Federal Health Centers: An Overview
Elayne J. Heisler
Specialist in Health Services
April 21, 2015
Congressional Research Service
7-5700
www.crs.gov
R43937
Federal Health Centers: An Overview
Summary
The federal Health Center Program is authorized in Section 330 of the Public Health Service Act
(42 U.S.C. §§201 et seq.) and administered by the Health Resources and Services Administration
(HRSA) within the Department of Health and Human Services. The program awards grants to
support outpatient primary care facilities that provide care to primarily low-income individuals or
individuals located in areas with few health care providers.
Federal health centers are required to provide health care to all individuals, regardless of their
ability to pay, and to be located in geographic areas with 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 cost-
effective; 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.
Section 330 grants—funded by the Health Center Program’s appropriation—are only one funding
source for federal health centers. The grants are estimated to cover only 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 budgets. These federal
programs provide (1) incentives to recruit and retain providers; (2) access to the federally
qualified health center (FQHC) designation, which entitles facilities to higher reimbursement
rates from Medicare and Medicaid; (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
drug discounts or federal coverage for medical malpractice claims.
This report provides an overview of the federal Health Center Program, including its statutory
authority, program requirements, and appropriation levels. It then describes health centers in
general, where they are located, their patient population, and outcomes associated with health
center use. The report also describes federal programs available to assist health center operations,
including the FQHC designation for Medicare and Medicaid payments. The report concludes with
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: An Overview
Contents
Introduction ...................................................................................................................................... 1
What Is the Federal Health Center Program? .................................................................................. 2
Statutory Authority and General Requirements ......................................................................... 2
Location Requirements ....................................................................................................... 2
Fee Schedule Requirements ................................................................................................ 3
Medicaid Coordination and Reimbursement Requirements................................................ 3
Governance Requirements .................................................................................................. 4
Health Service Requirements .............................................................................................. 4
Reporting and Quality Assurance Requirements ................................................................. 5
Licensing and Accreditation Requirements ......................................................................... 6
Grants That Support Federal Health Centers ............................................................................. 6
Grants Available to Support Health Centers ........................................................................ 6
Grant Eligibility and Awarding Criteria .............................................................................. 7
What Is the Health Center Program’s Appropriation? ............................................................... 8
What Are the Other Sources of Funding for the Health Center Program? .............................. 11
What Are Health Centers? ............................................................................................................. 12
What Types of Health Centers Exist? ...................................................................................... 12
Community Health Centers ............................................................................................... 12
Health Centers for the Homeless ....................................................................................... 12
Health Centers for Residents of Public Housing ............................................................... 13
Migrant Health Centers ..................................................................................................... 13
Who Uses Health Centers? ...................................................................................................... 14
What Outcomes Are Associated with Health Center Use? ...................................................... 17
Health Outcomes ............................................................................................................... 17
Cost Outcomes .................................................................................................................. 18
Access to Health Care ....................................................................................................... 20
Quality ............................................................................................................................... 20
Which Federal Programs Are Available to Health Centers? .................................................... 21
National Health Service Corps Providers .......................................................................... 22
J-1 Visa Waivers ................................................................................................................ 22
Federally Qualified Health Center Designation ................................................................ 22
340B Drug Pricing Program .............................................................................................. 23
Vaccines for Children Program ......................................................................................... 23
Federal Torts Claims Act Coverage ................................................................................... 24
Ryan White HIV/AIDS Treatment Grants......................................................................... 24
Other Federal Grant Programs .......................................................................................... 24
Figures
Figure 1. Community Health Center Grantee Sites ....................................................................... 16
Figure 2. Selected Other Health Center Sites ................................................................................ 17
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Federal Health Centers: An Overview
Tables
Table 1. Examples of Services Provided and the Number of Patients Served by Health
Centers (2013) .............................................................................................................................. 5
Table 2. Health Center Grants Awarded (FY2015) .......................................................................... 8
Table 3. Health Center Appropriations and Sites, FY2005-FY2016 (President’s Budget
Request) ...................................................................................................................................... 10
Table 4. Health Center Program Revenue Sources (FY2015) ....................................................... 11
Table 5. Comparison of Health Center Types ................................................................................ 14
Table 6. Health Centers’ Patient Profiles, 2013 ............................................................................. 15
Appendixes
Appendix A. Other Federal Programs That May Provide Primary Care to the Underserved ........ 26
Appendix B. Medicare and Medicaid Payments and Beneficiary Cost Sharing for Health
Center Services ........................................................................................................................... 31
Contacts
Author Contact Information........................................................................................................... 34
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Federal Health Centers: An Overview
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)—specifically by its Bureau of
Primary Care—within the Department of Health and Human Services (HHS).1 The federal Health
Center Program is authorized in Section 330 of the Public Health Service Act (PHSA)2 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, over 9,200 unique health center sites (i.e., individual health center
facility locations) exist;3 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 farmworkers). Regardless of type, health centers are required by statute to provide
health care to all individuals, regardless of their ability to pay, and to be located in geographic
areas that have few health care providers.4 These requirements make health centers part of the
health safety net—providers that serve the uninsured, the underserved, or those enrolled in
Medicaid.5 Data compiled by HRSA demonstrate that health centers primarily serve the intended
safety net population, as the majority of patients are uninsured or enrolled in Medicaid.6
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 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. 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.
1 For more information about the Health Resources and Services Administration (HRSA), see CRS Report R43304,
Public Health Service Agencies: Overview and Funding.
2 42 U.S.C. §§201 et seq.
3 U.S. Department of Health and Human Services, Health Resources and Services Administration, “The Affordable
Care Act and Health Centers,” http://bphc.hrsa.gov/about/healthcenterfactsheet.pdf.
4 42 U.S.C. §254b.
5 Lewin, Marion Ein and Altman, Stuart, America’s Health Care Safety Net: Intact but Endangered, Institute of
Medicine, Washington, DC, 2000, p. 21; for more information on the Medicaid program, see CRS Report R43357,
Medicaid: An Overview. For information that discusses health centers’ service to this population, see Peter Shin et al.,
Community Health Centers: A 2012 Profile and Spotlight on Implications of State Medicaid Decisions, The Kaiser
Commission on Medicaid and the Uninsured, Issue Brief, Washington, DC, September 2014.
6 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, 2011 UDS Report); Health Resources and Services Administration, Bureau of Primary Care, Uniform
Data System, 2012 National Summary Report, Rockville, MD, http://bphc.hrsa.gov/uds/datacenter.aspx?year=2012&
state=AL&compare=Nat (hereinafter, 2012 UDS Report); and Health Resources and Services Administration, Bureau
of Primary Care, Uniform Data System, 2013 National Summary Report, Rockville, MD, http://bphc.hrsa.gov/uds/
datacenter.aspx?q=tall&year=2013&state= (hereinafter, 2013 UDS Report).
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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. This section of the report describes the
statutory authority for the federal 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 Requirements7
Section 330 of the PHSA authorizes grants for health centers and includes the requirements that
entities must meet to receive a health center grant. Section 330 requires health centers to provide
services to the entire population of their service area, regardless of individuals’ 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 upon evaluation they determine that changes are 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. HRSA is required to determine whether health center grantees meet these
requirements; however, the Government Accountability Office (GAO) has raised concerns that
the agency may not be providing sufficient oversight of the program and that some health centers
may not be meeting these requirements.8 This report does not evaluate whether health centers
meet program requirements; rather, it describes the program’s requirements.
Location Requirements
PHSA Section 330 requires that a health center be located in an area designated as medically
underserved or as serving a population designated as “Medically Underserved” (see text box).9
7 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.
8 U.S. Government Accountability Office, Health Center Program: Improved Oversight Needed to Ensure Grantee
Compliance with Requirements, 12-546, May 2012.
9 §5602 of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) 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, but the committee’s report was not unanimous; therefore,
the Secretary is not required to use the report when drafting the new rule. For the committee’s report, see
http://www.hrsa.gov/advisorycommittees/shortage/nrmcfinalreport.pdf. HRSA is currently drafting an interim final
rule, but has not, as of the date of this CRS report’s publication, released a final rule.
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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://www.hrsa.gov/shortage/index.html.
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 (i.e., sliding-scale fees), which is then
further discounted or waived based on a patient’s ability to pay. Ability to pay is determined by a
patient’s income relative to the federal poverty level10 and the patient’s family size—no other
criteria may be considered.11 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.12 Individuals with insurance coverage
may also be eligible for discounted services if the copayment charged by the individual’s health
insurance plan would be greater than the amount that the individual would pay for the service
under the discounted fee schedule. In this case, the individual would pay only the discounted fee
schedule amount and not the full copayment amount.13
Medicaid Coordination and Reimbursement Requirements
Health centers are required to coordinate with state Medicaid and State Children’s Health
Insurance Program (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 two-thirds of the Health Center Program’s revenue (see Table 4).
Although health centers collect reimbursements, GAO found that Medicare payments did not
cover the full cost of health center services in nearly two-thirds of the visits it examined.14
10 The 2015 federal poverty level was $11,770 for an individual living alone, $15,930 for a two-person family, and
$24,250 for a family of four. For more information, see U.S. Department of Health and Human Services, Assistant
Secretary for Planning and Evaluation, “2015 Poverty Guidelines,” http://www.aspe.hhs.gov/poverty/15poverty.cfm.
11 U.S. Department of Health and Human Services, Health Resources and Services Administration, Policy Information
Notice: Sliding Fee Discount and Related Billings and Collections Program Requirements, Document PIN 2014-2,
Rockville, MD, September 22, 2014.
12 42 C.F.R. 51c.303(f) and §330(k)(3)(G)(i) of the Public Health Service Act (PHSA).
13 Ibid.
14 U.S. Government Accountability Office, Medicare Payments to Federally Qualified Health Centers, GAO-10-576R,
July 30, 2010. The Centers for Medicare & Medicaid Services, the agency that administers the Medicare program,
disagreed with GAO’s findings; see Enclosure III of 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. CMS released the
final rule to implement these changes; see Center for Medicare & Medicaid Services, “Medicare Program; Revisions to
Payment Policies Under the Physician Fee Schedule, Clinical Laboratory Fee Schedule, Access to Identifiable Data for
(continued...)
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Similarly, the National Association of Community Health Centers (NACHC)—the main advocacy
group for health centers at the national level—reports that the amount received in reimbursements
is not sufficient to cover the cost of the health services provided.15 It found that Medicaid
reimbursements covered 81% of the cost of providing services, while Medicare and private
insurance reimbursements covered approximately two-thirds.16 The NACHC also found that the
PHSA Section 330 grant amount received per uninsured patient—$344—was less than half the
average health center cost per patient of $687.17
Governance Requirements
Health centers are required to have a governing board that is made up primarily of health center
patients. The governing board provides input on center operational issues, including the center’s
budget, operating hours, management, and oversight. The governing board is required to meet
monthly, and it must approve the center’s director and must approve grant applications submitted
by the center.18
Health Service Requirements
Health centers are required to provide primary health services and preventive and emergency
health services.19 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.20 Primary health services are those provided by physicians21 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.
(...continued)
the Center for Medicare and Medicaid Innovation Models & Other Revisions to Part B for CY 2015,” 79 Federal
Register 67547 -68010, November 13, 2014; see Section O “Establishment of the Federally Qualified Health Center
Prospective Payment System (FQHC PPS).”
15 See National Association of Community Health Centers, A Sketch of Community Health Centers, Chartbook,
Washington, DC, 2014, http://www.nachc.com/client/Chartbook_2014.pdf (hereinafter, 2014 Health Center
Chartbook).
16 Ibid.
17 Ibid. These amounts were for 2012.
18 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 (e.g., some migrant health centers are only open for
portions of the year so the requirement to meet monthly would not apply in these instances).
19 42 C.F.R. 51c.102(h).
20 This requirement was added by P.L. 109-171, effective January 1, 2006.
21 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 or, where appropriate, that
these services may be provided by physician assistants, nurse practitioners, or nurse midwives.
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Health center providers must also have admitting privileges at one or more hospitals located near
the health center. This requirement is intended 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.
Health centers are also required to provide enabling services such as translation services, health
education, and transportation for individuals residing in a center’s service area who have
difficulty accessing the center. Health centers may also provide supplemental services such as
additional dental care, mental health services, and substance abuse treatment.22 Table 1 identifies
some specific services tracked in the Uniform Data System (UDS) 2013, the HRSA-required
health center grantee reporting system.
Table 1. Examples of Services Provided and the Number of Patients Served by
Health Centers (2013)
Service Provided
Number of Patients Serveda
Medical Services
18,592,375
Dental Services
4,442,177
Enabling Servicesb 2,077,351
Mental Health Services
1,119,706
Substance Abuse Services
105,605
Source: HRSA, Uniform Data System (UDS) Report, UDS, National Rollup Report, 2013, at http://bphc.hrsa.gov/
uds/datacenter.aspx?q=tal &year=2013&state=; hereinafter, 2013 UDS Report.
a. An individual patient may receive more than one type of service in a given year.
b. For example, translation or transportation to the health center.
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.23 These outcomes are similar to those examined in other health care settings. They
include, for example, the percentage of children who received recommended immunizations by
the age of two, the percentage of women who were screened for cervical cancer, and the
percentage of patients whose body mass index was assessed and who were referred to appropriate
services if found to be obese.24 Finally, health centers are required to have quality improvement
22 For specific types of health centers (see “What Types of Health Centers Exist?”), some supplemental services may be
required.
23 The performance measures and clinical outcomes that health centers are required to report are those 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.
24 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,
(continued...)
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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. The clinical director conducts periodic assessments
of the health center’s services to evaluate the quality and appropriateness of services provided.
The HHS Inspector General found that more than two-thirds of the health centers conducted
quality assessments.25 HHS has also awarded grants to health centers to implement quality
initiatives such as care coordination through mechanisms like medical homes.26
Licensing and Accreditation Requirements
Health center providers must be properly licensed in the state in which they practice. In addition,
they must have admitting privileges at hospitals where health center patients are likely to be
referred (see “Health Service Requirements”). Furthermore, providers must maintain proper
credentials during their health center employment.
Although health centers are not required to be accredited by a national accreditation agency,
HRSA encourages them to seek accreditation. Specifically, HRSA encourages health centers to
seek accreditation from either the Accreditation Association for Ambulatory Health Care (AAHC)
or The Joint Commission (TJC). HRSA pays some of the costs of seeking and maintaining
accreditation from one of these two accrediting entities.27
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.28 This
section describes these types of grants, the entities that are eligible to receive grants, and the
factors taken into consideration when awarding grants.
Grants Available to Support Health Centers
As noted, five types of grant programs support health centers.
• New Access Point (NAP) grants permit existing grantees to establish new sites or
new grantees to establish new health centers.
(...continued)
April 26, 2011, http://bphc.hrsa.gov/ftca/riskmanagement/healthcenterqualityimprovement.pdf (hereinafter, Health
Center Quality Improvement Report).
25 Stuart Wright, Deputy Inspector General for Evaluation and Inspections, Memorandum Report: Quality Assurance
and Care Provided at HRSA-Funded Health Centers, Department of Health and Human Services, Office of Inspector
General, OE-09-06-00420, Washington, DC, March 2, 2012.
26 U.S. Department of Health and Human Services, “Affordable Care Act Funds to Enhance Quality of Care at
Community Health Centers,” press release, September 27, 2012, http://www.hhs.gov/news/press/2012pres/09/
20120927b.html.
27 For more information, see http://bphc.hrsa.gov/policiesregulations/accreditation.html.
28 PHSA §330 also authorizes the Secretary to make grants to health centers to plan and develop managed care
networks and plans and practice management networks, and to guarantee loans that health centers may incur for these
purposes.
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• Increased Demand for Services (IDS) or Expanded Service (ES) grants are for
health centers to expand the number of patients they serve or to provide
additional types of services. A subset of ES grants, Quality Improvement Grants,
are used to expand services at existing health centers; these grants award funds to
health centers to support activities that support health center quality improvement
efforts, including meeting the requirements to become an accredited Patient-
Centered Medical Home.29
• The Capital Improvement Program (CIP) provides funding for the construction
and renovation of health centers.
• Planning Grants are available to entities that are not health centers, to plan and
develop health centers. Funds 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.
• Infant Mortality Grants had been available for activities that aim to reduce infant
mortality. These grants have not been awarded in recent years; instead, HRSA
supports other infant mortality reduction programs.30
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 some operate
more than one type of health center.31 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.32 Under statute, HRSA must allocate certain percentages of the Health
Center Program’s budget to grants that support health centers serving special populations (e.g.,
migrant workers, the homeless, residents of public housing). Specifically, the Health Center
Program’s budget must be allocated as follows:
• at least 8.6% for grants to centers serving migrant or seasonal farmworkers,
• at least 8.7% for grants to centers serving homeless individuals, and
• at least 1.2% for grants to centers serving residents of public housing.33
A health center may be of more than one type—for example, a community health center may also
operate a migrant health center, but it must devote at least 25% of its HRSA grant funding to
migrants to be considered to be serving a “special population.” In addition to these funding
requirements, HRSA is required to give special consideration, within the competitive grant
29 U.S. Department of Health and Human Services, Health Resources and Services Administration, Accreditation and
Patient Centered Medical Home Recognition Initiative, Program Assistance Letter: Document 2015:02, Rockville, MD,
February 15, 2015, http://bphc.hrsa.gov/policiesregulations/policies/pdfs/pal201502.pdf.
30 For more information about these programs, see CRS Report R41378, The U.S. Infant Mortality Rate: International
Comparisons, Underlying Factors, and Federal Programs.
31 Health Center Quality Improvement Report.
32 U.S. Department of Health and Human Services, Health Resources and Services Administration, Justification of
Estimates for Appropriations Committees, FY2016, Rockville, MD (hereinafter, HRSA FY2016 Budget Justification).
33 42 U.S.C. §254(b)(r)(2)(B).
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process, to applications for centers that would serve sparsely populated areas, defined as areas
with seven or fewer residents per square mile.34 GAO found that in order to ensure that these
percentages are met, HRSA may adjust funding criteria, thereby funding some applications that
may not have scored as high in the competitive process.35
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 are
based on the cost of proposed grant activity (see Table 2). An entity may receive funding for
multiyear 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.36 At the end of the application period, health centers are required to compete for
continued funding.37
Table 2. Health Center Grants Awarded (FY2015)
Grants
FY2015
Total Number of Grants
1,349
Average Awarded Amount
$2.85 million
Range of Awarded Amounts
$200,000-$16.00 million
Source: U.S. Department of Health and Human Services, Health Resources and Services Administration,
Justification of Estimates for Appropriations Committees, FY2016, Rockville, MD.
What Is the Health Center Program’s Appropriation?
The Health Center Program’s appropriation has increased over the past decade, resulting in the
establishment of more centers and the ability to serve more patients. From FY2005 through
FY2015, the program’s funding level increased by 188%, from $1.7 billion to $5.0 billion. Over
this same time period, the number of health center sites also increased. Beginning in 2002, the
George W. Bush Administration began a multiyear effort to expand the Health Center Program by
providing funding for new or expanded health centers for 1,200 communities.38 The program’s
expansion has continued during the Obama Administration. In FY2009, the Health Center
Program received $2 billion under the American Recovery and Reinvestment Act of 2009
(ARRA, P.L. 111-5). 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 continued under the Patient
Protection and Affordable Care Act of 2010 (ACA),39 which permanently authorized the Health
Center Program, appropriated a total of $1.5 billion for health center construction and repair, and
34 Ibid. and 42 U.S.C. §254b(p).
35 U.S. Government Accountability Office, Health Center Program: 2011 Grant Award Process Highlighted Need and
Special Populations Merit Evaluation, 12-504, May 2012.
36 As discussed above, GAO has raised concerns with HRSA’s oversight of health center grants; see U.S. Government
Accountability Office, Health Center Program: Improved Oversight Needed to Ensure Grantee Compliance with
Requirements, 12-546, May 2012.
37 HRSA FY2016 Budget Justification.
38 Department of Health and Human Services, Budget in Brief, FY2007, pp. 5-6 and 21.
39 P.L. 111-148, as amended.
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created the Community Health Center Fund (CHCF), which included a total of $9.5 billion for
health center operations to be appropriated in FY2011 through FY2015.40 The Medicare Access
and CHIP Reauthorization Act of 2015 (MACRA, P.L. 114-10) extended the CHCF through
FY2017, providing a total of $7.2 billion to support health center operations.
Although the Health Center Program’s funding has increased because of the CHCF, this increase
was smaller than anticipated when the ACA was enacted in 2010 because the CHCF has been
used to offset reductions in discretionary appropriations to the Health Center Program.41 The ACA
also appropriated funding for competitive funds that permitted health centers to receive payments
in exchange for training medical residents.42 Although the program’s funding level has nearly
doubled since FY2005, the additional appropriated funds have generally been used to expand the
number of centers—which increased by 154%43—while funding awarded to individual centers
increased less rapidly over the same time period.44
Table 3 presents the Health Center Program’s appropriations from FY2005 through the FY2016
President’s budget request. The table also includes amounts appropriated under ARRA and the
ACA and the number of sites in each fiscal year.
40 The total amount that will be appropriated was reduced under the FY2013, FY2014, and FY2015 sequester. For more
information, see CRS Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules,
and U.S. Office of Management and Budget, OMB Report To The Congress On the Joint Committee Reductions for
Fiscal Year 2015, Washington, DC, March 10, 2014, http://www.whitehouse.gov/sites/default/files/omb/assets/
legislative_reports/sequestration_order_report_march2014.pdf.
41 Under the ACA, the CHCF was required to be used to increase the health center appropriation level above the
FY2008 appropriations level; however, the CHCF was used to augment discretionary funding for the health center
program. The same thing occurred in FY2012, FY2013, and FY2014 under the continuing resolution (P.L. 113-46).
42 CRS Report R41301, Appropriations and Fund Transfers in the Affordable Care Act (ACA), and CRS Report
R41278, Public Health, Workforce, Quality, and Related Provisions in ACA: Summary and Timeline. HHS has also
awarded grants to health centers to support care coordination initiatives, in particular medical homes; see U.S.
Department of Health and Human Services, “Affordable Care Act Funds to Enhance Quality of Care at Community
Health Centers,” press release, September 27, 2012, http://www.hhs.gov/news/press/2012pres/09/20120927b.html.
Funding for this program was extended through FY2017 in the Medicare Access and CHIP Reauthorization Act of
2015 (MACRA, P.L. 114-10).
43 See Table 3.
44 CRS analysis of HRSA Budget documents.
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Table 3. Health Center Appropriations and Sites, FY2005-FY2016 (President’s Budget Request)
2016
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Request)
Dollars in Millions
Appropriation
$1,735 $1,785 $1,988 $2,065 $2,190 $2,185 $2,190 $1,567 $1,480a $1,495 $1,492 $1,492
ARRA Fundsb
$2,000
ACA CHCFc
$1,000
$1,200
$1,465a $2,145a $3,509a $3,600d
Proposed
$2,700
Mandatory
Funds
Total
Funding $1,735 $1,785 $1,988 $2,065 $4,190 $2,185 $3,190 $2,767 $2,945 $3,640 $5,001e $4,192f
Number of Sites
Approx.
3,745 __g 3,831
6,208 7,892 8,156 8,501 8,746 9,000 9,200 9,500 __g
number of
sites
Source: Compiled by CRS from HRSA budget documents.
Notes: Appropriated amounts include federal tort claims funds.
a. Reflects amount reduced under sequestration as required in the Budget Control Act.
b. American Recovery and Reinvestment Act (ARRA, P.L. 111-5).
c. Community Health Center Fund (CHCF) refers to amounts transferred from the CHCF that was created in Section 10503 of the Patient Protection and Affordable
Care Act of 2010 (ACA, P.L. 111-148, as amended).
d. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, P.L. 114-10) extended the CHCF and provided $3.6 billion for each of FY2016 and FY2017.
e. The President’s FY2016 budget proposes to reserve a total of $541 million from the FY2105 CHCF allocation to be used in FY2016, FY2017, and FY2018.
f.
The President’s FY2016 budget proposes to use $178 million of the amount reserved from the FY2015 CHCF allocation for use in FY2016.
g. Number not included in HRSA budget documents.
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Federal Health Centers: An Overview
What Are the Other Sources of Funding for the Health
Center Program?
In addition to Section 330 grants, health centers receive funding from reimbursements and 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, HRSA compiles this information for
the Health Center Program. Table 4 presents data for FY2015, the most recent year of data
available. Medicaid is the largest source of health center revenue (41.7%) in FY2015; amounts
collected from private insurance increased from 8.6% of revenue in FY2014 to 10.0% in
FY2015.45 In FY2015, Medicare provides 5.8% of the program’s revenue; and Section 330 grants
provides 19.7% of the program’s revenue, an increase from the 17.5% they provided in FY2014.
Amounts received from grants and contracts from state, local, and private foundations provide
14.4% of the program’s total revenue in FY2015, a decline from FY2014, when these sources
were 16.1% of program revenue (see Table 4).
Table 4. Health Center Program Revenue Sources (FY2015)
(dollars in millions)
Percent of Program
Dollars
Revenue
Section 330 Authorized Grants
Section 330 Grants
4,210.0
19.7
Subtotal (Section 330 authorized grants)
4,210.0
19.7
Reimbursements
Medicaid
8,910.0
41.7
CHIP 320.0
1.5
Medicare
1,235.0
5.8
Other third party payers (e.g., private insurance)
2,130.0
10.0
Patient Feesa
1,045.0
4.9
Subtotal (Reimbursements)
13,640.0
63.8
Other Federal Grants
Other Federal Grants
445.0
2.8
Subtotal (Other Federal Grants)
445.0
2.8
State, Local, and Private Grants and Contracts
State, Local, Other
3,090.0
14.4
Subtotal (State, Local, and Private Grants and
3,090.0
14.4
Contracts)
Total (all sources)
21,385.0
100.0
Source: U.S. Department of Health and Human Services, Health Resources and Services Administration,
Justification of Estimates for Appropriations Committees, FY2016, Rockville, MD.
Note: Percentages may not sum to 100% due to rounding.
a. This refers to amounts collected from self-pay patients.
45 CRS analysis of HRSA FY2016 Budget Justification, p. 62.
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Federal Health Centers: An Overview
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 populations served by each center type. The section also describes where
health centers are located and outcomes associated with health center use.46
What Types of Health Centers Exist?
Four types of health centers exist: (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.
Each type of health center is described below, along with the population targeted by these centers
and the specific services that each type of center must provide.47
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 CHC
service area (also known as the catchment area). CHCs are required to provide “primary health
services” (see the “Health Service Requirements” section). 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. The majority of Health Center Program grant funding
is allocated to support CHCs. By statute, 18.5% of the budget must be reserved for grants that
support health centers serving special populations; this means that a maximum of 81.5% of the
Health Center Program budget may be used to support CHCs.48
Health Centers for the Homeless
Health centers for the homeless (HCHs) provide services to homeless individuals—the only
federal health program that targets this generally uninsured population.49 Section 330 defines
homeless individuals as those who lack permanent housing or live in temporary facilities or
transitional housing.50 In addition to the services required of all health centers, HCHs are required
46 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.
47 A number of outpatient facilities that are similar to health centers provide care to underserved populations, but these
facilities do not receive grants authorized in PHSA §330. These facilities are described in Appendix A.
48 CRS calculations based on requirements in 42 U.S.C. §254(b)(r)(2)(B) and discussion in U.S. Government
Accountability Office, Health Center Program: 2011 Grant Award Process Highlighted Need and Special Populations
Merit Evaluation, 12-504, May 2012.
49 National Coalition for the Homeless at http://www.nationalhomeless.org/factsheets/health.html.Information on other
programs available to the homeless population can be found in CRS Report RL30442, Homelessness: Targeted Federal
Programs and Recent Legislation.
50 P.L. 104-299 §330(h)(4)(A).
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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
provide outreach and comprehensive primary health services to homeless children and children at
risk of homelessness. By statute, HRSA must allocate at least 8.7% of the Health Center Program
budget to support these centers.51
Health Centers for Residents of Public Housing
Health centers for residents of public housing52 are located in public housing facilities and aim to
provide primary care to individuals who reside there. 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 By statute, HRSA must allocate at least 1.2% of the Health Center Program
budget to support these centers.54
Migrant Health Centers
Migrant health centers provide care to migrant farmworkers (persons whose principal
employment is in agriculture on a seasonal basis and who establish temporary residences for work
purposes) and seasonal farmworkers (persons whose principal employment is in agriculture on a
seasonal basis, but do not migrate for this work).55 HRSA estimates that it provides care to more
than one-quarter of all migrant and seasonal farmworkers.56 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.57 Migrant health centers may be exempt from providing all required services,
and may operate only during certain periods of the year. By statute, HRSA must allocate at least
8.6% of the Health Center Program budget to support these centers.58
Comparison of Health Center Types
Table 5 describes the four types of health centers, their target populations, the additional services
they are required to provide, and the number of patients seen in FY2013. Additional services are
assessed relative to the CHC service requirements (see “Health Service Requirements”).
51 42 U.S.C. §254(b)(r)(2)(B).
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, “Fact Sheet: Public Housing Primary Care
Program (PHPC),” May 2012, http://www.nchph.org/wp-content/uploads/2013/11/NCHPH-PHPC1.pdf.
54 42 U.S.C. §254(b)(r)(2)(B).
55 42 U.S.C. §254b.
56 Health Center Quality Improvement Report.
57 42 C.F.R. §56.102(g).
58 42 U.S.C. §254(b)(r)(2)(B).
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Table 5. Comparison of Health Center Types
(2013)
Number of
Health Center
Target
Patients
Type
Population Additional
Requirementsa
Seenb
Community
All individuals
Not Applicable.
19,857,433c
Health Centers
who live in
service area
Health Centers
Homeless
Prevention and treatment services for
851,641
For the Homeless
individuals
substance abuse.
Health Centers for Individuals who Must consult with public housing
227,665
Residents of Public
reside in or
residents prior to applying for a grant.
Housing
near public
housing
Migrant Health
Migrant,
Environmental health services including
790,226
Centers
agricultural
sanitation services; and services related
workers
to the prevention and treatment of
pesticide exposure.
Source: HRSA’s Data Warehouse at http://datawarehouse.hrsa.gov/sitesdetail.aspx and HRSA, UDS, National
Rollup Report 2013.
a. CHC-required services are considered the baseline; therefore, additional requirements are assessed relative
to the requirements for CHCs.
b. Refers to the 2013 patient population.
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
(21,726,965).
Who Uses Health Centers?
According to HRSA, health centers served 21.7 million patients in 2013. These patients were
generally socioeconomically disadvantaged and uninsured or underinsured.59 The majority of
health center patients have incomes at or below the federal poverty level. 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 2013, more than one-third of health center patients were identified
as Hispanic/Latino and nearly one-quarter identified as African American. Both of these rates are
close to 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 2013, including age,
race, ethnicity, and insurance status.
59 2013 UDS Report.
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Table 6. Health Centers’ Patient Profiles, 2013
Demographic Characteristics of Patients Percentage of Patients Served
Income at or below the federal poverty level
71.9%
Enrol ed in Medicaid
41.5%
Uninsured
34.9%
Hispanic/Latino 34.8%
Below age 18
31.7%
African American
23.8%
Enrol ed in Medicare
8.4%
Age 65 and older
7.4%
Source: Department of Health and Human Services, Health Resources Services and Administration’s website:
http://bphc.hrsa.gov/uds/datacenter.aspx, 2013 Data Snapshot; and HRSA website: “What is a Health Center” at
http://bphc.hrsa.gov/about/.
Figure 1 shows the locations of community health centers funded with PHSA Section 330 grants
and Figure 2 shows the locations of the three other types of health center grantees. Figure 1
shows that community health centers are distributed throughout the country. Figure 1, compared
with Figure 2, also shows that community health centers are the most numerous type of sites and
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. Community Health Center Grantee Sites
(Data as of February 2015)
Source: CRS analysis of HRSA grantee data.
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Federal Health Centers: An Overview
Figure 2. Selected Other Health Center Sites
(Data as of February 2015)
Source: CRS analysis of HRSA grantee data.
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. 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, access, and quality.
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
60 U.S. Government Accountability Office, Hospital Emergency Departments: Health Center Strategies that May Help
Reduce Their Use, GAO-11-414R, April 11, 2011.
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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 (e.g., 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 made progress in this effort: an increasing number of health center patients initiate
prenatal care in their first trimester, resulting in fewer health center patients—when compared to
the national average—having low birth weight babies, which is 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 successfully reduce 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 care sensitive conditions,” which are conditions
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; 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; and L. Elizabeth Goldman et al., “Federally Qualified Health Centers and Private Practice Performance on
Ambulatory Care Measures,” American Journal of Preventive Medicine, July 2012, pp. 1-8. Neda Laiteerapong et al.,
“Health Care Utilization and Receipt of Preventive Care for Patients Seen at Federally Funded Health Centers
Compared to Other Sites of Primary Care,” Health Services Research, vol. 49, no. 5 (October 2014), pp. 1498-1518.
Despite higher rates of preventive health services and vaccinations, the HHS Inspector General found that not all health
center patients received the recommended preventive services or appropriate vaccinations. See Stuart Wright, Deputy
Inspector General for Evaluation and Inspections, Memorandum Report: Quality Assurance and Care Provided at
HRSA-Funded Health Centers, Department of Health and Human Services, Office of Inspector General, OE-09-06-
00420, Washington, DC, March 2, 2012.
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 FY2016 HRSA Budget Justification and CRS Report R41378, The U.S. Infant Mortality Rate: International
Comparisons, Underlying Factors, and Federal Programs.
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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that potentially can be treated in an outpatient setting thus avoiding a hospitalization (e.g., asthma
or seizures). 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, relative to
Medicaid beneficiaries who did not use health centers.68
Researchers who looked at the Health Center Program’s use of medical homes to coordinate
patient care found that patients who received the majority of their care at health centers that have
implemented medical homes have lower medical costs (41% lower on average) than those who
receive the majority of their care through another source.69 Another study that examined national
survey data found that health centers (whether or not they employed the medical home model)
reduced costs by 24%,70 whereas 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 overall costly care
because their providers work on a salaried basis, and so do not have financial incentives to order
additional tests or procedures. This may not be the case in other outpatient settings 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 (i.e., the cost for a particular procedure or visit) 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 of how health centers
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 National Association of Community Health Centers, The Robert Graham Center, and Capital Link, Access Granted:
The Primary Care Payoff, Bethesda, MD, August 2007, http://www.graham-center.org/online/etc/medialib/graham/
documents/publications/mongraphs-books/2007/rgcmo-access-granted.Par.0001.File.tmp/rgcmo-access-granted.pdf.
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 FY2016 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.
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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 access for populations that are otherwise
underserved, for example, because of geography or income. Health centers also serve a more
diverse population than do office-based physicians; results from one study indicate 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 health centers may reduce health disparities because they
provide care to a population that might otherwise have difficultly accessing health care.77
Relative to other providers (such as office-based physicians), health centers are more likely to
accept new patients and patients who are unable to pay for services (i.e., charity patients).78
Health center patients are also more likely to be enrolled in Medicaid or CHIP. As noted, 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. As such, health centers are a
common source of care for Medicaid patients. Recent research found that Medicaid patients were
more likely to obtain an appointment at a health center than they were at private primary care
practice.79 Researchers have also found that health center presence in a geographic area increases
the likelihood that low-income adults have seen a doctor in the past year (whether at a health
center or not).80
Quality
Recent evaluations have compared the quality of care provided at health centers to that provided
in physician offices. One study examined 18 quality measures and found that health centers
performed better on 6 measures (related to treatment for congestive heart failure, coronary artery
disease, depression, and screening), no differently on 11 measures, and worse on 2 measures
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.
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 Brendan Saloner et al., The Availability of New Patient Appointments for Primary Care at Federally Qualified
Health Centers: Findings from an Audit Study, The Urban Institute Health Policy Center, Washington, DC, April 7,
2014.
79 Ibid. and Michael R. Richards et al., “Access Points for the Underserved: Primary Care Appointments Availability at
Federally Qualified Health Centers in 10 States,” Medical Care, vol. 52, no. 9 (September 2014), pp. 818-825.
80 Stacey McMorrow and Stephen Zuckerman, “Expanding Federal Funding to Community Health Centers Slows
Decline in Access for Low-Income Adults,” Health Services Research, vol. 49, no. 3 (June 2014), pp. 992-1010.
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(related to diet counseling for at risk adolescents). This was observed despite the study’s finding
that health centers treat a population with higher rates of comorbidities, which may make it more
difficult to provide care that meets the criteria required by the quality measures examined.81
Researchers have also examined the ability of health centers to manage chronic conditions and
have found that health centers provide quality care when it comes to managing conditions such as
diabetes and hypertension82 and are successful in managing and reducing hospitalizations and
emergency department visits due to asthma.83
Another study compared the quality of health center care to that of Medicaid managed care
organizations (MCOs) on selected quality measures, including diabetes and blood pressure
control.84 The study found that there were two groups of health centers: those that exceeded
Medicaid MCOs in the selected quality measures (called “high performing health centers”) and
those that were below the Medicaid MCOs (called “low performing health centers”). The
researchers found that more health centers were considered “high performing” (12%) and that
relatively few health centers (4%) were considered “low performing.” The authors observed that
there were differences in the population served by high- and low-performing health centers and
that it is possible that these population differences resulted in the quality differences observed.
Specifically, “low performing health centers” were more likely to serve individuals who were
uninsured or homeless and had less revenue from Medicaid. There were also geographic
differences in the quality of health centers, with “high performing” health centers located mostly
in California, New York, and Massachusetts and with “low performing health centers” more often
located in southern states.
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;85 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.86 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.87
Medicaid is the largest source of reimbursement, providing 40% of all revenue for the Health
Center Program (see Table 4). The amount received by an individual health center varies by the
81 L. Elizabeth Goldman et al., “Federally Qualified Health Centers and Private Practice Performance on Ambulatory
Care Measures,” American Journal of Preventive Medicine, July 2012, pp. 1-8.
82 Lydie A. Lebrun, “Racial/Ethnic Disparities in Clinical Quality Performance Among Health Centers,” Journal of
Ambulatory Care Management, vol. 36, no. 1 (January-March 2013), pp. 24-34.
83 Sibylle H. Lob et al., “Promoting Best-Care Practices in Childhood Asthma: Quality Improvement in Community
Health Centers,” Pediatrics, vol. 128, no. 1 (July 2011), pp. 20-28.
84 The Kaiser Commission on Medicaid and the Uninsured, Quality of Care in Community Health Centers and Factors
Associated with Performance, Issue Brief, Washington, DC, June 2013.
85 See Table 4.
86 They may also fulfill their National Health Service Corps (NHSC) commitment at other types of facilities that
provide care to populations in health professions shortage areas.
87 These payments are discussed in more detail in Appendix B.
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percentage of the patient population enrolled in Medicaid; however, the NACHC estimates that
the average health center receives 38.1% of its revenue from Medicaid reimbursements.88 Health
centers are also eligible for discounted prescription drugs and vaccines, and may receive
additional support from grants and loans offered through other federal programs.
National Health Service Corps Providers
Health centers, which are located in medically underserved areas, are also automatically
designated as health professional shortage areas (HPSAs)89 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,90 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.91
J-1 Visa Waivers
Health centers may also be able to obtain providers temporarily through special waivers for J-1
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.92 Because health
centers are designated as HPSAs, a number of centers may rely on this program to recruit
physicians.93
Federally Qualified Health Center Designation94
Health centers are eligible to be designated as Federally Qualified Health Centers (FQHCs),95 but
must enroll as a provider in the Medicare and/or Medicaid programs to receive the higher96
88 2013 Health Center Chartbook.
89 Health professional shortage areas (HPSAs) are defined in 42 U.S.C. §254e. See U.S. Department of Health and
Human Services, Health Resources and Services Administration, “Health Professional Shortage Areas (HPSA) and
Medically Underserved Areas/Populations (MUA/P),” http://hpsafind.hrsa.gov/. For a larger discussion of Health
Professional Shortage Areas (HPSAs), see CRS Report R42029, Physician Supply and the Affordable Care Act.
90 For more detailed information on the NHSC, see CRS Report R43920, National Health Service Corps: Changes in
Funding and Impact on Recruitment, by Bernice Reyes-Akinbileje. Funding for this program was extended through
FY2017 in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, P.L. 114-10).
91 U.S. Department of Health and Human Services, National Health Services Corps, “State Loan Repayment Program,”
http://nhsc.hrsa.gov/loanrepayment/stateloanrepaymentprogram/.
92 CRS Report R43735, Temporary Professional, Managerial, and Skilled Foreign Workers: Policy and Trends, and
http://www.raconline.org/topics/hc_providers/j1visafaq.php.
93 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.
94 Because all health centers are eligible to be designated as Federally Qualified Health Center (FQHCs), some refer to
FQHCs and health centers interchangeably.
95 Entities that receive PHSA §330 funds directly or through a contract with a §330 grantee may be designated as
Federally Qualified Health Centers (FQHCs). When FQHCs were first established in 1989, entities that received PHSA
§329 and §340 grants were also eligible to become FQHCs. The latter program is no longer authorized, and the former
is not currently funded.
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reimbursement rates for services provided to patients enrolled in these programs.97 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.98 Specific FQHC Medicare and
Medicaid reimbursement methodology, including recent payment changes, are described in
Appendix B.
340B Drug Pricing Program
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 provides drugs at discount prices—ranging from 13% to 17% below average
manufacturer price, depending on the type of drug.99 HRSA reports that in FY2013, 340B-eligible
facilities saved $3.8 billion because of the program.100
Vaccines for Children Program101
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,102
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.
(...continued)
96 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.
97 Health Resources and Services Administration, Program Assistance Letter: Process of Becoming Eligible for
Medicare Reimbursements under the FQHC Benefit, Rockville, MD, March 8, 2011.
98 Health Center Quality Improvement Report.
99 HRSA FY2016 Budget Justification.
100 Ibid.
101 This paragraph is drawn from Centers for Disease Control and Prevention, “Questions Answered on Vaccines
Purchased with 317 Funds” Atlanta, GA, http://www.cdc.gov/vaccines/imz-managers/guides-pubs/qa-317-funds.html
and Centers for Disease Control and Prevention, “About VFC: The VFC Program at a Glance,” Atlanta, GA,
http://www.cdc.gov/vaccines/programs/vfc/about/index.html.
102 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 available only at health
centers and rural health clinics.
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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).103 Under the FTCA, 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 FY2014,
103 claims were paid through the FTCA program totaling $72.2 million.104 This program provides
financial support to health centers because otherwise they would have to pay for malpractice
coverage and would be responsible for payment and rate increases that may accompany claims
made against health center providers.105
Ryan White HIV/AIDS Treatment Grants106
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.
Other Federal Grant Programs107
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,108 increase mental health and
substance abuse services availability,109 provide services to high-risk pregnant women and their
infants,110 increase health professional training at health centers,111 and increase access to family
planning services for low-income families.112 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
103 CRS Report 95-717, Federal Tort Claims Act (FTCA).
104 HRSA FY2016 Budget Justification.
105 This responsibility could include both the cost of the claims and the legal costs resulting from defending providers
against these claims.
106 For more information about this program, see CRS Report RL33279, The Ryan White HIV/AIDS Program.
107 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 2013 UDS Report.
108 HRSA FY2016 Budget Justification; for programs through the U.S. Department of Agriculture, see
http://www.rurdev.usda.gov/RD_Grants.html.
109 For more information about the Substance Abuse and Mental Health Services Administration, see
http://www.samhsa.gov/.
110 Health Resources and Services Administration, Maternal and Child Health Bureau, “Healthy Start,”
http://mchb.hrsa.gov/programs/healthystart/index.html and CRS Report R42428, The Maternal and Child Health
Services Block Grant: Background and Funding.
111 CRS Report R41390, Discretionary Spending Under the Affordable Care Act (ACA), and CRS Report R41301,
Appropriations and Fund Transfers in the Affordable Care Act (ACA).
112 CRS Report RL33644, Title X (Public Health Service Act) Family Planning Program.
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eligible for USDA programs that may assist facilities with acquiring equipment or space through
loan guarantees and with acquiring broadband access.113 Health centers may also use General
Services Administration resources to acquire real estate and dispose of property114 and may use
the Department of Housing and Urban Development’s insurance program to finance facility repair
and improvement.115
113 For description of these programs, see United States Department of Agriculture Rural Development, November 20,
2014, http://www.rurdev.usda.gov/HCF_CF.html.
114 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.
115 See U.S. Department of Housing and Urban Development, Property Improvement Loan Insurance (Title I) at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/title/title-i.
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Appendix A. Other Federal Programs That May
Provide Primary Care to the Underserved
The federal government supports a number of facilities that provide primary care to low-income
or otherwise medically underserved populations 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, 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.116 SBHCs may be located at public, private, charter, or parochial schools and must be
open, at a minimum, during school hours.117 Prior to the ACA, HRSA funded SBHCs through its
Section 330 appropriation.118 The 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.119 Although the ACA authorized grants for SBHC
operation, funding has not been appropriated for these grants.120 Despite the lack of an explicit
SBHC operating grant program, some Section 330 grantees may operate SBHCs. HRSA estimates
that SBHCs saw 479,670 patients in FY2013.121
116 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.
117 §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.
118 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
119 U.S. Department of Health and Human Services, “HHS Announces New Investment in School-Based Health
Centers: December 19, 2012, http://www.hhs.gov/news/press/2012pres/12/20121219a.html; U.S. Department of Health
and Human Services, “Affordable Care Act Support for School-Based Health Centers Will Create Jobs, Increase
Access to Care for Thousands of Children,” December 8, 2011, http://wayback.archive-it.org/3926/20140108161942/
http://www.hhs.gov/news/press/2011pres/12/20111208a.html#; U.S. Department of Health and Human Services, “HHS
Announces New Investment in School-Based Health Centers,” July 14, 2011, http://www.hhs.gov/news/press/
2011pres/07/20110714a.html; and U.S. Department of Health and Human Services, Health Resources and Services
Administration, “School-Based Health Centers,” http://wayback.archive-it.org/3926/20140108162123/http://
www.hhs.gov/news/press/2011pres/07/20110714a.html#.
120 CRS Report R41390, Discretionary Spending Under the Affordable Care Act (ACA).
121 Health Resources and Services Administration, Bureau of Primary Care, Uniform Data System, 2013 National
(continued...)
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Nurse-Managed Health Clinics
Nurse-managed health clinics (NMHCs) provide comprehensive primary care and wellness
services to underserved populations at centers 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 (e.g., asthma, hypertension, and diabetes), and health education. Some also provide
dental and mental health services.122 ACA authorized grants to support NMHCs in PHSA Section
330A-1. In FY2010, HHS awarded $15 million to provide three years of support for 10
NHMCs.123 Grantees were required to submit a sustainability plan for operation after the federal
grant period was completed in 2013.124 No funding has been awarded since FY2010.
Community Mental Health Centers
Community mental health centers (CMHC)125 are licensed facilities that provide mental health
services. These facilities are required to provide mental health services 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 who 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—effective April 1, 2011—that CMHCs provide less than 40% of their services to
Medicare beneficiaries.126
CMHCs receive funding from Substance Abuse and Mental Health Services Administration
(SAMHSA) block grants. These include SAMHSA substance abuse prevention and treatment
block grants and community mental health services block grants.127 In addition, CMHCs are
eligible for HHS grants awarded through the Social Service Block Grant.128 CMHCs also receive
reimbursements from Medicare and Medicaid for covered services provided to beneficiaries
enrolled in these programs.
(...continued)
Summary Report, Rockville, MD, http://bphc.hrsa.gov/uds/datacenter.aspx?q=tall&year=2013&state= (hereinafter,
2013 UDS Report).
122 Tina Hansen-Turton, NNCC 2010 Annual Report, National Nursing Centers Consortium, Philadelphia, PA,
http://www.nncc.us/site/pdf/publications/2010AnnualReport.pdf.
123 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.
124 Ibid.
125 As defined in 42 U.S.C. §1395x.
126 The Center for Medicare & Medicaid Services (CMS) has also established conditions of participation—
requirements for Medicare providers—for CMHCs. See 78 C.F.R. §64,603.
127 For more information about the Substance Abuse and Mental Health Services Administration block grants, see
http://www.samhsa.gov/.
128 CRS Report 94-953, Social Services Block Grant: Background and Funding.
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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 FY2019 in the ACA.129 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.130 In 2013, NHHCS provided medical and
enabling services, such as transportation and translation services, to more than 12,000 people.131
Tribal Health Centers
Indian Tribes (ITs), Tribal Organization (TOs), and Urban Indian Organizations (UIOs)132 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)133 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 required 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 used to provide services only 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 rate134—for services provided to beneficiaries enrolled in the Medicare and
Medicaid programs. RHCs are similar to health centers, except that they (1) do not receive federal
129 See CRS Report R41630, The Indian Health Care Improvement Act Reauthorization and Extension as Enacted by
the ACA: Detailed Summary and Timeline.
130 The NHHCS program has been funded from the Consolidated Health Centers budget line annually since 1997.
131 HRSA FY2016 Budget Justification.
132 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); Urban Indian Organizations must receive grants authorized
under Title V of the Indian Health Care Improvement Act. For more information, see CRS Report R43330, The Indian
Health Service (IHS): An Overview.
133 These facilities received the ability to be designated as FQHCs in P.L. 103-66.
134 Beginning in FY2015, because of requirements included in the ACA, Medicare payments for Rural Health Clinics
will differ from those made to FQHCs. See Appendix B.
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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.135
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.136 In general, free clinic funding comes from donations (both monetary and
in-kind), religious groups, foundations, and corporations.137 More than 1,200 free clinics138
provide services to a population that is similar to that served by health centers.139 Free clinics do
not receive HRSA funding, but they may participate in the Free Clinics Medical Malpractice
Program administered by HRSA, which provides liability coverage to health care providers at
free clinics.140
Federally Qualified Health Center (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.141 The FQHC look-alike program
was authorized in 1990 to support the demand for new health centers.142 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)143 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. In 2013, look-alikes reported
serving 1,027,960 patients.144 Generally, look-alikes offer similar services to health centers but
135 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.
136 42 U.S.C. §233.
137 Ibid.
138 See http://www.freeclinics.us/.
139 Julie S. Darnell, “Free Clinics in the United States: A Nationwide Survey,” Archives of Internal Medicine, vol. 170
(June 2010), pp. 946-953.
140 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.”
141 A number of look-alikes subsequently obtain health center grants, as HRSA found that between 2002 and 2007,
approximately 36% of look-alikes that applied for health center grants were successful. See U.S. Department of Health
and Human Services, Health Resources and Services Administration, Health Centers: America’s Primary Care Safety
Net, Reflection on Success, 2002-2007, Rockville, MD, 2008,
ftp://ftp.hrsa.gov/bphc/HRSA_HealthCenterProgramReport.pdf.
142 §1905 of the Social Security Act for Medicaid, and §1861(aa)(4) of the Social Security Act for Medicare.
143 See descriptions of these programs in the report sections “National Health Service Corps Providers” and “340B
Drug Pricing Program.” FQHC look-alikes are not eligible for “Federal Torts Claims Act Coverage.”
144 2013 UDS Report, Look-Alikes Data.
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may have more limited capacity than health centers; for example, they may offer fewer dental
services.145
145 Peter Shin et al., Community Health Centers: A 2012 Profile and Spotlight on Implications of State Medicaid
Decisions, The Kaiser Commission on Medicaid and the Uninsured, Issue Brief, Washington, DC, September 2014.
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Appendix B. Medicare and Medicaid Payments and
Beneficiary Cost Sharing for Health Center Services
All federal Health Center Program grantees may be designated as federally qualified health
centers (FQHCs)146 upon enrolling as an FQHC in the Medicare and Medicaid programs.147 The
FQHC designation makes Section 330 grantees (among others; see text box) eligible for Medicare
and Medicaid reimbursements rates that are generally higher than the reimbursement rates for
comparable services provided in a physician’s office.148 In FY2015, these reimbursements
represented 47.5% of the Health Center Program’s revenue (see Table 4). The FQHC designation
was created to ensure that Medicare and Medicaid reimbursements cover the costs of providing
services so that Section 330 grant funds are not used to subsidize these costs.149 This appendix
describes Medicare and Medicaid payments to FQHCs. The Affordable Care Act (P.L. 111-148, as
amended) required that a new Medicare payment methodology be developed. As a consequence,
Medicare payments to FQHCs increased by approximately 32%. This report describes current
Medicare payment methodology. For information about the prior Medicare payment
methodology, see CRS Report R42433, Federal Health Centers.150
Social Security Act FQHC Definition
FQHC means (1) an entity that is receiving a PHSA Section 330 grant or is receiving funding through a contract with a
PHSA Section 330 grant 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 the Secretary of HHS as a comprehensive federally funded
health center for the purposes of Medicare Part B as of January 1, 1990; or (4) an outpatient program or facility
operated by an Indian Tribe, Tribal Organization, or Urban Indian Organization receiving funds authorized in the
Indian Health Care Improvement Act.
Source: §18611(aa)(4 of the Social Security Act, 42 U.S.C. §1395x and §1905(l)(2)(B), 42 U.S.C. §1396d.
146 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.
147 A §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.
148 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 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.
149 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.
150 Prior to this policy change, Rural Health Clinics and FQHCs were paid using the same payment methodology; Rural
Health Clinics are still paid using the payment methodology described in Appendix B of CRS Report R42433, Federal
Health Centers.
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Medicare Payments to Health Centers151
Beginning October 1, 2014, Medicare FQHC payments increased by approximately 32% as the
Centers for Medicare & Medicaid Services (CMS)—the agency that administers the Medicare
and Medicaid programs—implemented a prospective payment (PPS) system.152 This change was
required in the ACA because of concerns that Medicare payments did not reflect the FQHC’s
costs of providing services to Medicare beneficiaries.153 To develop the PPS, CMS used the
Medicare cost report and claims data to ensure that the rate reflects the cost of providing
services.154
Under the new PPS, FQHCs are paid the lesser of their actual charges or an encounter rate for
professional services furnished to a beneficiary in a single day. Medicare pays 80% of this
amount which is based on an average reasonable cost for FQHC professional services furnished
to a Medicare beneficiary per day. The beneficiary pays the remainder as part of their required
cost sharing for FQHC services. The encounter rate is intended to reflect 100% of the reasonable
costs of providing a service. It was calculated by estimating the reasonable costs that would have
occurred for the year if the PPS was not implemented (excluding vaccines because they are paid
at 100% of reasonable costs); this estimate was calculated without the application of copayments,
per payment limits or productivity adjustments that limit Medicare payment to other provider
types. The new encounter rate is intended to reflect the type, intensity, and duration of services
that FQHCs provide and is adjusted to account for the geographic location of the FQHC
providing the service. Rates are also adjusted for the initial Medicare visit (i.e., the Welcome to
Medicare exam) and for the initial annual wellness visit (i.e., the first visit that Medicare
beneficiary has at that FQHC), which are determined to be more intensive than a standard visit.155
With some exceptions (e.g., mental health visit and when an injury occurs subsequent to the
medical visit), the encounter rate is only paid to a facility once per day, because CMS determined
that multiple visits per day were rare for Medicare beneficiaries. The new encounter rate applies
to all services, except for the costs associated with the influenza and pneumococcal vaccines and
their administration, which are paid at 100% of reasonable costs. FY2015 is a period of transition
151 Unless otherwise specified, this section is drawn from Centers for Medicare & Medicaid Services, “Medicare
Program; Prospective Payment System for Federally Qualified Health Centers; Changes to Contracting Policies for
Rural Health Clinics; and Changes to Clinical Laboratory Improvement Amendments of 1988 Enforcement Actions for
Proficiency Testing Referral,” 79 Federal Register 25435-25438, May 2, 2014, and Center for Medicare & Medicaid
Services, “Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule, Clinical Laboratory
Fee Schedule, Access to Identifiable Data for the Center for Medicare and Medicaid Innovation Models & Other
Revisions to Part B for CY 2015,” 79 Federal Register 67547 -68010, November 13, 2014; see Section O
“Establishment of the Federally Qualified Health Center Prospective Payment System (FQHC PPS).”
152 For information about the earlier payment system, see Appendix B of CRS Report R42433, Federal Health Centers.
153 Sec. 10501(i)(3)(A) required that CMS establish a PPS for FQHCs. For a discussion of Medicare payment rates to
FQHCs and their adequacy, see U.S. Government Accountability Office, Medicare Payments to Federally Qualified
Health Centers, GAO-10-576R, July 30, 2010. Note that CMS disagreed with GAO’s data and findings; see discussion
on p. 153 of Medicare Payment Advisory Commission, Chapter 6: Federally Qualified Health Centers, Report to
Congress: Medicare and the Health Care Delivery System, Washington, DC, June 2011.
154 In order to develop the new Prospective Payment System (PPS), 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. HCPCS is used to standardize the identification of medical
services, supplies, and equipment. It is used when billing the Medicare and Medicaid programs. For more information,
see https://www.cms.gov/MedHCPCSGenInfo/20_HCPCS_Coding_Questions.asp.
155 See “Prevention Under Medicare” section in CRS Report R41278, Public Health, Workforce, Quality, and Related
Provisions in ACA: Summary and Timeline.
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to the PPS, which will be updated (in accordance with other Medicare payment updates) annually
beginning January 1, 2016.
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
FQHC services.156 Beneficiaries—with some exceptions157—must pay the 20% copayment for
Medicare services. There are no copayments for preventive services, as required in the ACA.158
FQHC visits generally include a mix of preventive services (not subject to coinsurance) and
services that are subject to coinsurance. To determine which charges will be subject to the
coinsurance, CMS subtracts the dollar value of the FQHC’s reported line-item charge for the
preventive services provided from the full payment amount, Medicare then pays the FQHC 100%
of the dollar value of the FQHC’s reported line-item charge for the preventive services, up to the
total payment amount. Medicare will also pay 80% of the remainder of the full payment amount.
The beneficiary would then pay the remainder (the 20% coinsurance). Should the reported line-
item charge for the preventive services equal or exceed the full payment amount, Medicare pays
100% of the full payment amount and the beneficiary would not be responsible for any
coinsurance.
The rule that implemented the Medicare PPS also removed the requirement that certain midlevel
providers—certified nurse midwives, physician assistants, nurse practitioners, clinical
psychologists, and clinical social workers—be employees of the facility in order to bill Medicare
for services that are provided “incident to”159 the services of physicians.160
Medicare Payment for Mental Health Services
The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275)
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 was phased out, and as of January 1, 2014, Medicare payments are 100%
of the reasonable cost for mental health services.161
156 For discussion of FQHC services, see discussion in report section “Health Service Requirements.”
157 FQHCs can waive collection of all or part of the coinsurance, depending on the beneficiary’s ability to pay.
158 CRS Report R40978, Medicare Coverage of Clinical Preventive Services, and CRS Report R41196, Medicare
Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline.
159 This refers to services that are provided as part of a patient’s normal course of treatment, where physicians initiate
the service, but a non-physician provider continues treatment under the physician’s supervision. See Center for
Medicare & Medicaid Services, Medicare Learning Network, “Incident to” Services, MLN Matters Number: SE0441,
Baltimore, MD, http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/
MLNMattersArticles/downloads/se0441.pdf.
160 Center for Medicare and Medicaid Service, “D. Removal of Employment Requirement for Services Furnished
“Incident to”: Rural Health Clinics (RHSC) and Federally Qualitied Health Center (FQHC) Visits,” 79, No. 219
Federal Register 67751, November 13, 2014.
161 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.
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Medicaid Payments
Medicaid uses a PPS to reimburse FQHCs for services provided to Medicaid beneficiaries.162 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.163 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.164 In 2014,
approximately 23 states and the District of Columbia used the PPS, 14 states used an alternative
payment methodology (APM) to reimburse FQHCs under Medicaid, and 9 states used a
combination of both methods.165 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.166 The ACA did not include changes in Medicaid FQHC reimbursement policy.
Author Contact Information
Elayne J. Heisler
Specialist in Health Services
eheisler@crs.loc.gov, 7-4453
162 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. Prior to the PPS, Medicaid used an
all-inclusive rate.
163 U.S. Government Accountability Office, Medicare Payments to Federally Qualified Health Centers, GAO-10-
576R, July 30, 2010.
164 Ibid.
165 The remaining states did not respond to the National Association of Community Health Center’s survey. See
National Association of Community Health Centers, 2014 Update on the Implementation of the FQHC Prospective
Payment System (PPS) in the States, Washington, DC, December 2014.
166 See a CMS-issued 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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