Federal Health Centers Program

Federal Health Centers Program

Order Code RL32046
Federal Health Centers Program
Updated June 13, 2008
Barbara English
Information Research Specialist
Knowledge Services Group

Federal Health Centers Program
Summary
Health centers were first funded by the federal government as part of the War
on Poverty in the mid-1960s. When the Economic Opportunity Act (P.L. 88-452)
was phased out in the 1970s, about 100 neighborhood health centers were transferred
to the Public Health Service and funded as community health centers beginning in
1975.
Health centers under Section 330 of the Public Health Service Act (P.L. 87-838)
include community health centers, migrant health centers, health centers for the
homeless, and health centers for residents of public housing. In CY2006, there were
6,208 delivery sites serving more than 15 million clients with a total of 1,002
grantees.1 The clients are predominantly uninsured, underinsured, or are without
access to health care providers.
The Health Centers Consolidation Act of 1996 (P.L. 104-299) consolidated
funding for community health centers (CHCs) with similar programs in Section 330.
Under this authority, health centers’ grants provide largely primary health care
services to medically underserved populations. The act expired September 30, 2006.
Two major Reauthorization bills were introduced in the 110th Congress: S. 901, the
Health Care Safety Net Act (introduced March 15, 2007) was passed by the Senate
Health Education and Labor Committee on November 14, 2007, and a written report
was filed on March 12, 2008; and H.R. 1343, the Health Centers Renewal Act of
2007 (introduced March 6, 2007), was approved by the House Subcommittee on
Health on April 23, 2008.
The Health Centers Program was the focus of a multi-year initiative by President
Bush to strengthen the health care safety net. Its goal was to establish new health
centers in the poorest counties in the nation. In FY2008, the final year of the
President’s initiative, an additional 340 sites (220 new sites and 120 expansions)
were funded and total enrollment is expected to reach more than 16 million patients.2
The President requested $1.988 billion for FY2008 for CHCs. The
Consolidated Appropriations Act for 2008 (P.L. 110-161) provided a final amount
of $2.065 billion.3 For FY2009, the President requested $2.092 billion, a $27 million
increase. This report4 will be updated periodically to reflect legislative activity.
1 U.S. Health Center Fact Sheet, National Association of Community Health Centers, 2007.
2 U.S. Department of Health and Human Services, Budget in Brief, FY2008, p. 20.
3 The Continuing Resolution, H.J.Res. 20, passed on January 31, 2007, by the House
provided $1.765 billion for FY2007 funding. The Resolution passed the Senate February
14, 2007, and became P.L. 110-5. It provided a final amount of $1.988 billion for FY2007.
U.S. Department of Health and Human Services, Budget in Brief, FY2009, p. 18.
4 This report was originally written by former CRS Information Research Specialist Sharon
Kearney Coleman.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Health Centers Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Grant Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Health Centers Patient Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PHS Act Section 330 Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Community Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Required Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Migrant Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Health Centers for the Homeless . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Health Centers for Residents of Public Housing . . . . . . . . . . . . . . 7
Native Hawaiian Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Federally Qualified Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FQHC Look-Alikes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Tribal FQHCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Rural Health Clinics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Medicare and Medicaid Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Medicare Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Medicaid Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Funding for Consolidated Health Centers Program . . . . . . . . . . . . . . . . . . . . . . . 12
Other Federal Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Non-Federal Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Websites on Community Health Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
List of Tables
Table 1. Limited Comparison of Rural Health Centers (RHCs) and
Federally Qualified Health Centers (FQHCs) . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 2. Medicare Payment Update for FQHCs and RHCs Effective
January 1, 2008, through December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . 11
Table 3. Consolidated Health Center Funding, Grantees, and Sites,
FY2001-FY2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Federal Health Centers Program
Introduction
Health centers were first funded by the federal government as part of the War
on Poverty in the mid-1960s. When the Economic Opportunity Act (P.L. 88-452)
was phased out in the 1970s, about 100 neighborhood health centers were transferred
to the Public Health Service (PHS) and funded as community health centers (CHCs)
beginning in 1975. The Health Centers Program is administered by the Bureau of
Primary Health Care (BPHC) under the Health Resources and Services
Administration (HRSA) of the Department of Health and Human Services (HHS).
The Health Centers Consolidation Act of 1996 (P.L. 104-299) consolidated
funding for CHCs with other similar programs in Section 330 of the Public Health
Service Act (P.L. 87-838). Under this authority, health centers receive grant support
to provide largely primary health care services to medically underserved populations
residing in “an urban or rural area designated by the Secretary of HHS as an area with
a shortage of personal health services or a population group designated as having a
shortage of such services.”5 The authorization expired at the end of FY2006. There
are two major Reauthorization bills in the 110th Congress:
! S. 901, the Health Care Safety Net Act (introduced March 15, 2007),
which was passed by the Senate Health Education and Labor
Committee on November 14, 2007, would reauthorize
appropriations for FY2008-FY2012. It would also require a study
of the economic costs and benefits of school-based health centers
and their impact on the health of students. On March 12, 2008, a
written report was filed by Senator Kennedy for the Committee.
! H.R. 1343, Health Centers Renewal Act of 2007 (introduced March
6, 2007), would reauthorize the program through FY2012 and would
also allow limited liability protection for physicians who volunteer
at health centers. It would also extend liability protections to health
center employees who travel to provide services in emergencies.
The House Energy and Commerce’s Subcommittee on Health
approved the bill for full committee consideration on April 23, 2008.
In 2002, President Bush began his “Health Centers Initiative,” a multi-year
program to strengthen the health care safety net. The plan was to increase access to
health care in 1,200 of the nation’s neediest communities through a “New Access
5 42 U.S.C. § 254b(b)(3).

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Point (NAP)” grant.6 NAP was intended to provide comprehensive primary and
preventive health care services to address the unique and significant barriers to
affordable and accessible health care services for a specific population or community.
The two types of grants were: new starts, for entities who currently did not receive
the federal grants under Section 330, and satellites, for entities which already
received Section 330 grant money, but were establishing new access point(s) to serve
a new patient population outside the applicant’s already-approved scope of project.7
Beginning in FY2006, the Consolidated Health Center Program targeted the
nation’s poorest counties through a second health centers’ initiative, the “High
Poverty Counties Initiative.” The goal was to increase access over the next five years
to primary health care in 200 of the nation’s poorest counties that are in need of a
comprehensive health center.
In FY2008, the final year of the President’s initiative, HRSA funded an
additional 340 sites (220 new sites and 120 expansions), and expected to reach a total
enrollment of more than 16 million patients.8 In FY2009, the Administration plans
to fund up to 40 new access point grants and 25 planning grants for applicants who
can demonstrate they will serve areas with high levels of poverty and no access to an
existing health center site.9
Though the Administration increased the number of CHCs, providers are needed
to match their growing caseloads. A study in the Journal of the American Medical
Association (JAMA) concluded that “the largest numbers of unfilled positions were
for family physicians” at a time when there is declining interest in family medicine
among US graduating medical students, leaving “CHCs “challenged by these issues.”
There is also a high demand for dentists. Lack of provider interest in serving these
geographic and specialty areas and centers’ difficulty competing with salaries in the
private sector are some of the factors affecting the number of unfilled positions. The
“need for spousal employment opportunities, cultural activities, adequate housing,
and poor quality schools” were considered major barriers for rural centers.10
The Consolidated Health Centers Program, under Section 330, includes
community health centers, migrant health centers, health centers for the homeless,
and health centers for residents of public housing.11 Similar programs such as the
6 Department of Health and Human Services, Budget in Brief, FY2007, pp. 5-6 and 21.
7 Department of Health and Human Services, Budget in Brief, FY2007, pp. 5-6.
8 Department of Health and Human Services, Budget in Brief, FY2008, p. 20.
9 Ibid.
10 Rosenblatt, Roger A., et al., “Shortages of Medical Personnel at Community Health
Centers: Implications for Planned Expansion,” Journal of the American Medical
Association, March 1, 2006, vol. 295, no. 9.
11 Though HRSA has made reference to the School-Based Health Center (SBHC) Program
in past documents, Section 330 of the PHS Act does not include authorization for an SBHC
Program. Therefore, HRSA will no longer identify SBHCs as a separate Health Center
Program or category/type of health center. Although HRSA will continue to recognize
(continued...)

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Native Hawaiian Health Care, FQHC-Look-Alikes, and Tribal FQHCs also fall under
the umbrella of the Consolidated Health Centers Program.
All health centers receiving funds under the program are eligible for coverage
for medical malpractice under the Federal Tort Claims Act (FTCA). Under FTCA
coverage, the federal government assumes responsibility for malpractice claims
against centers and their practitioners.
The Omnibus Budget Reconciliation Act (OBRA) of 1989 (P.L. 101-239)
established Federally Qualified Health Centers (FQHCs) under Medicare and
Medicaid. FQHCs include Section 330 grantees and certain other outpatient clinics.
FQHCs receive reimbursement payments from the Centers for Medicare and
Medicaid Services (CMS) for services provided at these facilities for Medicare
eligibles. The state Medicaid agencies pay FQHCs on a prospective basis and then
the state gets a federal matching amount. The prospective payment system
establishes a per visit payment rate for each FQHC in advance.
Consolidated Health Centers Programs12
Grant Amounts
BPHC awards grants to public and nonprofit entities to operate health centers.
Amounts are determined based on the cost of proposed grant activity.
The Health Centers Patient Profile
The patient population is primarily low income, uninsured, or underinsured
individuals. A majority of this population — which includes people with chronic
diseases, pregnant teens, substance abusers, and a number of individuals living with
HIV/AIDS infection — is unemployed. Many are unable to afford even the most
basic medical or dental care.13 An estimated 92% of health center patients are at or
11 (...continued)
school-aged children as an underserved population, applications for funds to support an
SBHC must be made under the Section 330(e) “regular” Community Health Center Program
authority. Source: 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, at
[ftp://ftp.hrsa.gov/bphc/docs/2005pins/2005-20.pdf].
12 Unless otherwise indicated, all data hereafter cited on health centers are extracted from
the U.S. Department of Health and Human Services, Health Resources and Services
Administration, Bureau of Primary Health Care, Bureau of Primary Health Care Section
330 Grantees Uniform Data System (UDS), Calendar Year 2006 Data, National Rollup
Report. July 2, 2007.
13 Department of Health and Human Services, Health Resources and Services
(continued...)

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below 200% of the federal poverty level. Of this population, 40% have no health
insurance, 64% are racial or ethnic minorities, and 35% depend on Medicaid.14
PHS Act Section 330 Health Centers
Community Health Centers. For HRSA’s purpose, the term “health center”
refers to all the diverse public and nonprofit organizations and programs that receive
federal funding under the Consolidated Health Centers program. In CY2006, there
were 1,002 grantees, about 50% of which were rural, and 6,208 sites. Each CHC
must serve a medically underserved population by providing a range of
comprehensive health services, along with supportive/enabling service (such as
outreach, translation, transportation, health education, and assistance with eligibility
service for programs such as WIC or food stamps) for all residents of the area served
by the center (known as the catchment area).15 They must be governed by community
boards, a majority of whose members are current health center patients, to assure
responsiveness to local needs. Operating at the community level, health centers
provide services regardless of health status, insurance coverage, or ability to pay
(centers use a board-approved sliding fee schedule).
Required Services. Every center provides a similar range of primary health
services on an ambulatory basis. CHCs are required to provide primary health
services, as defined in the regulations,16 which include services of physicians,
physicians’ assistants, and nurse clinicians; diagnostic laboratory and radiologic
services; preventive health services; emergency medical services; preventive dental
services; pharmaceutical services; transportation, and other enabling services.
As appropriate, individual centers may provide supplemental services such as
additional dental care or mental health or substance abuse treatment. The Deficit
Reduction Act of 2005 (DRA), P.L. 109-171, added diabetes self-management
training and medical nutrition therapy for beneficiaries with diabetes or renal disease
to the list of services, effective January 1, 2006.
13 (...continued)
Administration, Justification of Estimates for Appropriations Committees. FY2007, p. 80.
14 America’s Health Centers Fact Sheet, #0108, National Association of Community Health
Centers, United States, January 2008.
15 Migrant, homeless, and public housing health centers are exempt from the requirement
to serve all residents in a catchment area.
16 42 CFR 51c.102(h).

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The average center cost per medical patient visit17 was $117 in 2006.18 Centers
are generally required to serve all residents of the area in which it is located,
regardless of the ability to pay.19 CHCs served more than 15 million persons in
CY2006. In CY2006, health centers also provided
! more than 59 million encounters,
! more than 283,000 mammograms,
! more than 1.6 million Pap tests,
! more than 3.39 million encounters for immunizations,
! 515,965 HIV tests,
! prenatal care for 426,052 women, and
! enabling services to more than 1.5 million patients.20
The Consolidated Health Centers Program includes four special categories (or
types of health centers) other than the basic “community” health center category.
These are described below.
Migrant Health Centers. Section 330 funded 135 community/migrant dual-
funded centers and 16 migrant-only centers as of May 24, 2006.21 These centers
serve a special medically underserved population of migratory farm workers (persons
whose principal employment is in agriculture on a seasonal basis and who establish
a temporary abode for the purpose of this work) and seasonal farm workers (persons
whose principal employment is in agriculture on a seasonal basis and who are not
migratory agricultural workers). Ninety-three percent of these health centers’
beneficiaries are primarily of Hispanic origin.22 Migrant health centers are required
17 The term “visit” is defined as a face-to-face encounter between the patient and a
physician, physician assistant, nurse practitioner, nurse midwife, visiting nurse, clinical
psychologist, or clinical social worker during which a Rural Health Clinic/Federally
Qualified Health Center service is rendered. Encounters with more than one health
professional and multiple encounters with the same health professionals which take place
on the same day and at a single location constitute a single visit, except when one of the
following conditions exist: (a) after the first encounter, the patient suffers illness or injury
requiring additional diagnosis or treatment; (b) the patient has a medical visit and a clinical
psychologist or clinical social worker visit. Source: Medicare Claims Processing Manual,
Chapter 9 - Rural Health Clinics/Federally Qualified Health Centers, paragraph 20.1 -
“Payment Rate for Independent and Provider Based RHCs and FQHCs.”
18 U.S. Health Center Fact Sheet, National Association of Community Health Centers, 2007
at [http://www.nachc.com/client/documents/US_Fact_Sheet_2007.pdf].
19 Migrant, homeless, and public housing health centers are exempt from the requirement
to serve all residents in a catchment area.
20 U.S. Department of Health and Human Services, Health Resources and Services
Administration, Bureau of Primary Health Care, Bureau of Primary Health Care Section
330 Grantees Uniform Data System (UDS), Calendar Year 2006 Data, National Rollup
Report. July 2, 2007.
21 Personal communication with an official at HRSA’s Office of Minority and Special
Populations on August 5, 2007.
22 Department of Health and Human Services, Health Resources and Services
(continued...)

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to provide primary health services and, as determined by the Secretary, other
services, such as
! supplemental services to support primary health service;
! environmental health services to alleviate unhealthful conditions of
the environment, such as problems associated with water supply,
sewage treatment, solid waste disposal, rodent and parasite
infestation, field sanitation, and housing conditions and the
treatment of medical conditions arising therefrom;
! accident prevention programs, including prevention of excessive
exposure to pesticides through, but not limited to, notification of
appropriate federal, state or local authorities of hazardous conditions
due to pesticide use; and
! information on the availability and proper use of health services.23
These centers may be exempt from providing all required services upon a
showing of good cause, and they may be approved to provide certain required health
services only during certain periods of the year. The migrant health centers served
758,894 migrant and seasonal farm workers and their families in CY2006.24
Health Centers for the Homeless. Section 330 grants for these centers
provide for a particular medically underserved population composed of homeless
individuals, defined by the act as (1) one who lacks permanent housing, whether or
not the individual is a member of a family, and (2) one who lives in temporary
facilities or transitional housing.25 In CY2005 39% of homeless center patients were
African American; 36% were white; 21.9 % were Hispanic.26 This is the only federal
program responsible for addressing the primary health care needs of homeless people,
furnishing a range of services that include emergency shelter, transitional housing,
job training, primary health care, 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.
Centers that receive grants to care for the homeless are required to provide substance
abuse treatment as a condition of the grant. In CY2006, 701,623 homeless
individuals were served by this program through 184 grantees.27
22 (...continued)
Administration, Justification of Estimates for Appropriations Committees. FY2008, p. 78.
23 42 CFR 56.102(g).
24 U.S. Department of Health and Human Services, Health Resources and Services
Administration, Bureau of Primary Health Care, Bureau of Primary Health Care Section
330 Grantees Uniform Data System (UDS), Calendar Year 2006 Data, National Rollup
Report, July 2, 2007.
25 P.L. 104-299, Section. 330(h)(4)(A).
26 Department of Health and Human Services, Health Resources and Services
Administration, Justification of Estimates for Appropriations Committees. FY2008. On-
line at [http://www.hrsa.gov/about/budgetjustification08/primarycare.htm] visited 5/29/2008
27 U.S. Department of Health and Human Services, Health Resources and Services
(continued...)

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Health Centers for Residents of Public Housing. Section 330 grants
fund these centers for the delivery of health services to the medically underserved
population composed of residents of public housing. The majority of Public Housing
Health Center patients were minorities; 43 % were African American and 42% were
Hispanic.28 These centers seek to improve the health status of such residents by
providing primary care services on the premises of the public housing projects or at
other locations. Barriers to health care such as clinic location, transportation,
operating hours, language, and other factors are addressed by providing health
services directly at housing projects. Public housing residents must be consulted on
the planning and administration of the center. In CY2006, 37 grantees provided
services to 129,280 public housing residents.29
Native Hawaiian Health Care. This program makes primary care, health
promotion, and disease prevention services available to Native Hawaiians who face
cultural, financial, and geographic barriers to health care services. Under the Native
Hawaiian Health Care Act of 1988 (P.L. 100-579), the Native Hawaiian Health Care
System, composed of five grantees and the Papa Ola Lokahi, a consortium of health
care organizations, receive direct funding to provide health care services. In the
conference report (H.Rept 104-863) that accompanied the omnibus appropriations
bill for FY1997 (P.L. 104-208), the conferees increased funding for the Consolidated
Health Centers program, in part, so that the Native Hawaiian healthcare program
could be supported under the broader Consolidated Health Centers’ budget line
instead of its own line item, resulting in increased funding for Native Hawaiian
Health Care if HRSA determines such funding would be appropriate. The System
provided medical encounters and supportive/enabling services to more than 6,163
Native Hawaiians in CY2005.30
Federally Qualified Health Centers
The Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), P.L. 101-239,
established the Federally Qualified Health Center (FQHC) Program under the Social
Security Act. OBRA 1989 authorized payment for FQHC services by Medicare and
Medicaid.
All Section 330 health center grantees are automatically designated as FQHCs,
making them certified Medicare/Medicaid providers and, therefore, eligible for
27 (...continued)
Administration, Bureau of Primary Health Care, Bureau of Primary Health Care Section
330 Grantees Uniform Data System (UDS), Calendar Year 2006 Data, National Rollup
Report, July 2, 2007.
28 Department of Health and Human Services, Health Resources and Services
Administration, Justification of Estimates for Appropriations Committees. FY2008. On-
line at [http://www.hrsa.gov/about/budgetjustification08/primarycare.htm].
29 U.S. Department of Health and Human Services, Health Resources and Services
Administration, Bureau of Primary Health Care, Bureau of Primary Health Care Section
330 Grantees Uniform Data System (UDS), Calendar Year 2006 Data, National Rollup
Report, July 2, 2007.
30 Personal communication with HRSA personnel August 22, 2007.

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reasonable cost reimbursement from Medicare and prospective payment system
(PPS) payment from Medicaid.
FQHC Look-Alikes. FQHCs also include non-federally funded “Look-Alike”
programs, entities which, based on the recommendation of the HRSA, are determined
to meet the statutory, regulatory, and policy requirements of the Section 330 grant
program but do not receive the grant. For these centers, HRSA reviews applications
for possible “Look-Alike” centers and recommends to CMS which of these non-
federally-funded health centers should receive the FQHC “Look-Alike” designation.
Designation as a Look-Alike site allows placements of National Health Service Corps
personnel because these centers are recognized by HRSA as operating in a medically
underserved area or serving a medically underserved population. Other benefits
associated with the FQHC Look-Alike designation include enhanced Medicare and
Medicaid reimbursement and eligibility to participate in the 340B drug pricing
program.31 The main reason that organizations apply for FQHC Look-Alike
designation is because grants under section 330 are limited and highly competitive.
Consequently, FQHC Look-Alike designation serves as a precursor and alternative
to section 330 grant funds.
As of July 3, 2007, there were 101 FQHC Look-Alikes operating 255 total sites.
As of October 2005, FQHCs were serving about 500,000 unduplicated patients based
on self-reporting. In FY2007, approximately 28% of FQHC Look-Alikes that
applied for funding under the President’s Health Centers Initiative were successful
in obtaining an award.
Tribal FQHCs. Certain outpatient clinics operated by Indian tribes are also
included under FQHCs. Those Indian facilities that are operated by a tribe or tribal
organization under the Indian Self-Determination Act (P.L. 93-638) or by an urban
Indian organization receiving funds under Title V of the Indian Health Care
Improvement Act (P.L. 94-437) are eligible for FQHC status under OBRA 1989, and
all are generally referred to as “Tribal FQHCs.” Though the Indian Health Service
determines their eligibility for FQHC status, Medicare and Medicaid authorize
payment for these facilities. There are 34 urban Indian health programs in 19 states,
of which 20 receive Medicaid reimbursement as FQHCs. One-third of these
programs bill Medicare as an FQHC, and the remainder bill Medicare for covered
services as other community (or non-Indian Health Service) providers or
practitioners. There is no information on the number of Tribal-operated health clinics
available.32
Rural Health Clinics
The Rural Health Clinic Services Act (P.L. 95-210) established the rural health
clinic (RHC) program in December 1977. That act amended the Social Security Act
to provide payment for rural health clinic services provided to Medicare and
31 Information, data and statistics on FQHC Look-Alikes is based on correspondence with
HRSA personnel on August 20, 2007.
32 Personal communication with an official at the Indian Health Service, June 19, 2007.

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Medicaid beneficiaries in rural communities. There were an estimated 3,721 RHCs
in operation as of May 2007.33
Unlike FQHCs, RHCs are not required to provide services to uninsured or
indigent patients; therefore, they are not eligible for Section 330 grants. They receive
enhanced reimbursement rates for providing Medicaid and Medicare services in rural
areas. They must provide outpatient primary care services and basic laboratory
services. They can also offer other services, such as mental health services and
vision services, but those services may not be reimbursed based on allowable costs.
Some other differences between RHCs and FQHCs are listed in Table 1 below.
Table 1. Limited Comparison of Rural Health Centers (RHCs)
and Federally Qualified Health Centers (FQHCs)
RHCs
FQHCs
Can be nonprofit and for-profit corporations,
FQHC status is limited to nonprofit, tax exempt
public agencies, sole proprietorships, and
corporations and public agencies.
partnerships.
RHCs are permitted, but not required, to
FQHCs must utilize a sliding fee scale, with
provide sliding fee reductions to patients —
varying discounts available, based on patient
should an RHC opt to obtain health
family size and income in accordance with
professional shortage area (HPSA)
federal poverty guidelines.
designation, it would be required to have a
sliding fee scale.
The RHC program has no requirements
FQHC status is restricted to nonprofit
related to boards of directors.
corporations and public agencies; therefore, a
board of directors that meet specific criteria is
required.
Preventive health care not required.
Preventive health care is required on-site or
under arrangement.
RHCs are required to provide medical
FQHCs are required to provide access to
emergency procedures as a first response to
emergency care 24/7 — either on site or
common life threatening injuries and acute
through clearly defined arrangements for access
illnesses (the definition of first response is
to health care for medical emergencies during
that the service is commonly provided in a
and after the FQHC’s regularly scheduled
physician office).
hours.
Source: Health Resources and Services Administration. Comparison of the Rural Health Clinic and
Federally Qualified Health Center Programs. Revised June 2006.
RHCs must be certified by the state. Certification requirements for an RHC
include
! location in a nonurbanized area;
! location in an area designated as a health professional shortage area
or a medically underserved area;
33 Data for rural health clinics found on HRSA on-line Geospatial Data Warehouse at
[http://datawarehouse.hrsa.gov/].

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! provision of primarily outpatient medical care;
! employment of at least one nurse practitioner, physician assistant, or
certified nurse midwife at least 50% of the time that the clinic is
open; and
! medical direction from a physician who periodically reviews
services of the health professional staff, provides general medical
supervision, and is present on site at least once every two weeks.34
Medicare and Medicaid Payments
One significant difference between the Medicaid and Medicare programs in their
policies on FQHCs is that under Medicaid, certain requirements for FQHC
designation can be waived for a center and that center can still be eligible for
reimbursement. The Secretary of Health and Human Services is allowed to waive
one or more specific requirements, such as using a limited pool of providers, for up
to two years for good cause. These waivers are not allowed under Medicare.35 The
second significant difference in the way the FQHCs are treated under Medicare and
Medicaid is the way they are reimbursed under the programs.
Medicare Payments. FQHCs and RHCs are paid on the basis of an all-
inclusive rate for each beneficiary visit for covered services. The payment rate is
calculated by dividing the total allowable cost by the number of total visits for
services. An interim payment is made to the FQHC or RHC based on estimates of
allowable costs and number of visits and a reconciliation is made at the end of the
year based on actual costs and visits. Per-visit payment limits are established for
FQHCs and all RHCs (other than those in hospitals with fewer than 50 beds).36
Medicare announces payment rates for FQHCs and RHCs annually. The payments
are determined by the rate of the increase in the Medicare Economic Index. Table 2
below indicates the updated payments for FQHCs and RHCs.
34 University of Southern Maine, Edmund S. Muskie School of Public Service, The
Characteristics and Roles of Rural Health Clinics in the United States: A Chartbook,
January 2003.
35 U.S. Department of Health and Human Services, Bureau of Primary Health Care,
“Overview of FQHC Program,” at [http://www.bphc.hrsa.gov].
36 U.S. Congress, House Committee on Ways and Means, 2004 Green Book, Background
Material and Data on Programs Within the Jurisdiction of the Committee on Ways and
Means, committee print, 108th Cong., 2nd sess., WMCP108-6 (Washington: GPO, 2004),
Appendix D, p. D-38.

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Table 2. Medicare Payment Update for FQHCs and RHCs
Effective January 1, 2008, through December 31, 2008
FQHCs (urban)
FQHCs (rural)
RHCs
upper payment limit per visit
the maximum Medicare
upper payment
for urban FQHCs was
payment limit per visit for rural
limit per visit was
increased from $115.33 to
FQHCs was increased from
increased from
$117.41
$99.17 to $100.96
$74.29 to $75.63
Source: Transmittal 1426, Change Request 5896, SUBJECT: Announcement of Medicare Rural
Health Clinics (RHCs) and Federally Qualified Health enters (FQHCs) Payment Rate Increases,
February 1, 2008. Medicare Claims Processing Manual, Chapter 9 - Rural Health Clinics/Federally
Qualified Health Centers, paragraph 20.6.2 - “Federally Qualified Health Centers.”
Notes: If the FQHC is located within a Metropolitan Statistical Area (MSA) or New England County
Metropolitan area (NECMA), then the urban limit applies. If the FQHC is not in an MSA or NECMA
and cannot be classified as a large or other urban area, the rural limit applies. Rural FQHCs cannot
be reclassified into an urban area (as determined by the Bureau of Census) for FQHC payment limit
purposes.
Medicaid Payments. Medicaid also pays for FQHC services on a per visit
basis, but in accordance with a prospective payment system (PPS) established under
the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of
2000 (BIPA), P.L. 106-554. The PPS establishes a per visit payment rate for each
FQHC in advance.
Beginning in January 2001, existing FQHCs were paid per visit payments equal
to 100% of the average costs incurred during 1999 and 2000, adjusted for any
increase or decrease in the cost of services furnished. For new FQHCs, the per visit
payments begin in the first year that the center or clinic attains qualification and are
based on 100% of the costs incurred during that year, based on the rates established
for similar centers or clinics.37

In 2001, the General Accounting Office (GAO) reported to Congress that the
PPS under BIPA would be likely to constrain future payments to FQHCs and
RHCs.38 The report observed that ultimately a center’s ability to manage under the
new PPS would depend on its initial payment rate and its ability to keep its cost
growth at or below the inflation adjustment. In many cases, this average payment
may be lower than what an FQHC or RHC received in 2000. HHS concurred. HHS
also noted that the effects of the new system would vary among FQHCs and RHCs,
and agreed that FQHCs and RHCs that were already operating efficiently could be
penalized.
37 For further information on the Medicaid prospective payment system for FQHCs, see CRS
Report RL30718, Medicaid, SCHIP, and Other Health Provisions in H.R. 5661: Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, by Jean Hearne,
Elicia Herz, and Evelyne Baumrucker.
38 U.S. General Accounting Office, Health Centers and Rural Health Clinics, Payments
Likely to Be Constrained Under Medicaid’s New System , GAO-01-577 (Washington: June
2001, p. 12).

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GAO conducted a BIPA-mandated study in 2005 to review states’
implementation of the new PPS system, the need to rebase or refine BIPA PPS, and
CMS oversight. The GAO report concluded that CMS’ guidance and oversight
regarding the new BIPA payment requirements were inadequate to ensure consistent
state compliance with the law. The report also found that CMS had conducted
limited oversight of states’ implementation and therefore was unaware of compliance
issues with some states’ payment systems. GAO recommended CMS explore the
development of a more appropriate inflation index for the BIPA PPS and improve its
guidance for states and its oversight of states’ payment methodologies. CMS said it
would take steps related to its oversight but disagreed on the need to issue additional
guidance. CMS also disagreed on the need to develop an inflation index. GAO
maintained its recommendation and also elevated the issue to a matter for
congressional consideration.39
Funding for Consolidated Health Centers Program
In addition to federal grant support, fees collected from third-party payors such
as Medicaid, Medicare, or private insurers, centers may also collect fees from
patients with family incomes above the federal poverty line, according to sliding fee
scales. They may also receive funds from state, local, and other sources.
For FY2007, the President requested $1.963 billion for Health Centers. The
final Resolution passed by the Senate February 14, 2007, that became P.L. 110-5,
provided a final amount of $1.988 billion for FY2007 (which included $44 million
for federal tort claims).
For FY2008, H.R. 2764, the Consolidated Appropriations Act for 2008 (P.L.
110-161) signed into law on December 26, 2007 provided $2.065 billion for health
centers (which included $43 million for federal tort claims).
The President’s FY2009 Budget requested $2.092 billion for health centers, an
increase of $27 million over FY2008 (and includes $44 million federal tort claims
funds).40 Table 3 shows historical appropriations and the number of grantees and
sites since FY2001.
39 U.S. General Accounting Office, Health Centers and Rural Health Clinics, State and
Federal Implementation Issues for Medicaid’s New Payment System, GAO-05-452,
(Washington: June 2005), summary page.
40 U. S. Department of Health and Human Services, The Budget in Brief, FY2009, p .18.

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Table 3. Consolidated Health Center Funding, Grantees, and Sites, FY2001-FY2008
(in $millions)
FY2000
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
Health center
appropriations
$1,019.0
$1,168.7
$1,344.5
$1,465.3
$1,572.6
$1,734.3
$1,782.3a
$1,988.0
$2,065.0
Change in
appropriations
+ $84
+ $149.7
+ $175.8
+ $110.8
+ $107.3
+ $161.7
+ $48.0
+ $205.7
+ $77.0
from previous year
Grantees
746
748
843
890
914
N/A
N/A
952
1,002
Sites
3,000
3,317
3,488
3,578
3,651b
3,741b
3,745
3,831
6,208
Source: Health Resources and Services Administration budget documents, as compiled by CRS.
Note: All appropriation amounts include federal tort claims funds.
a. This amount was derived from P.L. 109-149 and reflects a 1% rescission.
b. Estimate.

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Other Federal Support. In addition to the Health Resources and Services
Administration (HRSA) start-up grant funds, FQHCs may apply for other HRSA
grants.
! The National Health Service Corps provides assistance for
qualifying practice sites in recruiting and retaining
community-responsive, culturally competent primary care clinicians
to deliver health care in underserved communities.
! HRSA’s 340B Drug Pricing Program allows facilities to purchase
prescription and non-prescription medications at reduced cost.
! The Ryan White AIDS program provides funding. Seventy-five
percent of these funds must be spent on core medical services and
50% on early intervention services. There will be overlap; some
approved early intervention services also qualify as core medical
services.
! The Rural Health Outreach Grant supports projects that demonstrate
creative or effective models of outreach and service delivery in rural
communities.
! The Health Information Technology Innovation Initiative provides
funding to support health centers in the new implementation of
Health Information Technology (HIT) other than electronic health
records (EHR) that will substantially enhance the quality and
efficiency of primary and preventive care in the health center
delivery system.
! Distance Learning and Telemedicine Program Loans and Grants are
specifically designed to provide access to education, training and
health care resources for people in rural areas to encourage and
improve telemedicine services and distance learning services
through the use of telecommunications, computer networks, and
related advanced technologies.
Other potential grants include the following:
! The Substance Abuse & Mental Health Services Administration
(SAMSHA) Special Program: “screening, brief intervention,
referral, and brief treatment (SBIRT)” program.
! Grants issued through the Centers for Disease Control and
Prevention (CDC) such as
— Diabetes Control Programs (DCPs), a grant for diabetes
education;
— Vaccines for Children Program (VFC), supporting program operations
and providing vaccines to participating providers that administer vaccines
for preventable diseases to uninsured or underinsured children; and
— Health Disparities Collaboratives, a national, federally funded
quality-improvement initiative.
Non-Federal Assistance. FQHCs may also receive non-federal grants from
state Medicaid programs. A majority of states now provide funding for health
centers. According to the National Association of Community Health Centers

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(NACHC), “In state FY2007 (which for most states began in July 2007), health
centers in 23 states saw an increase in state funding totaling about $81 million.”41
A NACHC survey of Primary Care Associations revealed that 36 states,
including the District of Columbia, reported they were receiving direct funding from
Medicaid for health centers for a total of almost $590 million, almost $70 million
more than FY2007.42
FQHCs may also receive grants from private foundations or contracts.
Websites on Community Health Centers
Hawaiian Health Centers, Hawaii Primary Care Association
[http://www.hawaiipca.net/chcs]
National Association of Community Health Centers
[http://www.nachc.com/]
National Coalition for the Homeless
[http://www.nationalhomeless.org/health/hchprogram.html]
National Care for the Homeless Council
[http://www.nhchc.org/]
The National Center for Farmworker Health
[http://www.ncfh.org/]
National Association of Rural Health Clinics
[http://www.narhc.org]
Rural Assistance Center
[http://www.raconline.org]
Tribal FQHCs (urban Indian health programs), Urban Indian Institute
[http://www.uihi.org/publications.asp]
National Council of Urban Indian Health
[http://www.ncuih.org]
41 National Association of Community Health Centers, Gaining Ground? State Funding,
Medicaid Cuts, and Health Centers, State Policy Report #12, October 2006, p. 3, at
[http://www.nachc.com/client/documents/issues-advocacy/state-issues/state-report-12-dir
ect-funding-final.pdf].
42 National Association of Community Health Centers, Gaining Ground II: State Funding,
Medicaid Changes and Health Centers, State Policy Report #18, August 2007, p. 4, at
[http://www.nachc.com/client/documents/issues-advocacy/state-issues/SPR-18-direct-fun
ding-survey.pdf].