Editor’s Note: Lammot du Pont, and Helen Pfister of Manatt Health Solutions are also coauthors of this post. The post is an edited version of a longer article written with guidance and support from the California HealthCare Foundation; the Community Clinics Initiative, a project of Tides and the California Endowment; the Colorado Health Foundation; and the RCHN Community Health Foundation.

As the health care industry moves toward health information technology (IT)-enabled, quality-based reimbursement, it is crucial that the nation’s federally qualified health centers (FQHCs) and the vulnerable populations they serve are not left behind. FQHCs provide primary care to approximately 15 million people per year, most of whom are poor, minority, uninsured, and/or living in medically underserved areas. Health center patients also are more likely to have a chronic illness than patients of office-based physicians. 

In spite of this complex patient population, health centers have consistently demonstrated improved health care outcomes for their patients, and a high quality of care. Through participation in quality improvement efforts such as disease management collaboratives, FQHCs have been at the forefront of national efforts to improve primary care delivery. FQHCs also have a history of reporting quality indicators through the use of electronic patient registries and reportable performance measures to their federal funders.

Health IT is crucial to continued improvements in FQHC operations and in clinical care, and to preparing FQHCs for quality-based reimbursement. Yet FQHCs face unique challenges in crossing the digital divide. Operating with limited reserves, limited access to capital, and constrained revenue streams, these safety-net providers often lack the resources necessary to invest in health IT and fully participate in community health information exchange. A recent California study of community health centers found that only 5 percent of surveyed centers had fully adopted electronic health records (EHRs) and that 23 percent had begun planning to implement EHRs. These adoption rates are well below the 17-25 percent of physicians in ambulatory care settings that have adopted EHRs.

Without scalable revenue sources to underwrite both the debt service on up-front capital and the ongoing operational costs of health IT adoption, FQHCs face insurmountable barriers to health IT adoption and use. The problem is not with existing law. In fact, a close reading of federal law governing Medicaid and Medicare suggests that such costs may actually be required to be reimbursed. However, despite growing efforts at the state and federal level to encourage health IT adoption and use, and to transition Medicaid and Medicare toward quality-based reimbursement, policymakers have not encouraged FQHCs to leverage this funding, and FQHCs largely have not pursued it.

How Can Medicaid Support IT Investments By FQHCs?

Most state Medicaid programs reimburse FQHCs based on a prospective payment system (PPS). Federal law requires that the rate for any fiscal year be “adjusted to take into account any increase or decrease in the scope of such services furnished by the center or clinic during that fiscal year.” Thus, the critical question is whether health IT investments are considered a change in scope of services.

Limited federal guidance has been given defining a change in scope of services, leaving it largely to the states to interpret. The result has been a patchwork of state policies, many lacking detail on the standards and procedures for pursuing a rate adjustment resulting from a change in scope of services. However, the Centers for Medicare and Medicaid Services (CMS) has published a series of questions and answers relating to the PPS, which provide some guidance: “A change in the ‘scope of services’ is defined as a change in the type, intensity, duration and/or amount of services.”

Among the states that have defined a change in the scope of services in state plan amendments, at least four — Arkansas, California, New Jersey, and Texas — include a change in technologies as meeting the definition. Because they are included in state plan amendments, these definitions have been directly approved by the federal government.

Officials in other states should adopt similar rules defining health IT investments that impact the clinical delivery of care as a change in scope under federal law, thereby warranting an adjustment in Medicaid reimbursement. And federal officials should approve these rules, where required. Such rules should ensure that standards related to reimbursable health IT investments align with state and federal priorities related to interoperable health information exchange, quality improvement, and quality-based reimbursement initiatives enabled by health IT. For example, guidance could encourage FQHCs to make investments in certified, interoperable EHRs by creating a presumptive finding that such investments constitute a change in scope.

How Can Medicare Support IT Investments By FQHCs?

Medicare reimbursement to FQHCs is based on an all-inclusive per visit rate that is calculated using FQHCs’ reasonable costs. Federal regulations mandate that “[a]ll necessary and proper expenses . . . are recognized.” Necessary and proper costs are defined as “costs that are appropriate and helpful in developing and maintaining the operation of patient care facilities and activities.” Health IT costs fall well within the scope of these rules. However, because FQHCs’ Medicare payments are subject to a reimbursement rate cap impacting 75 percent of FQHCs nationally, these rules currently have limited practical application in supporting health IT in FQHCs. The Medicare cap for calendar year 2007 for urban FQHCs is $115.33; for rural FQHCs, the cap is $99.17

While the merits of the existing cap on Medicare reimbursement for FQHCs continues to be the subject of considerable debate, it is clear that the application of this cap in the context of health IT is inconsistent with federal goals related to health IT adoption, movement toward value-based purchasing, and interoperability through the creation of a nationwide health information network. Indeed, when the existing cap on reimbursement for FQHCs under Medicare was developed in 1992, EHRs were not in operation, and therefore their costs were not considered in developing the cap.

Federal officials should issue guidance that at the very least creates an exemption to the Medicare cap for health IT investments by FQHCs, such as interoperable EHRs and costs related to participation in health information exchanges, that support the federal agenda for health IT.

How Can FQHCs Build Support For Health IT Reimbursement?

FQHCs themselves should approach health IT as a tool to improve patient care and as a means for furthering their core mission and purpose. As such, FQHCs should work together with state officials to promote reimbursement for health IT investments that improve patient care and pave the way for quality-based reimbursement. In states that are engaged in quality improvement and affordability initiatives enabled by health IT, FQHCs should align their health IT strategies accordingly, to support the case for affirmative rulings with respect to change in scope of services fueled by health IT. A coordinated health IT strategy that aligns public policy and marketplace actions, including those of FQHCs, is the best approach for ensuring the impact of health IT on service delivery, clinical value, and quality-based reimbursement.

This entry was posted on Wednesday, December 5th, 2007 at 11:46 am and is filed under All Categories, Health IT, Medicaid, Medicare. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.