly e-newsletter for additional resources.

Since May 2016, the National Academy of State Health Policy’s (NASHP) Value-Based Payment Reform Academy has been working with six states—Colorado, Washington, DC, Hawaii, Michigan, Nevada, and Oklahoma—to support their development of APMs for FQHCs that reward value over volume. Supported by the Health Resources and Services Administration (HRSA), the academy provided each state’s team, made up of Medicaid, primary care association (PCA), and FQHC leaders, with 15 months of technical assistance from NASHP staff, federal and state leaders, and national experts to help plan and develop value-based APMs.

The lessons learned from these states about value-based APM development provide important information for other states considering these models. This is an opportune time for states to begin working with their PCAs and FQHCs to develop value-based APMs for a number of reasons.

First, FQHCs are critical health care providers for Medicaid beneficiaries in many states. Second, HRSA has a long history of helping FQHCs build capacity, providing many with funding and support to make investments in electronic health record systems and registries and to help them implement practice transformation to become recognized patient-centered medical homes.

FQHCs that have made these investments in care delivery transformation are well on their way to having the necessary capacity and infrastructure to participate in value-based APMs. Medicare and state Medicaid programs are increasingly implementing value-based APMs to broadly incentivize their providers to improve health outcomes and patient experiences while reducing costs.

States are finding they can pursue value-based APMs with their FQHCs within federal Medicaid PPS regulations as long as:

  • Individual FQHCs agree to the APM; and
  • Each clinic’s total payments are equivalent to, or higher than, the total payments they would receive through PPS.

As long as states meet the above requirements for APMs, they have the ability to implement value-based reimbursement models to encourage and incentivize efficient, high-quality care over volume-based care.

Academy-assisted states’ efforts and progress demonstrate a growing commitment to partnering with FQHCs to develop value-based APMs that better align with comprehensive, high quality, patient-centered primary care. State policy makers interested in developing value-based APMs for FQHCs should consider the following lessons learned from the academy’s state teams:

  1. Identify a vision and shared goals that define how health care should be delivered to patients, then determine how payment needs to change to support providers to achieve that vision.
  2. Engage critical stakeholders from Medicaid, state departments of health, PCA, and FQHCs to develop collaborative processes. Strategies, such as regular meetings, help foster trust and transparency among the state agencies and organizations involved in the development efforts.
  3. Consider the state Medicaid agency’s bandwidth, and look for opportunities to align FQHC value-based APMs with broader Medicaid initiatives and goals. As with other payment reform efforts, the implementation of new models may involve staff from various sections, such as managed care, quality, rate setting, and information technology.
  4. Work with PCAs to assess FQHCs’ readiness to take on value-based APMs. Remember that FQHCs must opt-in to participate in an APM. It is not necessary for all FQHCs in a state to simultaneously adopt this new model. States may find it beneficial to pilot the APM in a few advanced FQHCs and refine the model as necessary.

To learn more about the academy and how the states’ APM initiatives are progressing across the country, explore the following NASHP resources:

In October 2017, NASHP will release a toolkit that provides states with a roadmap, key steps, promising strategies, and unique considerations to develop value-based APMs for FQHCs. Visit www.nashp.org often and subscribe to NASHP’s weekly e-newsletter for additional resources.

How States Work with FQHCs to Promote High Quality, Efficient CareThe nation’s 1,400 community health centers, including FQHCs, provide primary care to 24.3 million low-income residents.Federal law, now incorporated into section 1902(bb) of the Social Security Act, requires state Medicaid programs to reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit payment rates for individual clinics. PPS rates can vary by clinic location.State Medicaid agencies may reimburse FQHCs through an alternative payment model (APM) that provides financial incentives for quality and efficient care if a FQHC agrees to participate and its total payments equal what it would have received under PPS.NASHP is creating a toolkit to help state Medicaid agencies develop value-based APMs for FQHCs. For more information visit www.nashp.org and subscribe to NASHP’s weekly e-newsletter for additional resources.