On September 23, CMS published a proposed rule that would establish a prospective payment system (PPS) for federally qualified health center (FQHC) services under Medicare Part B beginning on October 1, 2014.  CMS has proposed the FQHC PPS in compliance with the statutory requirement of the Affordable Care Act, which added section 1834(o) of the Social Security Act.

Under the proposed rule, CMS is proposing to establish a national, encounter-based rate for all FQHCs and pay FQHCs a single encounter-based rate for professional services furnished per beneficiary per day.  The encounter-based rate would be calculated based on an average cost per visit (i.e., total FQHC cost divided by total FQHC encounters) using Medicare cost report and claims data. CMS noted that the encounter-based rate is “administratively simple,” but also believes it still allows for appropriate payments to FQHCs.  Within the encounter-based rate, CMS is proposing certain adjustments to account for (i) geographic differences in the cost of inputs by applying an adaptation of the geographic practice cost indices used to adjust payment under the Medicare Physician Fee Schedule and (ii) care to a patient new to the FQHC or to a beneficiary receiving a comprehensive initial Medicare visit, to account for the greater resources used for such services.  CMS has proposed a base payment rate of $155.90 per beneficiary per day for the FQHC PPS, but notes that this base rate may change due to more current data in the final rule.

Currently, FQHCs are paid pursuant to an all-inclusive rate for all services furnished on the same day to the same beneficiary, with a few exceptions.  Citing that the exceptions that allow FQHCs to bill for more than one visit per day for a single beneficiary is rarely utilized by FQHCs, the proposed rule eliminates payments to FQHCs for multiple visits on the same day and instead limits FQHCs to one encounter payment per day. CMS does not believe this approach will impact reimbursement to FQHCs, but is seeking comments to the proposed rule, including comments regarding factors that CMS may not have considered, especially with respect to mental health services.  CMS noted that FQHCs would continue to bill separately for laboratory tests and technical components of other preventive tests, which are not currently part of the FQHC all-inclusive rate and would not be part of the FQHC PPS.

FQHCs would transition into the PPS based on their cost-reporting periods. The claims processing system would maintain the current system and the PPS until all FQHCs have transitioned to the PPS.  CMS estimates that the proposed FQHC PPS will increase total Medicare payments to FQHCs by approximately 30 percent.

Comments to the proposed rule must be received by CMS no later than 5 p.m. on November 18, 2013.  A copy of the proposed rule may be read here.