Federal Health Centers
Elayne J. Heisler
Analyst in Health Services
March 21, 2012
Congressional Research Service
7-5700
www.crs.gov
R42433
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Federal Health Centers
Summary
The federal health center program, authorized in Section 330 of the Public Health Service Act,
awards grants to support health centers: outpatient primary care facilities that provide care to
primarily low-income individuals. The program—administered by the Health Resources and
Services Administration (HRSA) within the Department of Health and Human Services (HHS)—
supports four types of health centers: (1) community health centers; (2) health centers for the
homeless; (3) health centers for residents of public housing; and (4) migrant health centers.
According to HRSA data, there are over 8,633 unique health center sites (i.e., unique health
center facility locations). Facilities must meet a number of requirements to receive a Section 330
grant, but receiving these grants enables health centers to receive services or in-kind benefits
from a number of federal programs.
Appropriations for the health center program have increased over the past decade, resulting in
more centers and more patients served. From FY2000 through FY2012 the health center
program’s appropriation increased by 48%. Over this same time period, the number of health
center sites increased by 59%. The program also received supplemental appropriations through
the American Recovery and Reinvestment Act (P.L. 111-5) in FY2009. The program’s expansion
may continue under the Patient Protection and Affordable Care Act of 2010 (P.L. 111-148, ACA),
which permanently authorized the health center program and created the Community Health
Center Fund (CHCF) that included a total of $9.5 billion for health center operations to be
appropriated in FY2011 through FY2015. However, it is not clear whether these funds will be
used to expand the health center program because in FY2011, FY2012, and the FY2013
President’s Budget request, these funds were or would be used to augment discretionary
appropriation reductions to the health center program.
Health centers are required to provide health care to all individuals regardless of their ability to
pay and are required to be located in geographic areas that have few health care providers. These
requirements make health centers part of the health safety net—providers that serve the
uninsured, the underserved, or those enrolled in Medicaid. Data compiled by HRSA demonstrate
that health centers serve the intended safety net population as the majority of patients are
uninsured or enrolled in Medicaid. Some research also suggests that health centers are a cost
effective way of meeting this population’s health needs because researchers have found that
patients seen at health centers have lower health care costs than those served in other settings. In
general, research has found that health centers, among other outcomes, improve health, reduce
costs, and provide access to health care for populations that may otherwise not obtain health care.
This report provides an overview of the federal health center program including its statutory
authority, program requirements, and appropriation levels. The report then describes health
centers in general, where they are located, their patient population, and some outcomes associated
with health center use. It also describes some federal programs available to assist health center
operations including the federally qualified health center (FQHC) designation for Medicare and
Medicaid payments. The report then concludes with a brief discussion of issues for Congress such
as the potential effects of the ACA on health centers, the health center workforce, and financial
considerations for health centers in the context of changing federal and state budgets. Finally, the
report has two appendixes that describe (1) FQHC payments for Medicare and Medicaid
beneficiaries served at health centers; and (2) programs that are similar to health centers but not
authorized in Section 330 of the PHSA.
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Federal Health Centers
Contents
Introduction...................................................................................................................................... 1
What Is the Federal Health Center Program? .................................................................................. 4
Statutory Authority and General Requirements......................................................................... 4
Location Requirements ....................................................................................................... 4
Fee Schedule Requirements ................................................................................................ 5
Medicaid Coordination and Reimbursement Requirements................................................ 5
Governance Requirements .................................................................................................. 5
Health Service Requirements .............................................................................................. 6
Reporting and Quality Assurance Requirements................................................................. 7
Licensing and Accreditation Requirements......................................................................... 7
Grants that Support Federal Health Centers .............................................................................. 8
Types of Grants Available to Support Health Centers......................................................... 8
Grant Eligibility and Awarding Criteria .............................................................................. 8
What Is the Health Center Program’s Appropriation?............................................................... 9
What Are the Other Sources of Funding for the Health Center Program? .............................. 12
What Are Health Centers? ............................................................................................................. 13
What Types of Health Centers Exist?...................................................................................... 13
Community Health Centers............................................................................................... 13
Health Centers for the Homeless....................................................................................... 13
Health Centers for Residents of Public Housing............................................................... 14
Migrant Health Centers ..................................................................................................... 14
Who Uses Health Centers?...................................................................................................... 15
Where Are Health Centers Located? ....................................................................................... 16
What Outcomes Are Associated with Health Center Use?...................................................... 17
Health Outcomes ............................................................................................................... 18
Cost Outcomes .................................................................................................................. 18
Access to Health Care ....................................................................................................... 19
Which Federal Programs Are Available to Health Centers?.................................................... 20
National Health Service Corps Providers.......................................................................... 21
J-1 Visa Waivers ................................................................................................................ 21
Federally Qualified Health Center Designation ................................................................ 21
340B Drug Pricing Program.............................................................................................. 22
Vaccines for Children Program ......................................................................................... 22
Federal Torts Claims Act Coverage................................................................................... 22
Ryan White HIV/AIDS Treatment Grants......................................................................... 23
Other Federal Grant Programs .......................................................................................... 23
Issues for Congress ........................................................................................................................ 24
Health Centers and Health Insurance Expansion in the ACA ................................................. 25
Health Centers and Medicaid Expansion .......................................................................... 25
Health Centers and ACA Private Insurance Expansions ................................................... 26
Health Center Workforce......................................................................................................... 27
National Health Service Corps Providers.......................................................................... 27
Teaching Health Centers ................................................................................................... 27
Financial Considerations ......................................................................................................... 28
Health Center Appropriations and the Community Health Center Fund........................... 29
Health Center Appropriations and the Budget Control Act............................................... 29
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Federal Health Centers
Health Center Funding and ACA Care Coordination Initiatives ....................................... 30
Health Center Funding and State Funding Availability..................................................... 30
Concluding Observations............................................................................................................... 31
Figures
Figure 1. Health Center Grantee Sites ........................................................................................... 17
Tables
Table 1. Examples of Services Provided and the Number of Patients Served by Health
Centers (2010) .............................................................................................................................. 7
Table 2. Health Center Grants Awarded in FY2011......................................................................... 9
Table 3. Health Center Appropriations and Sites, FY2002-FY2013 (President’s Budget
Request)...................................................................................................................................... 11
Table 4. Health Center Revenue Sources (FY2011) ...................................................................... 12
Table 5. Comparison of Health Center Types ................................................................................ 15
Table 6. Health Centers’ Patients’ Profile, 2010 ............................................................................ 16
Appendixes
Appendix A. Other Federal Programs that May Provide Primary Care to the Underserved ......... 32
Appendix B. Medicare and Medicaid Payments and Beneficiary Cost Sharing for Health
Center Services ........................................................................................................................... 36
Contacts
Author Contact Information........................................................................................................... 39
Acknowledgments ......................................................................................................................... 39
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Federal Health Centers
Introduction
The federal health center program awards grants to support health centers: outpatient primary
care facilities that provide care to primarily low-income individuals. The program is administered
by the Health Resources and Services Administration (HRSA)—within its Bureau of Primary
Care—within the Department of Health and Human Services (HHS). The federal health center
program is authorized in Section 330 of the Public Health Service Act (PHSA) and supports four
types of health centers: (1) community health centers; (2) health centers for the homeless; (3)
health centers for residents of public housing; and (4) migrant health centers.
According to HRSA data there are over 8,633 unique health center sites (i.e., individual health
center facility locations);1 the majority are community health centers (CHCs). CHCs serve the
general low income or otherwise disadvantaged population whereas the remaining three types of
health centers provide care to more targeted low income or otherwise disadvantaged populations
(e.g., migrant health workers). Regardless of type, health centers are required, by statute, to
provide health care to all individuals regardless of their ability to pay and are required to be
located in geographic areas that have few health care providers.2 These requirements make health
centers part of the health safety net—providers that serve the uninsured, the underserved, or those
enrolled in Medicaid.3 Data compiled by HRSA demonstrate that health centers serve the
intended safety net population as the majority of patients are uninsured or enrolled in Medicaid.4
Some research also suggests that health centers are a cost effective way of meeting this
population’s health needs because researchers have found that patients seen at health centers have
lower health care costs than those served in other settings.5 Others have found that areas with
health centers have lower emergency room use and fewer hospital stays.6 Researchers have also
found that care provided in emergency departments and physicians’ offices is generally more
costly than care provided at health centers.7 In general, research has found that health centers’
presence is associated with several outcomes, most notably improved health, reduced costs, and
increased access to health care for populations that may otherwise not obtain health care.8
1 The Health Resources and Services Administration regularly updates health center data. This report uses the number
of sites as of 1/17/2012, see http://datawarehouse.hrsa.gov/sitesdetail.aspx; hereinafter HRSA Data Warehouse.
2 42 U.S.C. §254b.
3 Lewin, Marion Ein and Altman, Stuart, America’s Health Care Safety Net: Intact but Endangered, Institute of
Medicine, Washington, DC, 2000, p. 21, http://www.nap.edu/catalog.php?record_id=9612; for more information on the
Medicaid program, see CRS Report RL33202, Medicaid: A Primer, by Elicia J. Herz.
4 Health Resources and Services Administration, Bureau of Primary Care, Uniform Data System, 2010 National
Summary Report, Rockville, MD, July 27, 2011, http://bphc.hrsa.gov/uds/doc/2010/National_Universal.pdf.
Hereinafter, 2010 UDS Report.
5 Patrick Richard et al., “Cost Savings Associated with the Use of Community Health Centers,” Journal of Ambulatory
Care Management, vol. 35, no. 1 (2012), pp. 50-59.
6 George Rust, et al. “Presence of a Community Health Center and Uninsured Emergency Department Visits Rates in
Rural Counties,” The Journal of Rural Health, vol.25, no. 1 (Winter 2009), pp, 8-16; Betty Smith-Campbell,
“Emergency Department and Community Health Center Visits and Costs in an Uninsured Population,” Journal of
Nursing Scholarship, (First Quarter 2005), vol.37, no. 1; and Jack Hadley and Peter Cunningham, “Availability of
Safety Net Providers and Access to Care for Uninsured Persons,” Health Services Research, vol. 39, no.5 (October
2004), pp. 1527-1546.
7 Ibid.
8 This research is summarized in the report section below: “What Outcomes Are Associated with Health Center Use?”
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Section 330 grants—funded by the health center program’s appropriation—are estimated to only
cover one-fifth of an individual health center’s operating costs; however, individual health centers
are eligible for grants or payments from a number of federal programs to supplement their
facilities’ budgets.9 These federal programs provide (1) incentives to recruit and retain providers;
(2) access to higher reimbursement rates from the Medicare, Medicaid, and State Children’s
Health Insurance (CHIP) programs;10 (3) access to additional funding through federal programs
that target populations generally served by health centers; and (4) in-kind support such as access
to discounted or free services that a health center may otherwise have to purchase at a higher rate
(e.g., prescription drug discounts or medical malpractice insurance). These additional programs
are important for individual health centers because more than one-third of all health center
program grantees rely on a federal program to recruit providers,11 and Medicaid is the largest
source of health center reimbursements.12 Other federal grants (i.e., non-330 grants) are also an
important source of financial support for health centers; in FY2011 health centers funded under
the health center program received approximately $230 million—which is roughly equivalent to
9% of the program’s annual appropriation13—in other federal grants.14
Appropriations to support the health center program have increased over the past decade. These
increases began in 2000 and continued with supplemental funding appropriated under the
American Recovery and Reinvestment Act (ARRA, P.L. 111-5) and the Patient Protection and
Affordable Care Act of 2010 (ACA, P.L. 111-148).15 Congress has appropriated additional funds
for the program, which have generally been used to award grants to create new centers.16 In
addition, ARRA and the ACA appropriated funds have supported health center construction and
renovation. Some ARRA funds were also used to increase services provided at existing centers.17
The ACA also appropriated funding for health centers to train medical residents.18 Although the
9 U.S. Department of Health and Human Services, Health Resources and Services Administration, Bureau of Primary
Health Care, Efforts to Expand and Accelerate Health Center Program Quality Improvement, Report to Congress,
Rockville, MD; hereinafter, Health Center Quality Improvement Report.
10 These payments are discussed in more detail in Appendix B; payments are considered to be “higher” than the
payment rates that physician practices receive because they are cost-based and reflect a broader range of services, than
do payments to physician practices. See, for example, Department of Health Policy, School of Public Health and Health
Services, The George Washington University, Quality Incentives for Federally Qualified Health Centers, Rural Health
Clinics and Free Clinics: A Report to Congress, Washington, DC, January 23, 2012.
11 Roger A. Rosenblatt et al., “Shortages of Medical Personnel at Community Health Centers: Implications for Planned
Expansion,” Journal of the American Medical Association, vol. 295, no. 9 (March 2006), pp. 1042-1049.
12 2010 UDS Report.
13 See Table 3 and Table 4.
14 See Table 4.
15 The ACA was subsequently amended by the Health Care and Education Reconciliation Act (HCERA, P.L. 111-152).
These two laws are collectively referred to as the ACA in this report. Previous CRS reports on the Patient Protection
and Affordable Care Act used the acronym PPACA to refer to the statute. This report will use “ACA,” in conformance
with the more widely-used acronym for the law.
16 See discussion in CRS Report R40181, Selected Health Funding in the American Recovery and Reinvestment Act of
2009, coordinated by C. Stephen Redhead, and CRS Report R41278, Public Health, Workforce, Quality, and Related
Provisions in PPACA: Summary and Timeline, coordinated by C. Stephen Redhead and Erin D. Williams. The ACA
also authorized new grant programs to provide funding for facilities that are similar to health centers—nurse managed
health clinics and school-based health centers. These facilities will provide care to populations similar to those served
by health centers, but are not authorized in PHSA Section 330. These facilities and other facilities that are similar to
health centers are summarized in Appendix A.
17 CRS Report R40181, Selected Health Funding in the American Recovery and Reinvestment Act of 2009, coordinated
by C. Stephen Redhead.
18 CRS Report R41301, Appropriations and Fund Transfers in the Patient Protection and Affordable Care Act
(continued...)
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program’s appropriations increased by 48% since FY2000, the additional appropriated funds have
generally been used to expand the number of centers—which increased by 59%19—while funding
awarded to individual centers increased less rapidly over the time period.20
The ACA aims to expand insurance coverage to the uninsured, which may have a number of
effects on health centers. Specifically, the law aims to reduce the number of uninsured by
expanding the Medicaid program and by providing subsidies for certain low income individuals
to purchase health insurance coverage.21 These changes may have a number of effects on
individual health centers. First, they may mean that more individuals may seek care at health
centers. This may occur because health centers are a source of care for the uninsured and those
enrolled in Medicaid because they are required to accept all patients regardless of ability to pay.22
Health centers may continue to serve those who obtain insurance under the ACA because some
may choose to remain with their providers and because health centers are located in areas with
few health care providers. It is also possible that health center reimbursements may increase as
fewer people remain uninsured. The ACA also includes a new direct appropriation that is a
significant investment in health centers, which may help these health centers provide care to an
expanded population; however, given recent fiscal concerns, these funds have not been used to
significantly expand the health center appropriation.23
This report provides an overview of the federal health center program including its statutory
authority, program requirements, and appropriation levels. The report then describes health
centers in general, where they are located, their patient population, and some outcomes associated
with health center use. It also describes the federal programs available to assist health center
operations including the federally qualified health center (FQHC) designation for Medicare and
Medicaid payments. The report then concludes with a brief discussion of issues for Congress such
as the potential effects of the ACA on health centers (both the program and individual health
centers), the health center workforce, and financial considerations for health centers in the context
of changing federal and state budgets. Finally, the report has two appendices that describe (1)
FQHC payments for Medicare and Medicaid beneficiaries served at health centers; and (2)
programs that are similar to health centers but not authorized in Section 330 of the PHSA.
(...continued)
(PPACA), by C. Stephen Redhead, and CRS Report R41278, Public Health, Workforce, Quality, and Related
Provisions in PPACA: Summary and Timeline, coordinated by C. Stephen Redhead and Erin D. Williams.
19 See Table 3.
20 CRS analysis of HRSA Budget documents.
21 CRS Report R41664, ACA: A Brief Overview of the Law, Implementation, and Legal Challenges, coordinated by C.
Stephen Redhead, and CRS Report R41210, Medicaid and the State Children’s Health Insurance Program (CHIP)
Provisions in ACA: Summary and Timeline, by Evelyne P. Baumrucker et al.
22 They are also a major source of care for Medicaid patients because some providers will not accept Medicaid because
of low reimbursements rates or administrative requirements of the program, see Jack Hadley and Peter Cunningham,
“Availability of Safety Net Providers and Access to Care of Uninsured Persons,” Health Services Research, vol. 39, no.
5 (October 2004), pp. 1527-1546 and Peter J. Cunningham and Ann S. O'Malley, “Do Reimbursement Delays
Discourage Medicaid Participation by Physicians?” Health Affairs, vol. 28, no. 1 (November 18, 2008), p. w17–w28.
23 See discussion of CHCF in Appendix A of CRS Report R41737, Public Health Service (PHS) Agencies: Overview
and Funding, FY2010-FY2012, coordinated by C. Stephen Redhead and Pamela W. Smith.
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What Is the Federal Health Center Program?
The federal health center program awards grants to support outpatient primary care facilities that
provide care to primarily low income individuals. The program is authorized in Section 330 of the
PHSA, which also includes definitions of the four types of health centers24 and program
requirements. This section describes the statutory authority for the federal health center program
(also called the health center program); program requirements; types of grants awarded in support
of the health center program; the health center program’s appropriation; and other
funding/revenue that health centers receive.
Statutory Authority and General Requirements25
Section 330 of the PHSA authorizes grants for health centers and includes the requirements for
entities to receive a health center grant. Section 330 requires health centers to provide services to
the entire population of their service area regardless of ability to pay. Health centers are also
required to document the health needs of the residents in their service area and to update their
service area if needed. Health center grantees must (1) be located in specific geographic areas; (2)
have an established fee schedule that meets certain requirements; (3) collect reimbursements for
individuals enrolled in public or private insurance programs; (4) have appropriate governance; (5)
offer specific health services; (6) meet certain reporting and quality assurance requirements; and
(7) license providers and seek accreditation. This section describes each of these requirements.
Location Requirements
PHSA Section 330 requires that a health center be located in an area that is designated as
medically underserved or as serving a population designated as “Medically Underserved” (see
text box).26
Medically Underserved Areas/Populations
Medically Underserved Areas (MUA): Areas of varying size—whole counties, groups of contiguous counties,
civil divisions, or a group of urban census tracts—where residents have a shortage of health care services.
Medically Underserved Populations (MUPs): Groups that face economic, cultural, or linguistic barriers to
accessing health care.
Source: HRSA, Bureau of Primary Care, Shortage Designations, at http://bhpr.hrsa.gov/shortage/index.htm.
24 These definitions and more information about the number and types of services that the four types of health centers
provide are discussed in the report section “What Types of Health Centers Exist?”
25 HRSA details the program’s requirements on its website at http://bphc.hrsa.gov/about/requirements/index.html. The
subsections that follow refer to this website in addition to the citations noted below.
26 Section 5602 of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148) required the Secretary of HHS
to revise the criteria and methodology used to designate health professional shortage areas (HPSAs) and MUPs. The
ACA also required that HHS appoint a committee to undertake this revision and publish a final rule with the new
criteria. The Committee released a report on October 1, 2011, see http://www.hrsa.gov/advisorycommittees/shortage/
nrmcfinalreport.pdf.
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Fee Schedule Requirements
Health centers must establish their own fee schedules that take into account local rates for health
services and the costs that the health center incurs providing services. The health center is then
required to establish a separate discounted fee schedule, which is then further discounted or
waived based on a patient’s ability to pay. Ability to pay is determined by the patient’s income
relative to the federal poverty level. The statute requires that individuals whose income is above
200% of the federal poverty level pay full charges, while individuals whose incomes are at, or
below, 100% of the federal poverty level pay only nominal fees.27
Medicaid Coordination and Reimbursement Requirements
Health centers are required to coordinate with state Medicaid and CHIP plans to provide services
to beneficiaries enrolled in these programs. They are also required to seek reimbursement from
third party payers such as private insurance plans, Medicare, Medicaid, and CHIP. Health centers
are further required to have systems to obtain reimbursements including those used for billing,
credit, and collections. These collections provide nearly two-thirds of the health center program’s
revenue (see Table 4).
Although health centers collect reimbursements, the Government Accountability Office (GAO)
found that Medicare payments did not cover the full cost of health center services in nearly two-
thirds of the visits they examined.28 Similarly, the National Association of Community Health
Centers (NACHC)—the advocacy group for health centers—reports that the amount received in
reimbursements is not sufficient to cover the cost of the health services provided.29 They found
that Medicaid reimbursements covered 85% of the cost of providing services, while Medicare and
private insurance reimbursements cover less than two-thirds.30 The NACHC also found that the
PHSA Section 330 grant amount received per patient—$270—was less than the average medical
cost per patient of $414.31
Governance Requirements
Health centers are required to have a governing board that is primarily made up of health center
patients. The governing board provides input on center operational issues including the center’s
budget, operating hours, management, and oversight. It is required to meet monthly, and must
approve the center’s director and must approve grant applications submitted by the center.32
27 42 C.F. R. 51c.303(f) and Section 330(k)(3)(G)(i) of the Public Health Service Act (PHSA).
28 U.S. Government Accountability Office, Medicare Payments to Federally Qualified Health Centers, GAO-10-576R,
July 30, 2010. Appendix B describes ACA changes to Medicare FQHC payments that may more closely align
Medicare payments to the costs of providing services.
29 See National Association of Community Health Centers, A Sketch of Community Health Centers, Chartbook,
Washington, DC, 2009, http://www.nachc.com/client/documents/Chartbook%20FINAL%202009.pdf; hereinafter, 2009
Health Center Chartbook.
30 Ibid.
31 Ibid; this amount does not include lab, x-ray, or nurse visits.
32 42 U.S.C. §254b; some governance requirements may be waived for migrant health centers, health centers for the
homeless, and health centers for residents of public housing.
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Health Service Requirements
Health centers are required to provide primary care services (as defined in Section 330 of the
PHSA and discussed below) and may also provide behavioral health services, case management,
and specialty care services. This section discusses the required services, certain optional services,
and then presents some data on services provided at health centers in 2010. (See Table 1.)
Health centers are required to provide primary health services and preventive and emergency
health services.33 Primary health services are those provided by physicians34 or physician
extenders (physicians’ assistants, nurse clinicians, and nurse practitioners) to diagnose, treat, or
refer patients. Primary health services include relevant diagnostic laboratory and radiology
services. Preventive health services include well-child care, prenatal and postpartum care,
immunization, family planning, health education, and preventive dental care. Emergency health
services refer to the requirement that health centers have defined arrangements with outside
providers for emergent cases that the center is not equipped to treat and for after-hours care.
Health center providers must also have admitting privileges at one or more hospitals located near
the health center. This requirement is to ensure care continuity for hospitalized health center
patients. In instances where a health center physician does not have admitting privileges at a
nearby hospital, the health center is required to establish other arrangements to ensure care
continuity. In addition to these three types of services (primary, preventive, and emergency),
health centers must provide diabetes self-management training for patients with diabetes or renal
disease.35
Health centers are also required to provide enabling services such as transportation for individuals
residing in each center’s service area who have difficulty accessing the center, translation
services, and health education. Health centers may also provide supplemental services such as
additional dental care, mental health services, or substance abuse treatment.36 Table 1 describes
some specific services tracked in the Uniform Data System (UDS) 2010 data, the most recent
year of final data available.
33 42 CFR 51c.102(h).
34 The regulation further specifies that these services should be provided by primary care physicians who are defined as
physicians in family practice, internal medicine, pediatrics, or obstetrics and gynecology.
35 This requirement was added by P.L. 109-171, effective January 1, 2006.
36 For specific types of health centers (see “What Types of Health Centers Exist?”) some of supplemental services may
be required.
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Table 1. Examples of Services Provided and the Number of Patients Served by
Health Centers (2010)
Service Provided
Number of Patients Served
Medical Services
16,777,152
Enabling Services
1,793,746
Dental Services
3,750,481
Substance Abuse Services
98,760
Mental Health Services
852,984
Source: HRSA, Uniform Data System (UDS) Report, UDS, National Rol up Report, 2010 at http://bphc.hrsa.gov/
uds/doc/2010/National_Universal.pdf and National Total Summary Data at http://bphc.hrsa.gov/uds/view.aspx?
year=2010; hereinafter, 2010 UDS Report.
Reporting and Quality Assurance Requirements
Health centers are required to report to HRSA certain information and to have quality
improvement and assurance plans in place. First, health centers are required to report patient
demographics, services provided, staffing information, utilization rates, costs, and revenue to
HRSA’s UDS. Second, within the UDS, health centers must report on certain clinical outcomes to
assess quality.37 These outcomes are similar to those examined in other health care settings. They
include, for example, the percentage of children receiving recommended immunizations by the
age of two; percentage of women who were screened for cervical cancer; and the percentage of
patients whose body mass index was assessed and were referred to appropriate services if found
to be obese.38 Finally, health centers are required to have quality improvement systems in place
that include clinical services, management, and patient confidentiality assurances. To meet this
requirement, health centers must have a clinical director who reports on quality improvement and
assurance activities and conducts periodic assessments of the health center’s services to evaluate
the quality and appropriateness of services provided.
Licensing and Accreditation Requirements
Health center providers must be properly licensed in the state in which they practice. They must
also have admitting privileges at hospitals that health center patients would likely be referred to
(see “Health Service Requirements”). Furthermore, they must maintain proper credentials during
their health center employment.
Health centers are not required to be accredited by a national accreditation agency, but HRSA
encourages health centers to seek accreditation. Specifically, the agency encourages health
centers to seek accreditation from either the Accreditation Association for Ambulatory Health
37 Such as performance measures and clinical outcomes commonly used by the Medicare and Medicaid programs, and
health insurance and managed care organizations. For more information, see http://bphc.hrsa.gov/policiesregulations/
performancemeasures/index.html.
38 Ibid. HRSA also submitted a report to Congress about ongoing health center quality improvement efforts; see U.S.
Department of Health and Human Services, Health Resources and Services Administration, Bureau of Primary Care,
Report to Congress: Efforts to Expand and Accelerate Health Center Program Quality Improvement, Rockville, MD,
April 26, 2011, http://bphc.hrsa.gov/ftca/riskmanagement/healthcenterqualityimprovement.pdf; herein after, Health
Center Quality Improvement Report.
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Care (AAHC) or The Joint Commission (TJC). HRSA will pay some of the costs of seeking and
maintaining accreditation from one of these two accrediting entities.39
Grants that Support Federal Health Centers
HRSA awards five types of Section 330 authorized grants to support health centers: (1) grants for
new health centers; (2) grants to expand services at existing health centers; (3) grants for
construction and renovation; (4) planning grants; and (5) grants to reduce infant mortality. This
section describes these types of grants, the entities that are eligible to receive grants, and the
factors taken into consideration when awarding grants.
Types of Grants Available to Support Health Centers
The first type of grants awarded is called New Access Point (NAP) grants and permits existing
grantees to establish new sites or new grantees to establish new health centers. The second type of
grants is called Increased Demand for Services (IDS) or Expanded Service (ES) grants. These
grants are for health centers to expand the number of patients they serve or to provide additional
types of services. The third type of grants is awarded through the Capital Improvement Program
(CIP) and provides funding for the construction and renovation of health centers. These grants
were supported with ARRA appropriated funds and with ACA appropriated funds in FY2011.40
The fourth type of grants is for entities that are not health centers, to plan and develop health
centers. Funds awarded may be used for assessing the health needs of the proposed service
population and developing linkages with the community and with health providers in the
proposed service area. ACA funds supported these grants in FY2011.41 The fifth grant program
supports activities that aim to reduce infant mortality. These grants have not been awarded in
recent years; instead, HRSA supports other infant mortality reduction programs.42
Grant Eligibility and Awarding Criteria
Public and non-profit entities are eligible to apply for Section 330 grants to operate health centers.
The majority of health center grantees operate facilities at more than one site and may operate
more than one type of health center.43 Grants are awarded competitively based on an assessment
of the need for services in a given area and the merit of the application submitted. Grants may
also be awarded based on certain funding priorities such as creating a rural-urban balance in
health center locations and ensuring that health centers are located in sparsely populated areas.44
39 For more information, see http://bphc.hrsa.gov/policiesregulations/accreditation.html/.
40 See discussion in CRS Report R40181, Selected Health Funding in the American Recovery and Reinvestment Act of
2009, coordinated by C. Stephen Redhead, and CRS Report R41278, Public Health, Workforce, Quality, and Related
Provisions in PPACA: Summary and Timeline, coordinated by C. Stephen Redhead and Erin D. Williams.
41 In FY2011, ACA-appropriated funds were also used to support planning grants for entities seeking to become health
centers; see U.S. Department of Health and Human Services, “HHS Awards Affordable Care Act Funds for
Organizations to Become Community Health Centers,” press release, September 15, 2011, http://www.hhs.gov/news/
press/2011pres/09/20110915d.html.
42 For more information about these programs, see CRS Report R41378, The U.S. Infant Mortality Rate: International
Comparisons, Underlying Factors, and Federal Programs, by Elayne J. Heisler.
43 Health Center Quality Improvement Report.
44 Department of Health and Human Services, Health Resources and Services Administration, Justification of
Estimations for Appropriations Committees, FY2012, Rockville, MD; hereinafter, HRSA FY2012 Budget Justification
(continued...)
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Grant recipients are not required to provide matching funds, but are required to use grant funds to
supplement and not supplant funding that had been available prior to the grant. Grant amounts
awarded are determined based on the cost of proposed grant activity (see Table 2). An entity may
receive funding for multi-year projects, but amounts awarded in subsequent years are contingent
on (1) congressional appropriations and (2) the entity’s compliance with applicable statutory,
regulatory, and reporting requirements. At the end of the application period, health centers are
required to compete for continued funding.45
Table 2. Health Center Grants Awarded in FY2011
Grants
FY2011
Total 1,134
Average Size
$2 million
Range of Awarded Amounts
$250 thousand-$13 million
Source: HRSA FY2013 Budget Justification.
What Is the Health Center Program’s Appropriation?
The health center program’s appropriation has increased over the past decade, resulting in more
centers and more patients served. From FY2000 through FY2012 (the last year of final
appropriation information available) the health center appropriation increased by 48%. Over this
same time period, the number of health center sites increased by 59%. Beginning in 2002, the
George W. Bush Administration began a multi-year effort to expand the health center program by
providing funding for new or expanded health centers for 1,200 communities.46 The program’s
expansion continued during the Obama Administration. In FY2009, under the Obama
Administration, the health center program received $2 billion under ARRA. Specifically, ARRA
provided $500 million for new sites and expanded services at existing sites. It also provided $1.5
billion for construction, renovation, equipment, and health information technology. The
program’s expansion may continue under the ACA, which permanently authorized the health
center program; appropriated a total of $1.5 billion for health center construction and repair; and
created the Community Health Center Fund (CHCF) that included a total of $9.5 billion for health
center operations to be appropriated in FY2011 through FY2015. However, it is not clear whether
these funds will be used to expand the health center program because in FY2011, FY2012, and
the FY2013 President’s Budget request, these funds were or would be used to augment reductions
to discretionary appropriations to the health center program.47
(...continued)
and Department of Health and Human Services, Health Resources and Services Administration, Justification of
Estimations for Appropriations Committees, FY2013, Rockville, MD; hereinafter, HRSA FY2013 Budget Justification.
45 Ibid.
46 Department of Health and Human Services, Budget in Brief, FY2007, pp. 5-6 and 21.
47 Under the ACA, the CHCF was required to be used to increase the health center appropriation level above the
FY2008 appropriations level; however, P.L. 112-10, which provided full-year funding in FY2011, removed this
requirement and some of the CHCF was used to augment discretionary funding for the health center program. The
same thing occurred in FY2012. The 112th Congress has also considered rescinding the CHCF in H.R. 3070, which
would have provided full year appropriations for FY2012.
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Table 3 presents the health center program’s appropriation from FY2002 through the FY2013
Request. The table also includes amounts appropriated under ARRA and the ACA and the number
of grantees in each fiscal year.
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Table 3. Health Center Appropriations and Sites, FY2002-FY2013 (President’s Budget Request)
(Dollars in Millions)
2011
2012
2013
2009
ACA
ACA
President’s
2013 ACA
ARRAa
CHCFb
CHCF
Budget
CHCF
2002 2003 2004 2005 2006 2007 2008 2009 Funds 2010 2011 Transfer 2012
Transferb
Request
Transferb
Health center $1,343 $1,505 $1,617 $1,735 $1,785 $1,988 $2,065 $2,190 $2,000 $2,185 $2,581d $1,000
$2,767c $1,200 $3,062c $1,500
appropriations
Change in +$174 +$162 +$112 +$118 +$50 +$203 +$77 +$2,126d N/A
-$2,005
+$396c N/A
+$186c +$200c +295c +300c
appropriations
from previous
year
Approximate
3,488 3,578 3,651 3,745 3,831 —e 6,208 7,892 7,892 8,156 8,501f N/A
8,746f N/A 8,746f N/A
number of
sites
Source: Compiled by CRS from Health Resources and Services Administration budget documents and H.Rept. 112-331 on P.L. 112-74.
Note: Appropriated amounts include federal tort claims funds.
a. American Recovery and Reinvestment Act (ARRA, P.L. 111-5).
b. Community Health Center Fund (CHCF) created in Section 10503 of the Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148).
c. Includes CHCF transfer.
d. Includes ARRA funding.
e. Number not included in HRSA budget documents.
f.
Number estimated in the FY2013 HRSA Budget Justification.
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What Are the Other Sources of Funding for the Health Center
Program?
In addition to amounts received from grants authorized under the program’s annual appropriation
(i.e., Section 330 grants), health centers receive funding from reimbursements and funding from
other sources (e.g., state and local grants). The relative contribution of each of these sources to an
individual health center’s budget varies by center. However, the HRSA compiles this information
for the health center program. Table 4 presents data for FY2011, the most recent year of final
data available. The table shows that Medicaid is the largest source of health center revenue (38%)
and that Section 330 grants provide approximately 20% of the program’s revenue. The table also
shows that amounts received from grants and contracts from state, local, and private foundations
provided nearly 17.6% of the program’s total revenue in FY2011. (See Table 4.)
Table 4. Health Center Revenue Sources (FY2011)
(Dollars in Millions)
Percent of
Funding Sources
Dollars
Program Revenue
Section 330 Authorized Grants
Section 330 Grants
2,480.0
19.5
Total (Section 330 authorized grants)
2,480.9
19.5
Reimbursements
Medicaid
4,830.0
38.0
CHIP
760.0
6.0
Medicare
300.0
2.4
Other third party payers (e.g., private insurance)
1,100.0
8.7
Patient Feesa
765.0
6.0
Total (Reimbursements)
7,755.0
61.0
Other Federal Grants
Other Federal Grants
230.0
1.8
Total (Other Federal Grants)
230.0
1.8
State, Local, and Private Grants and Contracts
State, Local, Other
2,240.0
17.6
Total (State, Local, and Private Grants and
2,240.0 17.6
Contracts)
Total (all sources)
12,705.9
N/A
Source: HRSA FY2013 Budget Justification.
Note: Percentages may not sum to 100% due to rounding.
a. This refers to amounts collected from self-pay patients.
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What Are Health Centers?
This section describes health center facilities funded under the health center program
appropriation. It includes a discussion of the four types of health centers funded and compares the
services offered and population served by each center type. The section also describes (1) the
populations served by the four types of health centers; (2) where health centers are located; and
(3) outcomes associated with health center use.48
What Types of Health Centers Exist?
There are four types of health centers: (1) community health centers; (2) health centers for the
homeless; (3) health centers for residents of public housing; and (4) migrant health centers. The
majority of health centers are community health centers (CHCs), which serve a generally
underserved population. The other three types of health centers serve more targeted populations,
including the homeless, residents of public housing, and migrant workers (Health Centers for the
Homeless, Health Centers for Residents of Public Housing, and Migrant Health Centers,
respectively). This section describes each type of health center, the population targeted by these
centers, and the specific services that each type of center must provide.49
Community Health Centers
The majority of health centers are CHCs because these facilities serve the general population with
limited access to health care. CHCs are required to serve all residents who reside in the area that
the CHC serves (this is also known as the catchment area). CHCs are required to provide
“primary health services” (see “Health Service Requirements”). The CHC-required services are
the baseline services that all types of health centers are required to provide. The other three types
of health centers may be required to provide certain supplemental services that aim to meet the
specific needs of the population they serve.
Health Centers for the Homeless
Health Centers for the Homeless (HCHs) provide services to homeless individuals; it is the only
federal health program that targets this generally uninsured population.50 Section 330 defines
homeless individuals as those who lack permanent housing or live in temporary facilities or
transitional housing.51 In addition to the services required of all health centers, HCHs are required
to provide substance abuse services and supportive services that aim to meet the health needs of
the homeless population. HCHs may also provide mobile services and aim to connect homeless
individuals with supportive services such as emergency shelter, transitional housing, job training,
education, and some permanent housing. Grants are also available for innovative programs that
48 The outcomes discussed are not exhaustive; instead, the discussion focuses on some of the more commonly
considered outcomes: improved health, reduced costs, and improved access.
49 There are a number of outpatient facilities that provide care to underserved populations that are similar to health
centers, but do not receive grants authorized in PHSA Section 330. These facilities are described in Appendix A.
50 National Coalition for the Homeless at http://www.nationalhomeless.org/factsheets/health.html.
51 P.L. 104-299 Section 330(h)(4)(A).
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provide outreach and comprehensive primary health services to homeless children and children at
risk of homelessness.
Health Centers for Residents of Public Housing
Health centers for residents of public housing52 are located in public housing and aim to provide
primary care to individuals who reside in public housing. These centers provide the services
required of CHCs and are not required to provide specific supplemental services. These centers
were authorized in 1990 because of congressional concern that public housing residents had
worse health than similar (by demographic and economic status) individuals who did not reside in
public housing.53
Migrant Health Centers
Migrant health centers provide care to migratory farm workers (persons whose principal
employment is in agriculture on a seasonal basis and who establish temporary residences for work
purposes) and seasonal farm workers (persons whose principal employment is in agriculture on a
seasonal basis and who are not migratory agricultural workers).54 HRSA estimates that they
provide care to more than one-quarter of all migrant and seasonal farmworkers.55 In addition to
the general health center requirements, migrant health centers are required to provide certain
services specific to their service population’s health needs such as supportive services,
environmental health services, accident prevention, and prevention and treatment of health
conditions related to pesticide exposure.56 Migrant health centers may be exempt from providing
all required services, and may only operate during certain periods of the year.
Comparison of Health Center Types
Table 5 describes the four types of health centers, their target populations, the services they are
required to provide, and the populations they serve. Additional services are assessed relative to
the CHC service requirements (see “Health Service Requirements”).
52 As defined by 42 U.S.C. §1437 et. seq.
53 P.L. 101-527, see also National Center for Health in Public Housing, “Public Housing Primary Care Program
(PHPC),” press release, July 28, 2011, http://www.nchph.org/healthcenterprofiles.html.
54 42 U.S.C. 254b.
55 Health Center Quality Improvement Report.
56 42 CFR 56.102(g).
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Table 5. Comparison of Health Center Types
(2010)
Health Center
Target
Number of
Additional
Population
Type
Population
Sites
Requirements
Characteristicsa
Community
All individuals who
7,508 Not
Applicable.b 17,799,585c
Health Centers
live in service area
Health Centers
Homeless
2,438 Prevention
and 697,769 homeless
For the
individuals
treatment services for
patients seen; more than
Homeless
substance abuse.
20,000 of the patients
served were veterans.
Health Centers
Individuals who
712
Must consult with
172,731 patients seen.
for Residents of
reside in or near
public housing residents Approximately 46% of
Public Housing
public housing
prior to applying for a
the patient population
grant.
were African American
and 35% were of
Hispanic origin.
Migrant Health
Migrant,
2,438 Environmental
health
799,382 patients seen in
Centers
agricultural
services including
2010; more than 90% of
workers
sanitation services; and
patients were of Hispanic
services related to the
origin.
prevention and
treatment of pesticide
exposure.
Source: HRSA’s Data Warehouse at http://datawarehouse.hrsa.gov/sitesdetail.aspx and HRSA, UDS, National
Rollup Report 2010.
a. Refers to the 2010 patient population.
b. CHC-required services are considered the baseline; therefore, additional requirements are assessed relative
to the requirements for CHCs.
c. HRSA does not report number of patients seen at CHCs; this number was estimated by subtracting the
number seen at the three other types of health centers from the total number of patients seen
(19,469,467).
Who Uses Health Centers?
According to HRSA, health centers served 19.5 million patients in 2010. These patients were
generally socioeconomically disadvantaged and uninsured or underinsured.57 The majority of
health center patients have incomes at or below the federal poverty level.58 Nearly a quarter of
patients are treated in a language other than English and the majority of health center patients are
racial or ethnic minorities. In 2010, nearly one-third of health center patients were identified as
African-American and/or Hispanic/Latino. Both of these rates are more than double the
proportion of these groups in the overall U.S. population. Table 6 presents some demographic
characteristics of the health center patient population in 2010 including age, race, ethnicity, and
insurance status.
57 2010 UDS Report.
58 The 2010 federal poverty level was $11,139 for an individual living alone; $14,218 for a two-person family; and
$22,314 for a family of four. For more information, see CRS Report RL33069, Poverty in the United States: 2010, by
Thomas Gabe.
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Table 6. Health Centers’ Patients’ Profile, 2010
Demographic Characteristics of Patients Percentage of Patients Served
Income are at or below the federal poverty level
72%
Live in a rural area
50%
African-American 26%
Enrolled in Medicaid
39%
Uninsured
38%
Hispanic/Latino 35%
Age 18 and younger
34%
Enrolled in Medicare
7%
Age 65 and older
7%
Source: Department of Health and Human Services, Health Resources Services and Administration’s website:
http://bphc.hrsa.gov/healthcenterdatastatistics/index.html, 2010 Data Snapshot; and HRSA website: “What is a
Health Center” at http://bphc.hrsa.gov/about/.
Where Are Health Centers Located?
Figure 1 shows the locations of health centers funded with PHSA Section 330 grants. These
include some school-based health center locations because some grantees use Section 330 funds
to support this health center type. The map generally shows, as expected, that the majority of sites
are community health centers. It also shows that a number of health centers receive grants to
operate multiple health center types in the same geographic area.
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Figure 1. Health Center Grantee Sites
(Data as of June 2011)
Source: HRSA Geospatial Data Warehouse.
Notes: Some entities use PHSA Section 330 funds to operate School Based Health Center even though these
centers are not explicitly authorized in PHSA Section 330. The ACA created a separate grant program to
support School-Based Health Centers. This program is discussed in Appendix A.
What Outcomes Are Associated with Health Center Use?
Researchers have found that access to health centers can improve health outcomes and reduce
costs for the populations and areas they serve.59 Research has also found that health centers may
increase access to health care for generally underserved populations such as those enrolled in
Medicaid and racial and ethnic minorities. This section briefly summarizes the research on the
effects of health centers on health, costs, and access.
59 This research is summarized in report sections “Health Outcomes” and “Cost Outcomes.”
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Health Outcomes
Health centers focus on preventive care and attempt to manage patients’ chronic conditions. This
focus may improve health by preventing disease and disease-related complications.60 Research
has found that health center patients are more likely to receive preventive health services—
including pap tests and influenza vaccinations—and more likely to receive preventive
screenings—including mammograms and colonoscopies—when compared to non-health center
patients of similar socioeconomic status.61 Health center patients are also more likely to have their
chronic conditions—like diabetes—managed.62 Finally, health centers aim to increase prenatal
care use in low income pregnant women to reduce outcomes associated with infant mortality such
as low birth weight. HRSA has found that health centers have succeeded in this effort because an
increasing number of health center patients initiate prenatal care in their first trimester. This has
resulted in fewer health center patients—when compared to the national average—having low
birth weight babies—a major cause of infant death.63
Cost Outcomes
Researchers have found that health centers may lower health care costs by reducing more costly
emergency department visits. GAO found that, on average, treatment at health centers is nearly
one-seventh the cost of treatment of the same condition in an emergency department.64 Given
these differences in cost, health centers that are successful at reducing emergency department use
may reduce health care costs. One study found that counties with health centers have lower
emergency room use and that individuals who live near health centers use emergency rooms
less.65 In addition, GAO found that health centers attempt to lower emergency department use in
the communities in which they operate by educating patients about services offered at health
centers and by offering same day and afterhours appointments.66
Health centers may also reduce health care costs by preventing unnecessary hospitalizations. A
number of studies have examined “ambulatory sensitive conditions,” which are conditions that
60 U.S. Government Accountability Office, Hospital Emergency Departments: Health Center Strategies that May Help
Reduce Their Use, GAO-11-414R, April 11, 2011.
61 Leiyu Shi et al., “Racial/Ethnic and Socioeconomic Disparities in Access to Care and Quality of Care for US Health
Center Patients Compared with Non-Health Center Patients,” Journal of Ambulatory Care Management, vol. 32, no. 4
(October-December 2009), pp. 342-350 and Leiyu Shi and Gregory D. Stevens, “The Role of Community Health
Centers in Delivering Primary Care to the Underserved,” Ambulatory Care Management, vol. 30, no. 2 (April-June
2007), pp. 159-170.
62 Marshall H. Chin et al., “Quality of Diabetes Care in Community Health Centers,” American Journal of Public
Health, vol. 90, no. 3 (March 2000), pp. 431-434.
63 FY2012 HRSA Budget Justification and CRS Report R41378, The U.S. Infant Mortality Rate: International
Comparisons, Underlying Factors, and Federal Programs, by Elayne J. Heisler.
64 See research summarized in U.S. Government Accountability Office, Hospital Emergency Departments: Health
Center Strategies that May Help Reduce Their Use, GAO-11-414R, April 11, 2011.
65 Md. Monir Hossain and James N. Laditka, “Using Hospitalization for Ambulatory Care Sensitive Conditions to
Measure Access to Primary Health Care: An Application of Spatial Structural Equation Modeling,” International
Journal of Health Geography, vol. 8, no. 51 (August 2008) and Janice C. Probst et al., “Association Between
Community Health Center and Rural Health Clinic Presence and County-Level Hospitalization Rates for Ambulatory
Care Sensitive Conditions: An Analysis Across U.S. States,” BMC Health Services Research, vol. 9, no. 134 (July
2009).
66 U.S. Government Accountability Office, Hospital Emergency Departments: Health Center Strategies the May Help
Reduce Their Use, GAO-11-414R, April 11, 2011.
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potentially can be treated in an outpatient setting thus avoiding a hospitalization. These studies
have found that in communities with health centers, individuals with these conditions were less
likely to be hospitalized.67 Health center patients enrolled in Medicaid were also less likely to be
hospitalized and less likely to have an emergency room visit.68
Researchers have also found that patients who receive the majority of their care at health centers
had lower medical costs (41% lower on average) than those who receive the majority of their care
through another source.69 Another study found the difference to be 24%,70 while a North Carolina
study found that health center users’ annual health care spending was 62% less than similar
patients (matched by demographic characteristics and health status) who were served in other
outpatient settings.71 Regardless of the magnitude of the difference, there appears to be consensus
that health centers provide less costly health care than other outpatient settings.72 The reasons that
health centers provide less costly care are debated. The authors of the North Carolina study
suggest that health centers provide health care at a lower cost because they can offer discounted
services through federal programs (see “Which Federal Programs Are Available to Health
Centers?”). They also suggest that health centers may provide less costly care because their
providers work on a salaried basis, and so do not have financial incentives to order additional
tests. In other outpatient settings this may not be the case because providers generally work under
a fee-for-service model where they may receive additional remuneration for providing more
services.73 Other studies note that differences in the cost of services do not explain the difference
because health centers are paid the FQHC rate, which should likely be comparable to, or higher
than, the rates reimbursed in other outpatient settings. Given differing explanations on how health
centers may reduce health care costs, the researchers state that health center costs may be lower
because they avert more costly emergency room visits, specialty care, or hospital stays.74
Access to Health Care
Health centers aim to provide care to underserved populations and, in doing so, may increase
health care access. By definition, health centers are located in areas with few providers including
rural and inner city areas. These locations may provide to access for populations that are
67 The study measured “ambulatory care sensitive conditions,” which are conditions for which hospitalization could
have been prevented with timely primary care. These conditions are used as a measure of access to health care and this
measure has been endorsed by the Institute of Medicine, among others. See MD Monir Hossain and James N. Laditka,
“Using Hospitalization for Ambulatory Care Sensitive Conditions to Measure Access to Primary Health Care: An
Application of Spatial Structural Equation Modeling,” International Journal of Health Geography, vol. 8, no. 51
(August 2008).
68 Health Center Quality Improvement Report.
69 Ibid.
70 Patrick Richard et al., “Cost Savings Associated with the Use of Community Health Centers,” Journal of Ambulatory
Care Management, vol. 35, no. 1 (2012), pp. 50-59.
71 Patrick Richard, et al., Bending the Health Care Cost Curve in North Carolina: The Experience of Community
Health Centers, Geiger Gibson/RCHN Community Health Foundation Research Collaborative, Policy Research Brief
#24, Washington, DC, August 9, 2011.
72 See, for example, discussion in HRSA FY2012 Budget Justification and HRSA FY2013 Budget Justification.
73 Patrick Richard, et al., Bending the Health Care Cost Curve in North Carolina: The Experience of Community
Health Centers, Geiger Gibson/RCHN Community Health Foundation Research Collaborative, Policy Research Brief
#24, Washington, DC, August 9, 2011.
74 Patrick Richard et al., “Cost Savings Associated with the Use of Community Health Centers,” Journal of Ambulatory
Care Management, vol. 35, no. 1 (2012), pp. 50-59.
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otherwise underserved, for example, because of geography or income. Health centers also serve a
more diverse population than do office-based physicians; health center patients were more likely
to be Hispanic or African American.75 Health centers may also increase access for specific racial
and ethnic groups. For example, one study found that health centers increase health care access
for Asian Americans, Native Hawaiians, and other Pacific Islanders.76 Some research has
suggested that because health centers provide care to a population that might otherwise have
difficultly accessing health care, health centers may reduce health disparities.77
Health centers are more likely to accept new patients and patients who are unable to pay for
services (i.e., charity patients). Health center patients are also more likely to be enrolled in
Medicaid or CHIP. As noted above health centers are required to coordinate with Medicaid and
CHIP plans and are required to accept all patients regardless of their insurance status or ability to
pay. Some researchers have found that private providers may not accept Medicaid patients
because of the program’s administrative requirements or low reimbursements rates.78 Given this
possibility, health centers may provide access to Medicaid and CHIP patients who would
otherwise have difficulty finding care.
Which Federal Programs Are Available to Health Centers?
Section 330 grants, on average, cover approximately one-fifth of the cost of operating a health
center;79 the federal government provides other assistance—for example, provider recruitment
and financial assistance—that may support individual health center operations. To assist with
operations, health centers may employ members of the National Health Service Corps (NHSC), a
program that provides scholarships and loan repayments in exchange for a period of service at a
health center.80 The federal government also provides financial support to health centers. For
example, it designates health centers as Federally Qualified Health Centers (FQHCs), thereby
making these facilities eligible for higher Medicare and Medicaid reimbursement rates.81
Medicaid is the largest source of reimbursements, providing nearly 38% of all revenue for the
health center program (see Table 4). While the amount received by an individual health center
varies by the percentage of the patient population that is enrolled in Medicaid, the NACHC
estimates that more than one-third of all health center revenue is from Medicaid
75 Esther Hing, Roderick S. Hooker, and Jill J. Ashman, “Primary Health Care in Community Health Centers and
Comparisons with Office-Based Practice,” Journal of Community Health, vol. 36, no. 3 (2011), pp. 406-413.
76 Rosy Chang Weir, “Use of Enabling Services by Asian American, Native Hawaiian, and Other Pacific Islander
Patients at 4 Community Health Centers,” American Journal of Public Health, vol. 100, no. 11 (November 2010), pp.
2199-2205.
77 Health Center Quality Improvement Report.
78 Jack Hadley and Peter Cunningham, “Availability of Safety Net Providers and Access to Care of Uninsured
Persons,” Health Services Research, vol. 39, no. 5 (October 2004), pp. 1527-1546 and Peter J. Cunningham and Ann S.
O'Malley, “Do Reimbursement Delays Discourage Medicaid Participation by Physicians?” Health Affairs, vol. 28, no.
1 (November 18, 2008), p. w17–w28.
79 Ibid.
80 They may also fulfill their National Health Service Corps (NHSC) commitment at other types of facilities that
provide care to the underserved.
81 These payments are discussed in more detail in Appendix B; payments are considered to be “higher” than the
payment rates that physician practices receive because they are cost-based and reflect a broader range of services, than
do payments to physician practices. See, for example, Department of Health Policy, School of Public Health and Health
Services, The George Washington University, Quality Incentives for Federally Qualified Health Centers, Rural Health
Clinics and Free Clinics: A Report to Congress, Washington, DC, January 23, 2012.
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reimbursements.82 Health centers are also eligible for discounted prescription drugs and vaccines.
Health centers may also receive additional support from grants and loans offered through other
federal programs.
National Health Service Corps Providers
Health centers are automatically designated as health professional shortage areas (HPSAs) and
are therefore eligible for National Health Service Corps (NHSC) providers. The NHSC provides
scholarships or loan repayments to health professionals working at specific facilities in HPSAs.
About half of Corps members serve in health centers,83 making the program an important
mechanism for health centers to recruit providers. In addition to the NHSC, some states may
operate loan repayment programs for health professionals providing care in state designated
shortage areas.84
J-1 Visa Waivers
Health centers may also be able to obtain providers temporarily through special waivers for J1
visa physicians. In general, foreign medical graduates who entered the country on a J-1 student
visa must return to their home country for two years after they have completed their medical
training (medical school and residency). J-1 visa waivers permit the two year foreign residency
period to be waived if the J-1 visa holder practices primary care in a HPSA.85 Because health
centers are designated as HPSAs, a number of centers may rely on this program to recruit
physicians.86
Federally Qualified Health Center Designation87
Health centers are automatically designated as Federally-Qualified Health Centers (FQHCs),88 but
must enroll as a provider in the Medicare and/or Medicaid programs to receive the higher89
82 2009 Health Center Chartbook.
83 For more detailed information on the NHSC, see HRSA FY2012 Budget Justification.
84 National Association of Community Health Centers, The Struggle to Build a Strong Workforce at Health Centers,
Fact Sheet #0609, Washington, DC, 2009.
85 CRS Report R40848, Immigration Legislation and Issues in the 111th Congress, coordinated by Andorra Bruno and
http://www.raconline.org/topics/hc_providers/j1visafaq.php.
86 This program provides a limited number of visa waivers and requires that the applicant have a three-year
employment contract. For more information, see http://www.raconline.org/topics/hc_providers/j1visafaq.php.
87 Because all health centers are eligible to be designated as Federally Qualified Health Center (FQHCs) some refer to
FQHCs and health centers interchangeably.
88 Entities that receive PHSA Section 330 funds directly or through a contract with a Section 330 grantee, may be
designated as Federally Qualified Health Centers (FQHCs). When FQHCs were first established in 1989, entities that
received PHSA Section 329 and Section 340 grants were also eligible to become FQHCs. The latter program is no
longer authorized and the former is not currently funded.
89 These payments are discussed in more detail in Appendix B; payments are considered to be “higher” than the
payment rates that physician practices receive because they are cost-based and reflect a broader range of services, than
do payments to physician practices. See, for example, Department of Health Policy, School of Public Health and Health
Services, The George Washington University, Quality Incentives for Federally Qualified Health Centers, Rural Health
Clinics and Free Clinics: A Report to Congress, Washington, DC, January 23, 2012.
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reimbursement rates for services provided to patients enrolled in these programs.90 This higher
reimbursement rate is an important source of health center revenue because more than one-third
of the patients seen at health centers are enrolled in Medicaid.91 Specific FQHC Medicare and
Medicaid reimbursement methodology, including recent payment changes, are described in
Appendix B.
340B Drug Pricing Program92
Federal health centers are eligible to participate in the 340B Drug Pricing program, which
requires drug manufacturers to provide drug discounts or rebates to 340B eligible facilities. The
program is free for health centers and provides drugs at discount prices—ranging from 13% to
23% below average manufacturer price depending on the type of drug. HRSA reports that 340B
eligible facilities, between FY2010 and FY2011, will receive an estimated $3 billion in drug
discounts through the program.93
Vaccines for Children Program94
Health centers are eligible to participate in the Vaccines for Children Program (VFC), which
provides vaccines for low income children who may not be vaccinated because of costs. The
program is administered by the Centers for Disease Control and Prevention (CDC) and partially
funded by Medicaid. The CDC buys the vaccines and distributes them to health departments that,
in turn, distribute them to VFC providers including health centers. VFC provides free vaccines to
Medicaid enrolled children and VFC eligible children (those who are uninsured, underinsured,95
or those who are American Indian or Alaska native). Health centers are a VFC eligible provider,
and provide vaccinations as part of their mission to provide primary and preventive services. The
VFC program enables health centers to provide these vaccines at a lower cost to the patients and
to the health center.
Federal Torts Claims Act Coverage
Health center employees and board members do not need to carry medical malpractice coverage
because they are covered under the Federal Tort Claims Act (FTCA).96 Under this program, health
center employees and contractors cannot be sued for medical malpractice for care they provided
that was within the scope of their health center employment. According to HRSA, in FY2010,
90 Health Resources and Services Administration, Program Assistance Letter: Process of Becoming Eligible for
Medicare Reimbursements under the FQHC Benefit, Rockville, MD, March 8, 2011.
91 Health Center Quality Improvement Report.
92 HRSA FY2012 Budget Justification.
93 Ibid.
94 This paragraph is drawn from Centers for Disease Control and Prevention, Vaccines for Children Operations Guide,
Atlanta, GA, February 2, 2011, http://www.cdc.gov/vaccines/programs/vfc/downloads/vfc-op-guide/vfc-op-guide-all-
chaptr-files.pdf.
95 Underinsured refers to children who have private insurance coverage that does not cover vaccination or where
vaccination coverage is capped at a certain amount. VFC coverage for underinsured children is only available at health
centers and rural health clinics.
96 CRS Report 95-717, Federal Tort Claims Act (FTCA), by Vivian S. Chu.
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103 claims were paid through the FTCA program totaling $52.6 million.97 This program provides
financial support to health centers because the center would otherwise have to pay for this
coverage and would be responsible for payment and rate increases that may accompany claims
made against health center providers.98
Ryan White HIV/AIDS Treatment Grants99
Health centers are eligible to receive grants authorized under parts A and C of the Ryan White
AIDS program. Part A authorizes grants for primary care, access to antiretroviral therapies, and
other health and supportive services. These grants are awarded to certain metropolitan areas and
are used to provide care for low-income, underserved, uninsured, or underinsured individuals
living with HIV/AIDS. Part C grant funds are awarded to entities to provide medical services
such as testing, referrals, and clinical and diagnostic services to underserved and uninsured
people living with HIV/AIDS in rural and frontier communities. In 2009, health centers received
approximately $75 million in Ryan White AIDS program grants.100
Other Federal Grant Programs101
Health centers are eligible to apply for a number of federally funded grant programs including
programs that seek to improve rural health and health care;102 increase mental health and
substance abuse services availability;103 provide services to high-risk pregnant women and their
infants;104 increase health professional training at health centers;105 and increase access to family
planning services for low income families.106 The majority of these programs are funded by
discretionary appropriations and are competitive grant programs authorized in the PHSA.
Programs specific to rural areas may also be administered by the U.S. Department of Agriculture
(USDA) and are authorized in other acts. For example, health centers in rural areas may be
eligible for USDA programs that may assist facilities with acquiring equipment or space through
loan guarantees and with acquiring broadband access.107 Health centers may also use General
97 HRSA FY2013 Budget Justification.
98 This responsibility could include both the cost of the claims and the legal costs resulting from defending providers
against these claims.
99 For more information about this program, see CRS Report RL33279, The Ryan White HIV/AIDS Program, by Judith
A. Johnson.
100 2010 UDS Report.
101 In addition to federal support and amounts collected from reimbursements, health centers may also receive support
from private foundations and state or local government grants and contracts; see 2010 UDS Report.
102 HRSA FY2013 Budget Justification; for programs through the U.S. Department of Agriculture, see
http://www.rurdev.usda.gov/RD_Grants.html.
103 CRS Report R41477, Substance Abuse and Mental Health Services Administration (SAMHSA): Agency Overview
and Reauthorization Issues, by C. Stephen Redhead.
104 Health Resources and Services Administration, Maternal and Child Health Bureau, “Healthy Start,” accessed
October 14, 2011, http://mchb.hrsa.gov/programs/healthystart/index.html.
105 CRS Report R41390, Discretionary Funding in the Patient Protection and Affordable Care Act (ACA), coordinated
by C. Stephen Redhead, and CRS Report R41301, Appropriations and Fund Transfers in the Patient Protection and
Affordable Care Act (PPACA), by C. Stephen Redhead.
106 CRS Report RL33644, Title X (Public Health Service Act) Family Planning Program, by Angela Napili.
107 For description of these programs, see United States Department of Agriculture Rural Development, accessed
October 14, 2011, http://www.rurdev.usda.gov/HCF_CF.html.
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Services Administration resources to acquire real estate and dispose of property108 and may use
the Department of Housing and Urban Development’s insurance program to finance facility repair
and improvement.109
Issues for Congress
There are a number of issues facing health centers that may be of concern to Congress. These
include (1) the role of health centers in health insurance expansions under the ACA; (2) the
adequacy of the health center workforce; and (3) financial challenges that health centers may
face. These challenges may also be interrelated; for example, health centers may be affected by
the mandatory budget reductions that may be required as part of the Budget Control Act (P.L.
112-25),110 and such budget reductions may impact the ability of health centers to provide access
to care for the newly insured when the ACA is fully implemented. This section briefly
summarizes these issues and discusses how some ACA changes may alleviate or exacerbate
health center concerns.
Health care access has traditionally been an issue of congressional concern. For example, GAO,
at congressional request, has examined Medicare and Medicaid beneficiary access to health care
providers.111 In addition, one of the purposes of ACA Title V was to improve access to and the
delivery of health care services for all individuals, particularly low income, underserved,
uninsured, minority, health disparity, and rural populations.112 The health workforce and its role in
providing access to traditionally underserved populations has also been an area of congressional
interest. For example, one of the four mechanisms that Title V of the ACA included to improve
health care access was to “increase the supply of a qualified health care workforce.” The title also
reauthorized a number of programs in Titles VII and VIII of the PHSA both of which focus on the
workforce.
Congress, through the appropriations process for the health center program and for programs that
support health centers, has an interest in the financial circumstances that health centers face.
Congress may also be interested in how deficit reduction efforts and other policy changes (for
example, changes in Medicare and Medicaid payments or eligibility) may affect the health center
program and the financial circumstances of individual health centers. Finally, Congress may
consider program changes—such as making changes to granting preference or program
requirements—as a way of addressing some of the challenges that health centers face.
108 See General Services Administration, Federal Real Property Utilization and Disposal at https:///
propertydisposal.gsa.gov and Personal Property for Reuse and Sale at http://www.gsa.gov/portal/category/21045.
109 See U.S. Department of Housing and Urban Development, Property Improvement Loan Insurance (Title I) at
http://www.hud.gov/offices/hsg/sfh/title/title-i.cfm.
110 These budget reductions will be required if spending exceeds certain levels. For more information, see CRS Report
R41965, The Budget Control Act of 2011, by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M. Mahan.
111 For discussion of Medicare beneficiary access, see U.S. Government Accountability Office, Medicare Physician
Services: Utilization Trends Indicate Sustained Beneficiary Access with High and Growing Levels of Service in Some
Areas of the Nation, 09-0559, August 28, 2009, http://www.gao.gov/new.items/d09559.pdf; for Medicaid, see U.S.
Government Accountability Office, State and Federal Actions Have Been Taken to Improve Children’s Access to
Dental Services, but More Can Be Done, GAO-10-112T, October 7, 2009, http://www.gao.gov/products/GAO-10-
112T.
112 P.L. 111-148. The populations included in the purpose of this title are those that are traditionally served by health
centers.
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Health Centers and Health Insurance Expansion in the ACA
The ACA, by expanding health insurance coverage, may increase the number of health center
patients and may increase the amount of reimbursements received. The ACA aims to expand
insurance coverage by expanding Medicaid eligibility and by providing subsidies for certain
individuals to obtain private insurance.113 These changes may increase the number of individuals
who access health centers and may increase the amount of reimbursements that health centers
receive. Although health centers are available to the uninsured and Medicaid patients prior to the
full implementation of the ACA, patients are required to pay for services based on their income
(see “Fee Schedule Requirements”). Individuals who obtain private health insurance or Medicaid
coverage under the ACA may have lower out of pocket costs for services received at health
centers. These lower costs could increase the number of health center patients.114 There is also
evidence that individuals use more health services after obtaining insurance coverage. If this
occurs after the ACA is implemented, it would also increase health center use.115 Evidence from
Massachusetts, which implemented health insurance expansions similar to those included in the
ACA, suggests that health center use will increase after implementation. Massachusetts health
centers reported that their patient case load increased by 7% after the state’s health insurance
expansions were implemented.116 The ACA health insurance and Medicaid expansion, by
potentially increasing the health center patient base, may also strain health centers’ capacity to
provide services. These changes may affect health care access in general and health care access
for Medicaid beneficiaries in particular. This section discusses the potential impacts of Medicaid
and private insurance expansion on health centers.
Health Centers and Medicaid Expansion
The ACA aims to increase health insurance coverage, in part, by expanding Medicaid
enrollment.117 Medicaid beneficiaries may seek care at health centers because some private
providers may not accept Medicaid because of low reimbursement rates or administrative
requirements,118 whereas health centers are required to accept Medicaid patients. Some have
speculated that the ACA’s investment in health centers—in particular through the CHCF—was, in
part, in recognition of the potential for an expanded health center population base.119 Should
health centers provide care to an expanded Medicaid population this would likely benefit health
113CRS Report R41664, ACA: A Brief Overview of the Law, Implementation, and Legal Challenges, coordinated by C.
Stephen Redhead.
114 Kaiser Commission on Medicaid and the Uninsured, Community Health Centers: Opportunities and Challenges of
Health Reform, Issue paper, Washington, DC, August 2010.
115 U. S Department of Health and Human Services, Health Resources and Services Administration, Bureau of Health
Professions, The Physician Workforce: Projections and Research into Current Issues Affecting Supply and Demand,
December 2008,ftp://ftp.hrsa.gov/bhpr/workforce/physicianworkforce.pdf.
116 Kaiser Commission on Medicaid and the Uninsured, How is the Primary Care Safety Net Faring in Massachusetts?
Community Health Centers in the Midst of Health Reform, Issue paper, Washington, DC, March 2009.
117117CRS CRS Report R41664, ACA: A Brief Overview of the Law, Implementation, and Legal Challenges,
coordinated by C. Stephen Redhead.
118 Peter J. Cunningham, State Variation in Primary Care Physician Supply: Implications for Health Reform Medicaid
Expansions, Center for Studying Health System Change, No 19, Washington, DC, March 2011.
119 Kaiser Commission on Medicaid and the Uninsured, Community Health Centers: Opportunities and Challenges of
Health Reform, Issue paper, Washington, DC, August 2010 and Patrick Richard et al., “Cost Savings Associated with
the Use of Community Health Centers,” Journal of Ambulatory Care Management, vol. 35, no. 1 (2012), pp. 50-59.
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centers because more health center patients will have services reimbursed by Medicaid.120 The
expanded service population may strain health centers’ capacity to provide services, as discussed
below.
Health Centers and ACA Private Insurance Expansions
Health centers are also a source of care for the uninsured, some of whom may obtain private
insurance coverage under the ACA. There are some who suggest that once health center patients
who were previously uninsured gain insurance coverage, they may seek private providers, which
would reduce the health center service population. However, evidence from Massachusetts, which
has already expanded insurance coverage, does not suggest that this will occur. Researchers found
that Massachusetts health centers retained their patients after Massachusetts’s insurance
expansion was implemented.121 Should this occur after the ACA insurance expansions, it would
likely benefit health centers because more health center patients will have services reimbursed by
private insurance,122 which should increase health center revenue. Experts project that 9.2% of
health center patients will be covered by a private insurance plan offered through the new health
insurance exchanges and that this percentage should grow over time.123
The ACA also requires that private insurance policies offered through the newly created
exchanges include access to “essential community providers”—providers that serve
predominately low-income and medically underserved individuals, including health centers.124
This would mean that health centers would be included as providers in all health insurance plans
offered through the exchanges. This requirement may mean that some newly insured who were
not previously health center patients may consider becoming health center patients.
The impact of the ACA when fully implemented on the health center patient base and revenue is
not yet known. Furthermore, as will be discussed below, health centers face other challenges that
may make it difficult to provide care to an expanded population. For example, an expanded
patient base could strain health centers’ capacity to provide care because some health centers have
provider shortages. It is also possible that an expanded patient base may exacerbate some of the
financial challenges that health centers face as reimbursements may not cover the cost of
providing care125 and some patients will remain uninsured.126
120 Ibid.
121 Mary Takach, Community Health Centers and Health Reform: Highlights from a National Academy for State Health
Policy Forum, National Academy for State Health Policy, Washington, DC, October 2008.
122 Kaiser Commission on Medicaid and the Uninsured, Community Health Centers: Opportunities and Challenges of
Health Reform, Issue paper, Washington, DC, August 2010 and National Association of Community Health Centers,
Expanding Health Centers Under Health Care Reform: Doubling Patient Capacity and Bringing Down Costs,
Washington, DC, June 2010.
123 Ibid.
124 42 U.S.C. §13031.
125 See discussion below for “Financial Considerations” and discussion above (“Medicaid Coordination and
Reimbursement Requirements”) for information on how reimbursed rates relate to the cost of care.
126 Although the ACA will expand insurance coverage some will remain uninsured even if full implementation occurs.
Health centers will continue to provide access to this population and may have to rely on grant funding and sliding
scale fees because some of the remaining uninsured population will not eligible for Medicaid or ACA subsidies for
private plans offered through the exchange.
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Health Center Workforce
One of the major challenges that health centers face is employing and retaining health care
providers. The National Association of Community Health Centers (NACHC)—the advocacy
group for health centers—estimates that, in 2008, health centers had 1,800 too few primary care
providers (physicians, nurse practitioners, and certified nurse midwives) and 1,400 too few
nurses. The organization further estimated that staffing needs would increase with health center
expansion resulting in a shortage of between 15,000 and 19,000 primary care providers and
between 11,000 and 14,000 nurses in 2015.127 Health centers may have challenges recruiting and
retaining staff because they are located in rural and remote areas; because there are generally
declining numbers of primary care providers;128 and because private practice options are generally
more lucrative for providers.129 Health centers have traditionally relied on the National Health
Service Corps (NHSC) to recruit providers; this section discusses some of the advantages and
disadvantages of that strategy. The section also discusses the advantages and disadvantages of a
new ACA-authorized program—teaching health centers—to increase provider training at health
centers.
National Health Service Corps Providers
To lessen the health center provider shortages, the federal government makes NHSC providers
available to health centers. Recent expansions of the NHSC130 may help health centers fill
vacancies; however, appropriations in FY2011 and FY2012 indicate that these expansions may
not continue.131 More than half of all NHSC providers fulfill their service commitment in health
centers, making this program an important component of the health center workforce. However,
the reliance on the NHSC may create instability in the health center workforce, because the
NHSC offers scholarships and loan repayments in return for a service commitment for a defined
period of time. Some NHSC providers will stay beyond their service commitment; however, not
all will, which may mean high turnover among health center providers. This can lead to
discontinuity in care, and additional costs for health centers because of the need to continuously
recruit and train providers.
Teaching Health Centers
The ACA authorizes a new program to increase medical residency training at health centers,
which may help health centers recruit physicians, but may also challenge the health centers that
operate these programs. The ACA authorizes teaching health centers: medical residency training
programs that are located at outpatient facilities including health centers. Prior research has found
127 National Association of Community Health Centers, The Struggle to Build a Strong Workforce at Health Centers,
Fact Sheet #0609, Washington, DC, 2009.
128 CRS Report R42029, Physician Supply and the Patient Protection and Affordable Care Act, by Elayne J. Heisler
and Amanda K. Sarata.
129 Roger A. Rosenblatt et al., “Shortages of Medical Personnel at Community Health Centers: Implications for Planned
Expansion,” Journal of the American Medical Association, vol. 295, no. 9 (March 2006), pp. 1042-1049.
130 U.S. Department of Health and Human Services, “HHS Announces Record Number of National Health Service
Corps Members,” press release, October 13, 2011, http://www.hhs.gov/news/press/2011pres/10/20111013a.html.
131 See discussion in HRSA section and Appendix 1 of CRS Report R41737, Public Health Service (PHS) Agencies:
Overview and Funding, FY2010-FY2012, coordinated by C. Stephen Redhead and Pamela W. Smith.
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that medical residents who train at health centers are more likely to be employed at health centers
after they complete their training.132 Teaching health centers may help health centers recruit
physicians; however, health centers may face a number of challenges when operating residency
programs. Case studies of pre-ACA teaching health centers found that operating a training
program requires provider time and may reduce the number of patients a health center can see,
thereby reducing health center reimbursements. These case studies also found that health centers
do not receive graduate medical education payments in amounts that are high enough to support
the full costs of the resident training and supervision. These case studies did show some benefits
from operating training programs. For example, teaching health centers were, as expected, an
important recruitment tool for health centers. These programs also connected non-primary care
providers (i.e., medical specialists) with health centers because some specialists may supervise
health center residents in other settings. The involvement of medical specialists in the health
center may expand health center services.133
The ACA appropriated funding for teaching health center graduate medical education payments
through FY2015. This funding may assist health centers in operating residency training programs,
because programs have stated that graduate medical education payments are generally not high
enough to support the cost of residency training.134 However, efforts exist to repeal these
payments (see H.R. 1216), and these payments are time limited (through FY2015). In addition,
although the ACA authorized funding for grants to develop teaching health centers, no funds have
been appropriated. Given that funding for teaching health center graduate medical education
payments is limited and uncertain, the ACA’s teaching health center program may have limited
effects on health center provider recruitment and retention.
Financial Considerations
Individual health centers may have a number of financial considerations including current and
future program appropriations which, in turn, affects the size of the individual health center’s
grant and the individual center’s ability to receive continued grant funding, the impact of federal
deficit reduction efforts on health centers, changes in state funding available for health centers,
and the potential effects of ACA care coordination efforts on health centers. Between 2000 and
2010, the health center program’s appropriation increased; however, given recent focus on deficit
reduction, it is unclear whether these expansions will continue. Whether the health center
program should be expanded or contracted is difficult to assess. Further, assessments about the
appropriate size of the health center program may also change depending on ACA
implementation, economic conditions in general, and a number of other factors. Given these
challenges, it is beyond the scope of this report to assess whether the size of the health center
program is appropriate. Instead, this section discusses changes in federal funding for health center
program and state funding for individual health centers and how the ACA may affect individual
health center finances.135 Specifically, state and local funding is a large source of support for
132 Krystal Knight et al., Health Centers’ Contributions to Training Tomorrow’s Physicians, National Association of
Community Health Centers, Washington, DC, August 2010.
133 Ibid.
134 U.S. Department of Health and Human Services, Health Resources and Services Administration, “HHS Announces
New Teaching Health Centers Graduate Medical Education Program,” press release, January 25, 2011,
http://www.hrsa.gov/about/news/pressreleases/110125teachinghealthcenters.html.
135 State funding for health centers varies by state and the number of health centers also vary; therefore, it is not
possible to assess the amount of state funding provided to health centers relative to a health center’s total budget.
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health centers (see Table 4), although the amount of funding an individual health center receives
varies. A number of states face fiscal challenges and have reduced their financial support of health
centers, but the ACA may provide additional support to health centers in the form of increased
reimbursements and reimbursements for care coordination, which many health centers currently
provide, but without reimbursement.
Health Center Appropriations and the Community Health Center Fund
The ACA included the CHCF, but it is unclear whether this will increase health center
appropriation levels. As shown in Table 3, the health center program has grown in the past
decade. This growth included funding increases for individual centers and funding for more
centers. ARRA continued these expansions, but appropriations for health centers may no longer
be increased as occurred in FY2011 and FY2012.136 As discussed above, the ACA appropriated
CHCF may be rescinded or used in place of the amounts that had been appropriated for the health
center program through the annual appropriations process. To a certain extent this occurred in
FY2011 and FY2012 when, as part of budget reduction efforts, $600 million of the CHCF was
used as part of the health center appropriation. Advocates note that this phenomenon resulted in
fewer New Access Point grants (i.e., grants to establish new health centers) being awarded as
HRSA used appropriated funds to support health centers already in existence including those
created using ARRA funds.137 This may indicate that the federal government’s focus has shifted to
maintaining the program—rather than continuing program expansions—as congressional concern
has increasingly focused on deficit reduction.
Health Center Appropriations and the Budget Control Act
Health center appropriations may also be affected by the possibility of budget reduction
provisions contained in deficit reduction proposals. The Budget Control Act (BCA, P.L. 112-25)
required that a deficit reduction plan be enacted to avoid mandatory budget reductions (called
sequestration). No such plan was enacted, so mandatory reductions are set to begin in 2013.138
Although budget reductions are limited to 2% for health centers, it is not clear whether this limit
will apply to CHCF funds.139 In addition, there are no limits on the budget reductions for some of
the programs that provide financial or in-kind support to health centers, such as the NHSC and
136 Funding increases discussed do not take into account inflation nor do they take into account medical inflation, which
is generally higher than general inflation.
137 Sara Rosenbaum and Peter Shin, Community Health Centers and the Economy: Assessing Center’s Role in
Immediate Job Creation Efforts, Geiger Gibson/ RCHN Community Health Foundation Research Collaborative, Policy
Research Brief #25, Washington, DC, September 14, 2011. In August of 2010, HRSA announced that there would be
up to $250 million available to support New Access Point grants and estimated that it would support 350 new health
center delivery sites in FY2011. However, in August of 2011, HRSA announced that it had awarded $28.8 million for
New Access Point grants. See U.S. Department of Health and Human Services, “HHS Announces Availability of
Health Center New Access Point Grants,” press release, August 9, 2010, http://www.hhs.gov/news/press/2010pres/08/
20100809a.html, and U.S. Department of Health and Human Services, “HHS Awards Affordable Care Act Funds to
Expand Access to Health Care,” press release, August 9, 2011, http://www.hhs.gov/news/press/2011pres/08/
20110809a.html.
138 CRS Report R41965, The Budget Control Act of 2011, by Bill Heniff Jr., Elizabeth Rybicki, and Shannon M.
Mahan.
139 This determination will be made by the Office of Management and Budget. CRS Report R42050, Budget
“Sequestration” and Selected Program Exemptions and Special Rules, coordinated by Karen Spar. This determination
will be made by the Office of Management and Budget.
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the Ryan White HIV/AIDS Program. Should sequestration occur as scheduled, health centers
could be affected both by reductions to their program budgets and by reductions to programs that
provide additional revenue, staffing, or services to health centers.
Health Center Funding and ACA Care Coordination Initiatives
The ACA may provide additional reimbursements to support care coordination. Health centers
may coordinate care in ways that reduce health care costs to the system overall, but may have
little or no monetary benefit to the health center doing the care coordination. For example, GAO
found that health centers employ a number of strategies to reduce emergency department use,
which, as noted above, is more expensive than care provided in a health center.140 Reduced
emergency department use may yield savings to third party payers or hospitals, but would not
yield savings to health centers. The opposite may actually be true, whereby health centers employ
strategies such as care coordination and case management, which may not be reimbursed by third
party payers. Some health centers are concerned about sustaining these efforts,141 and funding
constraints may make it more difficult for health centers to provide these services. However, the
ACA may make it more feasible for health centers to sustain these efforts because the law
includes programs that may provide additional reimbursements for care coordination activities.142
Specifically, health centers are eligible for increased reimbursements under Medicare to increase
primary care and care coordination143 and may participate in accountable care organizations that
aim to increase care coordination across health providers.144
Health Center Funding and State Funding Availability145
As discussed above, future federal funding for health centers is in flux; in addition, a number of
states are reducing their funding for health centers because of state-level fiscal constraints. As
shown in Table 4, state funding is an important source of revenue for health centers; however,
state funding available for health center varies by state and is declining. Specifically, in
November of 2010, the NACHC, in a letter to the Secretary of HHS, noted that state funding for
health centers had declined 42% since 2008. The organization also noted that some state
policymakers have argued that less state funding is needed for health centers because of the
140 U.S. Government Accountability Office, Hospital Emergency Departments: Health Center Strategies that May Help
Reduce Their Use, GAO-11-414R, April 11, 2011.
141 Ibid.
142 See discussion of these efforts in CRS Report R41474, Accountable Care Organizations and the Medicare Shared
Savings Program, by Amanda K. Sarata, and section on “PPACA Provisions Targeting Physician Productivity” in CRS
Report R42029, Physician Supply and the Patient Protection and Affordable Care Act, by Elayne J. Heisler and
Amanda K. Sarata.
143 Rebecca Adams, “HHS Announces Community Health Center Grant Opportunity,” CQ HEALTHBEAT NEWS, June
6, 2011 and U.S. Department of Health and Human Services, “Affordable Care Act to Support Quality Improvement
and Access to Primary Care for More Americans,” press release, September 20, 2011, http://www.hhs.gov/news/press/
2011pres/09/20110929b.html.
144 CRS Report R41474, Accountable Care Organizations and the Medicare Shared Savings Program, by Amanda K.
Sarata.
145 Unless otherwise noted, this paragraph is drawn from National Association of Community Health Centers,
Calculating the Cost: State Budgets and Community Health Centers, State Policy Report #39, Washington, DC,
November 2011 and Letter from Tom Van Coverden, President and CEO, National Association of Community Health
Centers, to Honorable Kathleen Sebelius, Secretary, U.S. Department of Health and Human Services, December 3,
2010, http://www.nachc.com/client/Leter%20to%20Secretary%20Sebelius%20-%20120310.pdf.
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federal government’s investment in the program through ARRA and ACA appropriations. In
contrast, advocates argue that such state funding is still needed and that these state funding
reductions coupled with the uncertainty of the CHCF may mean reductions in the services that
health centers can provide. Advocates also argue that much of the reduced health care costs
attributed to health center usage accrues to Medicaid—a joint federal-state program—so states
realize some cost savings from health centers, which should justify state investment in health
centers. A November 2011 report indicates that states continue to reduce their funding for health
centers. The report surveyed state funding levels for state FY2012 and found a 15% decline from
state FY2011. In addition, some states that have historically supported health centers have,
because of state budget concerns, withdrawn this support.146 Advocates argue that these recent
declines in state funding for health centers may continue and, when coupled with decreasing
federal appropriations for health centers, may strain health center finances.
Concluding Observations
Health centers serve a predominantly low-income medically underserved population who have
limited or no access to health care. Research has shown that health centers improve health care
access and improve health for the underserved populations they target. In doing so, health centers
may reduce the use of more costly emergency department services thereby reducing health care
costs. The federal government supports health centers through the health center program that
awards grants to plan, operate, and expand health centers and through programs that provide
recruitment and financial incentives including increased reimbursements through the FQHC
designation. Health center appropriations have increased over the past decade, but it is unclear
whether these increases will continue. There are a number of issues facing both the health center
program and individual health centers that may be of concern to Congress. On the program side,
Congress may be concerned about the program’s appropriation level and the impact of federal
deficit reduction efforts on the health center program. For individual health centers, Congress
may be concerned about provider vacancies and the role that individual health centers may play
in providing health access when the ACA is fully implemented.
146 Six states their funding; 19 states reduced their funding; and 15 states did not provide funding. National Association
of Community Health Centers, Calculating the Cost: State Budgets and Community Health Centers, State Policy
Report #39, Washington, DC, November 2011.and Dawn McKinney et al., Entering the Era of Reform: The Future of
State Funding for Health Centers, National Association of Community Health Centers, State Policy Report #33,
Washington, DC, October 2010, http://www.nachc.com/client/State%20Funding%20Report-%20Final.pdf.
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Appendix A. Other Federal Programs that May
Provide Primary Care to the Underserved
The federal government supports facilities that provide primary care to low-income or otherwise
medically underserved populations through a number of facilities that are similar to health
centers, but are not authorized in PHSA Section 330. For example, the ACA authorized funding
for school-based health centers and nurse-managed health clinics. Both of these facilities serve
underserved populations, but have different requirements than facilities authorized in PHSA
Section 330. The federal government also provides support for facilities that provide care to
targeted populations such as American Indians and Alaska Natives and Native Hawaiians,
facilities located in rural areas, facilities that provide mental health services, and facilities that
provide free care. This appendix describes these types of facilities, their authorization, and
program requirements.
School-Based Health Centers
School-based health centers (SBHCs) are facilities located on or near school grounds that provide
age-appropriate comprehensive primary health care services to students regardless of their ability
to pay.147 SBHCs may be located at public, private, charter, or parochial schools and must open, at
a minimum, during school hours.148 Prior to ACA, HRSA funded SBHCs through its Section 330
appropriation.149 ACA authorized separate SBHC grants in Section 339Z-1 of the PHSA and
appropriated $200 million ($50 million annually) from FY2010 to FY2013 to support grants for
SBHC construction and renovation.150 Although ACA authorized grants for SBHC operation,
funding was not appropriated in FY2011 or FY2012, and is not proposed for FY2013.151 Despite
the lack of an explicit SBHC operating grant program, some Section 330 grantees may operate
SBHCs. HRSA estimates that there are 358 SBHCs.152
147 U.S. Government Accountability Office, School-Based Health Centers: Available Information on Federal Funding,
11-18R, October 8, 2010, http://www.gao.gov/new.items/d1118r.pdf.
148 Section 2110(c)(9) of the Social Security Act defines a sponsoring facility as: a) a hospital; b) a public health
department; c) a community health center; d) a non-profit health care agency; e) a local educational agency; or f) a
program administered by the Indian Health Service or the Bureau of Indian Affairs or operated by an Indian tribe or a
tribal organization.
149 HRSA recognizes children as an underserved population and permitted SBHCs to apply for health center funding.
See Budget Period Renewal Non-Competing Continuation Funding Under the Consolidated Health Centers Program
Announcement Number: 5-H80-06-001, Catalog of Federal Domestic Assistance (CFA) No. 93.224, Program
Guidance, Fiscal Year 2006. U.S. Department of Health and Human Services, Health Resources and Services
Administration, Bureau of Primary Health Care, July 7, 2005, p. 3 (footnote 1) and page 4, at
ftp://ftp.hrsa.gov/bphc/docs/2005pins/2005-20.pdf
150 HRSA Press Office: HHS Announces Availability of $100 million for School-based Health Centers, October 4,
2010 at http://www.hrsa.gov/about/news/pressreleases/101004schoolbasedhealthcenters.html; and the awarding of this
funding, at http://www.hhs.gov/news/press/2011pres/12/20111208a.html. H.R. 1214 would repeal this funding and
rescind any unobligated funding.
151 HRSA FY2013 Budget Justification.
152 HRSA Data Warehouse.
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Nurse-Managed Health Clinics
Nurse-Managed Health Centers (NMHCs) are centers that provide comprehensive primary care
and wellness services to underserved populations where nurses provide the majority of health
services. NMHCs are required to serve the entire population in the area in which they are located
and must have an advisory committee similar to those required for Section 330 health centers.
NHMCs provide wellness services, prenatal care, disease prevention, management of chronic
conditions like asthma, hypertension and diabetes, and health education. Some also provide
dental and mental health services.153 ACA authorized grants to support NMHCs in PHSA Section
330A-1. In FY2010, HHS awarded $15 million to provide 3 years of support for 10 NHMCs.154
Grantees are required to submit a sustainability plan for operation after the federal grant period is
complete in 2013.155
Community Mental Health Centers
Community mental health centers (CMHC)156 are licensed facilities that provide mental health
services. These facilities are required to provide mental health services that are tailored to the
needs of children and adults (including the elderly) who have a serious mental illness. These
facilities are also required to provide services to individuals that have been discharged from
inpatient treatment at a mental health facility. Among the required services, CMHCs must provide
emergency services; day treatment or other partial hospitalization services; psychosocial
rehabilitation services; and screening for admission into state mental health facilities. The ACA
required that CMHCs provide less than 40% of its services to Medicare beneficiaries.157
CHMCs received approximately $400 million in funding in FY2009 through FY2011 through
Substance Abuse and Mental Health Services Administration (SAMHSA) block grants. In
addition, CMHCs are eligible for SAMHSA substance abuse prevention and treatment grants, and
HHS grants awarded through the Social Service Block Grant.158 CMHCs also receive
reimbursements from Medicare and Medicaid for covered services provided to beneficiaries
enrolled in these programs. According to CMS there are 639 Medicare approved CMHCs.159
153 Tina Hansen-Turton, NNCC 2010 Annual Report, National Nursing Centers Consortium, Philadelphia, PA,
http://www.nncc.us/site/pdf/publications/2010AnnualReport.pdf.
154 Department of Health and Human Services, “Sebelius Announces New $250 Million Investment to Strengthen
Primary Health Care Workforce,” press release, June 16, 2010, http://www.hhs.gov/news/press/2010pres/06/
20100616a.html.
155 Ibid.
156 As defined in 42 U.S.C. §1395x.
157 P.L. 111-152 added this requirement effective April 1, 2011. CMS is also proposing to establish conditions of
participation—requirements for Medicare providers—for new CMHCs. See Medicare Press Release. “Medicare
proposes new standards for Community Mental Health Centers.” June 16, 2011, http://www.cms.gov/apps/media/press/
release.asp?Counter=3982&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=
0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&
year=&desc=false&cboOrder=date.
158 CRS Report 94-953, Social Services Block Grant: Background and Funding, by Karen E. Lynch.
159 Office of Legislation, Centers for Medicare & Medicaid Services, April 1, 2011.
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Native Hawaiian Health Care
The federal government supports the Native Hawaiian Health Care System (NHHCS), which is
composed of five grantees and the Papa Ola Lokahi, a consortium of health care organizations
that provide primary care, health promotion, and disease prevention services to Native Hawaiians.
This population often faces cultural, financial, and geographic barriers to accessing health care
services. The NHHCS was originally authorized under the Native Hawaiian Health Care Act of
1988 (P.L. 100-579), which was reauthorized through FY2010 in the ACA.160 The NHHCS is not
a grant program under Section 330 of the Public Health Service Act, but the system receives
funding through the health center appropriation.161 In FY2010, NHHCS provided medical and
enabling services, such as transportation and translation services, to more than 8,400 people.162
Tribal Health Centers
Indian Tribes (ITs), Tribal Organization (TOs), and Urban Indian Organizations (UIOs)163 may
receive funds from the Indian Health Service (IHS) to operate health centers for American Indians
or Alaska Natives. Although tribal health centers may be similar to health centers funded under
Section 330 grants they are not subject to Section 330 requirements. For example, they are not
required to provide services to all individuals in their service area. They are also not required to
seek payments or reimbursements on behalf of the clients they see because IHS provides services
to all eligible American Indians and Alaska Natives free of charge. Tribal health centers—those
operated by an IT, a TO, or a UIO—may be designated as Federally Qualified Health Centers
(FQHCs)164 and receive the Medicare and Medicaid FQHC payment rate (See Appendix B).
ITs, TOs, and UIOs may also apply for and receive funds under Section 330 of the PHSA;
however, should an entity receive Section 330 funds it would be subject to all Section 330
requirements (i.e., would be require to provide services to non-American Indians and Alaska
Natives). Tribal health centers that receive Section 330 grants are also required to ensure that
funds received from IHS are only used to provide services to IHS-eligible individuals.
Rural Health Clinics
Rural health clinics (RHCs) are outpatient primary care facilities located in rural and medically
underserved areas. These facilities receive higher Medicare and Medicaid payments—similar to
the FQHC payment rate—for services provided to beneficiaries enrolled in the Medicare and
160 This program was reauthorized, through FY2019, in PPACA, see CRS Report R41630, The Indian Health Care
Improvement Act Reauthorization and Extension as Enacted by the ACA: Detailed Summary and Timeline, by Elayne J.
Heisler.
161 The NHHCS program has funded from the Consolidated Health Centers budget line annually since 1997. Personal
correspondence with HRSA’s Office of Legislation on January 20, 2011.
162 Health Resources and Services Administration, The Health Center Program: Special Populations at
http://bphc.hrsa.gov/about/specialpopulations.htm and HRSA FY2013 Budget Justification.
163 Indian Tribes and Tribal Organizations must be operating facilities under the authority of the Indian Self-
Determination and Education Assistance Act (P.L. 93-638); and Urban Indian Organizations must receive grants
authorized under Title V of the Indian Health Care Improvement Act. For more information, see CRS Report R41630,
The Indian Health Care Improvement Act Reauthorization and Extension as Enacted by the ACA: Detailed Summary
and Timeline, by Elayne J. Heisler.
164 These facilities received the ability to be designated as FQHCs in P.L. 103-66.
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Medicaid programs. RHCs are similar to health centers except that they (1) do not receive federal
grants; (2) may be operated by for-profit entities, (3) are not required to provide services to
individuals regardless of ability to pay; and (4) are not required to offer a sliding scale fee
schedule.165
Free Clinics
Free clinics are outpatient facilities that provide medical, dental, and behavioral health services to
underserved populations that are primarily uninsured. Free clinics are tax-exempt organizations
that provide health care to individuals regardless of their ability to pay and are not permitted to
charge for services.166 In general, free clinic funding comes from donations (both monetary and
in-kind), religious groups, foundations and corporations.167 There are more than 1,200 free
clinics168 that provide services to a population that is similar to that served by health centers.169
Free clinics do not receive funding from HRSA, but may participate in the Free Clinics Medical
Malpractice Program administered by HRSA that provides liability coverage to health care
providers at free clinics.170
FQHC Look-Alikes
FQHC look-alikes are facilities that meet the criteria to receive a health center grant, but do not
receive a grant because Section 330 funding is not available. The FQHC look-alike program
began in 1991 to support the demand for new health centers.171 HRSA and CMS can designate
certain facilities as “FQHC look-alikes,” making these facilities eligible for certain federal
programs (e.g., the NHSC and the 340B drug discount program)172 available to health centers and
for the FQHC payment rate. To be designated as an FQHC look-alike, a facility submits an
application to HRSA, the agency reviews the application and then recommends to CMS which
facilities should be designated as FQHC look-alikes. As of January 2012, HRSA reported that
there were 107 FQHC look-alikes.173
165 Health Resources and Services Administration, Department of Health and Human Services, Comparison of the
Rural Health Clinic and Federally Qualified Health Center Programs, Revised, Rockville, MD, June 2006,
http://www.ask.hrsa.gov/downloads/fqhc-rhccomparison.pdf.
166 42 U.S.C. §233.
167 Ibid.
168 See http://www.freeclinics.us/.
169 Darnell, Julie S. “Free Clinics in the United States: A Nationwide Survey.” Archives of Internal Medicine, vol. 170
(June 2010), pp. 946-953.
170 See http://bphc.hrsa.gov/ftca/freeclinics/; this coverage is similar to the Federal Torts Claims Act coverage
discussed above, see “Federal Torts Claims Act Coverage.”
171 Section 1905 of the Social Security Act for Medicaid; and Section 1861(aa)(4) of the Social Security Act for
Medicare.
172 See descriptions of these programs in the report sections “National Health Service Corps Providers” and “340B
Drug Pricing Program”.
173 Email from HHS, Office of Legislation, January 26, 2012.
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Appendix B. Medicare and Medicaid Payments and
Beneficiary Cost Sharing for Health Center Services
All health centers can be designated as federally qualified health centers (FQHCs)174 upon
enrolling as a provider in the Medicare and Medicaid programs.175 The FQHC designation makes
Section 330 grantees (among
others, see text box) eligible for
Social Security Act FQHC Definition
Medicare and Medicaid
FQHC means (1) an entity that is receiving a PHSA Section 330 grant or is
reimbursements rates that are
receiving funding through a contract with a PHSA Section 330 grant
generally higher than the
recipient; (2) an entity that meets the requirements to receive a PHSA
Section 330 grant as determined by HRSA; (3) an entity that was treated by
reimbursement rates for
the Secretary of HHS as a comprehensive federal y funded health center
comparable services provided
for the purposes of Medicare Part B as of January 1, 1990; or (4) an
in a physician’s office.176 The
outpatient program or facility operated by an Indian Tribe, Tribal
FQHC designation was created
Organization, or Urban Indian Organization receiving funds authorized in
to ensure that Medicare and
the Indian Health Care Improvement Act.
Medicaid reimbursements
Source: §18611(aa)(4 of the Social Security Act, 42 U.S.C. §1395x and
cover the costs of providing
§1905(l)(2)(B), 42 U.S.C. §1396d.
services so that Section 330
grant funds are not used to subsidize these costs.177 This appendix describes Medicare and
Medicaid payments to FQHCs and ACA-required changes to Medicare FQHC payments.
174 The Medicaid payment designation began in 1990 in the Omnibus Budget Reconciliation Act (OBRA) of 1989 (P.L.
101-239). The FQHC payment rate for Medicare was implemented in 1992 in Department of Health and Human
Services, “Medicare Program: Payment for Federally Qualified Health Center Services,” 57 Federal Register 24,961,
June 12, 1992 and 61 Federal Register 14,640, April 3, 1996.
175 A Section 330 grantee can operate facilities at multiple sites, each of these sites must enroll as an FQHC. See Health
Resources and Services Administration, Program Assistance Letter: Process of Becoming Eligible for Medicare
Reimbursements under the FQHC Benefit, Rockville, MD, March 8, 2011.
176 These payments are considered to be “higher” than the payment rates that physician practices receive because they
are cost-based and reflect a broader range of services, than do payments to physician practices. See, for example,
Department of Health Policy, School of Public Health and Health Services, The George Washington University,
Quality Incentives for Federally Qualified Health Centers, Rural Health Clinics and Free Clinics: A Report to
Congress, Washington, DC, January 23, 2012.
177 See discussion in National Association of Community Health Centers, Emerging Issues in the FQHC Prospective
Payment System, Washington, DC, September 2011 and U.S. Government Accountability Office, Medicare Payments
to Federally Qualified Health Centers, GAO-10-576R, July 30, 2010.
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Medicare Payments to Health Centers
Health centers are paid an all-inclusive payment rate for most services provided to Medicare
beneficiaries. It is intended to reflect the cost of all services provided to a beneficiary during a
“covered visit”
regardless of the
What Is a Covered Visit?
specific services
Medicare pays FQHCs an all-inclusive rate for most services received during a “covered visit.”
provided (see
text box).178 The
Medicare defines a “visit” as a face-to-face encounter between a patient and a provider (physician,
all-inclusive
physician assistant, nurse practitioner, nurse midwives, visiting nurse, clinical psychologist, or clinic
social worker) where an FQHC service is provided (e.g., a medical, mental health service, diabetes self-
payment rate is
management training, or medical nutrition therapy). A “visit” may include services received from more
calculated by
than one health professional in a single day at the same location; however, a patient may have more
dividing the
than one visit type. For example, a patient can have a medical visit and a mental health visit in the same
total estimated
day or may have a medical visit and a diabetes self management training visit in the same day. The
allowable costs
facility may receive a separate all-inclusive payment rate for each of these visit types.
(with certain
Source: U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services,
limits that take
Medicare Claims Process Manual, Chapter 9- Rural Health Clinics/Federally Qualified Health Centers,
Baltimore, MD, November 12, 2010, p. 16, https://www.cms.gov/manuals/downloads/clm104c09.pdf.
into account the
reasonable costs
for providing a service, productivity, and payment limits) by the number of total number of visits
for services (see text box for definition of visits). The rate includes services provided by
physicians and other providers and the supplies used to provide these services.179 The all-
inclusive rate does not apply for certain preventive services including pneumococcal and
influenza vaccines and their administration; instead these services are billed separately and
reimbursed at 100% of the reasonable cost of providing the service. The all-inclusive payment
rate also does not include certain diagnostic tests such as x-rays and laboratory tests, which are
billed separately.180 FQHCs are reimbursed based on estimated costs, this payment is then
adjusted at the end of the year to account for the actual costs of providing services. These
reconciled amounts are subject to payment limits, which are updated each year by a measure of
price inflation. The all inclusive payment rate is also updated annually and is adjusted to take into
account urban and rural differences in the costs of providing care.181
Medicare beneficiaries are subject to different deductible and cost sharing requirements for
services provided at FQHCs. Specifically, the Medicare Part B deductible does not apply for
178 Health Resources and Services Administration, Program Assistant Letter: Process for Becoming Eligible for
Medicare Reimbursements Under the FQHC Program Benefit, 2011-4, Rockville, MD, March 8, 2011.
179 U.S. Government Accountability Office, Medicare Payments to Federally Qualified Health Centers, GAO-10-
576R, July 30, 2010.
180 Ibid.
181 For example, the 2012 urban per visit payment for an FQHC is $126.98 while the rural per visit payment limit is
$109.90. See CMS Transmittal 2343, SUBJECT: Announcement of Medicare Rural Health Clinics (RHCs) and
Federally Qualified Health Centers (FQHCs) Payment Rate Increases, November 4, 2011, http://www.cms.gov/
transmittals/downloads/R2343CP.pdf. CMS Manual System. Note: If the FQHC is located within a Metropolitan
Statistical Area (MSA) or New England County Metropolitan area (NECMA), then the urban limit applies. If the
FQHC is not in an MSA or NECMA and cannot be classified as a large or other urban area, the rural limit applies.
Rural FQHCs cannot be reclassified into an urban area (as determined by the Bureau of Census) for FQHC payment
limit purposes.
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FQHC services.182 Beneficiaries—with some exceptions183—must pay the 20% copayment for
Medicare services.
ACA Payment Changes
Recent studies have indicated that Medicare reimbursements may not be sufficient to cover the
costs of providing services;184 therefore, the ACA requires changes to how FQHCs are paid for
services provided to Medicare beneficiaries. Specifically, the ACA required that Medicare
develop a prospective payment system (PPS) for FQHCs that, when implemented in 2014, would
eliminate the all-inclusive payment rate and may better align Medicare payments with the cost of
providing services. In order to develop this system, the ACA required that, as of January 1, 2011,
FQHCs report every service provided during a Medicare-covered patient visit using the
appropriate Healthcare Common Procedure Coding System (HCPCS) code.185 The HCPCS codes
will then be used to develop a PPS that reflects the cost of providing services to Medicare
beneficiaries.
The ACA also required that Medicare preventive services and the initial exam for new Medicare
beneficiaries be provided without copayments.186 This differs from the general Medicare
beneficiary copayment of 20% of the fee charged by the health center.
Mental Health Service Payment Changes
The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275) also
changed Medicare reimbursement for mental health services at FQHCs. Previously, Medicare
reimbursements were limited at 62.5% of the reasonable costs for outpatient mental health
services; however, this limit will be phased out by January 1, 2014.187
182 For discussion of FQHC services, see discussion in report section “Health Service Requirements”.
183 FQHCs can waive collection of all or part of the coinsurance, depending upon the beneficiary’s ability to pay.
184 See discussion in report section “Medicaid Coordination and Reimbursement Requirements” and U.S. Government
Accountability Office, Medicare Payments to Federally Qualified Health Centers, GAO-10-576R, July 30, 2010.
185 Healthcare Common Procedure Coding System (HCPCS) is used to standardize the identification of medical
services, supplies and equipment. It is used when billing the Medicare and Medicaid programs. Source:
https://www.cms.gov/MedHCPCSGenInfo/20_HCPCS_Coding_Questions.asp
186 CRS Report R40978, Medicare Coverage of Clinical Preventive Services, by Sarah A. Lister and Kirsten J. Colello,
and CRS Report R41196, Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary
and Timeline, coordinated by Patricia A. Davis.
187 U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services, Medicare Claims
Process Manual, Chapter 9- Rural Health Clinics/Federally Qualified Health Centers, Baltimore, MD, November 12,
2010, p. 18, https://www.cms.gov/manuals/downloads/clm104c09.pdf and CRS Report RL34592, P.L. 110-275: The
Medicare Improvements for Patients and Providers Act of 2008, coordinated by Hinda Chaikind.
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Medicaid Payments
Medicaid uses a PPS to reimburse FQHCs for services provided to Medicaid beneficiaries.188 The
PPS establishes a predetermined per-visit payment rate for each FQHC based on costs of services.
The PPS was established based on cost report data in FY1999 and FY2000 and is updated
annually for medical inflation.189 The state, in turn, receives the appropriate federal matching
amount. States are also required to adjust PPS payment rates based on any changes in the scope of
services provided at the FQHC. States are not required to use the PPS to reimburse FQHCs, but
they may not reimburse an FQHC less than it would have received under the PPS.190 In 2010,
approximately 20 states did not use the PPS and instead used an alternative payment methodology
(APM) to reimburse FQHCs under Medicaid.191 States are also required to supplement FQHCs
that subcontract (directly or indirectly) with Medicaid Managed Care Entities (MCEs). These
supplemental payments are supposed to make up the difference, if any, between the payment
received by the FQHC from the MCE and the Medicaid payment that the FQHC would be
entitled to under the PPS or the APM.192 The ACA did not include changes in Medicaid FQHC
reimbursement policy.
Author Contact Information
Elayne J. Heisler
Analyst in Health Services
eheisler@crs.loc.gov, 7-4453
Acknowledgments
This report benefited from comments received from Barbara English, Paulette C. Morgan, and Amanda K.
Sarata.
188 This was established under the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA), P.L. 106-554); see CRS Report RL30718, Medicaid, SCHIP, and Other Health Provisions in H.R. 5661:
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, by Jean Hearne and Evelyne P.
Baumrucker. Prior to the PPS, Medicaid used an all-inclusive rate.
189 U.S. Government Accountability Office, Medicare Payments to Federally Qualified Health Centers, GAO-10-
576R, July 30, 2010.
190 Ibid.
191 National Association of Community Health Centers, Emerging Issues in the FQHC Prospective Payment System,
Washington, DC, September 2011.
192 Letter providing initial guidance on the new Medicaid prospective payment system, Jan. 19, 2001 at
http://www.cms.hhs.gov/smdl/downloads/smd011901d.pdf
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