Federally Qualified Health Centers (FQHCs) play an essential, often underappreciated role in the nation’s healthcare system. By serving some of the most vulnerable communities in both urban and rural areas, FQHCs provide a critical safety net for patients who have few other options for managing their complex clinical and socioeconomic situations.
Unfortunately, the providers who serve the neediest patients often have unmet needs themselves. FQHCs are subject to extreme financial pressures, exacerbated by unreliable grant funding, increasing mergers and acquisitions, shrinking funding streams, and increasing administrative complexity.
COVID-19 has only heightened the demands on FQHCs as skyrocketing unemployment rates prompted a 15 percent surge in Medicaid enrollment over a very short period of time – and a commensurate increase in spending.
Even before the pandemic, healthcare leaders were well aware that more patients and fewer resources is simply not a sustainable equation, especially under the traditional fee-for-service (FFS) framework. For more than ten years, they have been working to transition away from volume-based reimbursement and adopt a new strategy, known as value-based care (VBC).
VBC is built upon the idea that lower costs, better outcomes, and better experiences are achievable through proactive, preventive care for entire populations. Instead of reimbursing healthcare providers for the volume of services they provide, providers receive payments for meeting quality benchmarks and keeping spending below agreed-upon levels.
Value-based care takes the idea of capitation – very familiar to FQHCs used to working with Medicaid managed care organizations (MCOs) – and brings it one step further. Modern VBC initiatives include risk-based incentives for positive patient health outcomes and appropriate spending.
VBC has proved fruitful for Medicare and many commercial payers, saving a gross of $8.5 billion for Medicare alone since 2012. It has also made an impact in the Medicaid environment, and there are growing efforts to shift more and more dollars into pay-for-performance models.
For FQHCs who get approximately half of their reimbursements from Medicaid, this represents a promising opportunity to take advantage of the same type of revenue enhancements as their peers in private practice and escape the endless cycle of shoestring budgets and grant applications.
VBC is only going to become more widespread as federal regulators, commercial payers, and other influential stakeholders double down on their commitment to this successful approach. That means that community health centers will have a choice to make.
They can cling on to FFS for as long as possible. They can consider acquisition by a larger health system. They can attempt to navigate the complicated transition from FFS to VBC on their own. Or they can take advantage of innovative support structures, such as FQHC-specific independent provider associations (IPAs), to simplify a successful transition to the new reimbursement ecosystem.
Want more on what value-based care means for FQHCs? Download our guide.
Surveying the value-based care landscape for FQHCs
The Affordable Care Act (ACA) is responsible for catalyzing value-based care in its current form. With new insurance mandates, Medicaid expansion in many states, and a slew of technology requirements for healthcare providers, the ACA persuaded stakeholders that there was a strong business case for focusing on more holistic, preventive care.
Since the early 2010s, the industry has seen slow but steady progress toward alternative payment models (APMs) and shared savings programs that prioritize provider accountability for cost and quality.
Medicare has led the way with the highly influential Medicare Shared Savings Program (MSSP), now known as Pathways to Success. The program encourages both ambulatory and inpatient care providers to form accountable care organizations (ACOs) that bear financial responsibility for hitting quality targets and spending goals.
If the ACOs are successful, they can earn a portion of the savings produced for the sponsoring payer along with additional bonus payments. If they are not successful, ACOs in certain risk-bearing arrangements may be liable to return a portion of their overspending back to the payer.
Medicare has also spun up several other value-based programs including Comprehensive Primary Care Plus (CPC+) and various disease-specific models, while commercial payers and self-funded employers have followed suit with a number of value-based options for their populations.
As of 2019, 48 US states and territories had some form of VBC program in operation, including 22 states with ACO-like programs and 38 states pursuing innovation grants to help them transform their health delivery systems.
In 2017, Medicare Advantage and traditional Medicare (Medicare FFS) recorded 49.5 percent and 38.3 percent of payments, respectively, in risk-bearing or fully capitated, population-based payment structures, according to the Health Care Payment Learning & Action Network. Commercial payers were somewhat farther behind, at 28 percent.
Medicaid brought up the rear with just 25 percent of payments in more advanced value-based models.
However, this figure may be somewhat deceptive. More than 4 percent of Medicaid dollars flow through the most ambitious VBC models compared to just 1.7 percent in the commercial market, indicating that some Medicaid programs are eager to invest in comprehensive, integrated, population-based payments.
This is an important signal for FQHCs that Medicaid is no longer an outlier in the march toward payment reform. Value-based care is gaining momentum and will continue to do so. FQHCs cannot afford to be left behind, yet few are actively participating at the moment.
A 2019 survey from The Commonwealth Fund showed that a mere 39 percent of FQHCs were members of an ACO, despite the fact that 75 percent were eligible to receive financial incentives for meeting clinical care targets.
As Medicaid catches up with the rest of the payer community and expands its VBC options, FQHCs that do not take advantage of emerging reimbursement models are in danger of selling themselves short even more.
Learn how FQHCs can leverage value-based care with our free guide.