United States: CMS Releases Final Rule Establishing Medicare Prospective Payment System For FQHCs

On April 29, 2014, the Centers for Medicare & Medicaid Services (CMS) released a final rule establishing a Medicare prospective payment system for Federally Qualified Health Center (FQHC) services.  Beginning October 1, 2014, Medicare will pay all FQHCs an all-inclusive, encounter-based rate of $158.85 per patient per day, subject to certain adjustments.  The final rule also included a provision related to Rural Health Clinic staffing and created a new three-tiered penalty structure for non-compliance with certain clinical laboratory proficiency testing requirements.

On April 29, 2014, the Centers for Medicare & Medicaid Services (CMS) released a final rule establishing a Medicare prospective payment system (PPS) for Federally Qualified Health Center (FQHC) services.  As required by the Affordable Care Act (ACA), beginning on October 1, 2014, Medicare will pay FQHCs an all-inclusive, encounter-based rate of $158.85 per patient, per day, subject to adjustment for geographic location and certain types of services.  In addition to the establishment of the FQHC PPS, the final rule includes provisions related to Rural Health Clinic (RHC) staffing and penalties for non-compliance with certain clinical laboratory proficiency testing requirements.  The final rule was published in the Federal Register on May 2, 2014, and will be open for public comment until July 1, 2014.

FQHC Medicare PPS

Historically, each FQHC has been paid a facility-specific, all-inclusive, encounter-based rate based on the FQHC's cost of providing care.  Section 10501(i)(3)(A) of the ACA required the creation of a new payment system for FQHC services paid under Medicare Part B based on rates that were set prospectively and applicable to all FQHCs.  The ACA provided that the new payment system would take effect on October 1, 2014.

According to the final rule, under the FQHC PPS, FQHCs will receive $158.85 per patient, per day.  This rate is subject to adjustment based on an FQHC's geographic location (according to the FQHC Geographic Adjustment Factor).  The rate will also be increased by 34 percent when an FQHC provides care to a patient who is new to the FQHC and to a Medicare beneficiary receiving a comprehensive initial Medicare visit (an initial preventive physical examination or an initial annual wellness visit).  FQHCs may also receive the adjusted rate for subsequent annual wellness visits.

For non-preventive care visits, Medicare will pay FQHCs the lesser of actual charges or 80 percent of the PPS rate.  Beneficiary coinsurance will be calculated based on 20 percent of the lesser of actual charges or the FQHC PPS rate.  Consistent with the ACA, most preventive services are exempt from beneficiary coinsurance.  For FQHC claims featuring a mix of preventive and non-preventive services, Medicare will pay for 100 percent of the charges for preventive services, and a beneficiary's coinsurance will be 20 percent of the remaining amount (calculated by subtracting the FQHC's billed charges for the preventive service from the total rate, either PPS or actual charges).  Where any beneficiary coinsurance is waived due to the provision of preventive services, Medicare will pay 100 percent of the payment amount.

In the proposed rule, CMS sought to limit FQHCs to one encounter payment per patient, per day.  After receiving public comments, CMS created two exemptions to this proposed provision.  An FQHC may receive a second encounter payment when a patient leaves the FQHC after an initial visit, and returns the same day with an illness or injury not present at the time of the initial visit.  Additionally, an FQHC may receive a separate encounter payment for a mental health visit occurring on the same day as a medical visit.

An FQHC that contracts with a Medicare Advantage organization will receive at least the same amount for services as it would have received under the FQHC PPS.  If the Medicare Advantage contract rate is lower than the PPS rate, an FQHC will receive a wrap-around payment from Medicare to cover the difference.

FQHCs will transition into the PPS based on their cost-reporting periods, with PPS payments beginning with the first cost-reporting period beginning on or after October 1, 2014.  On January 1, 2016, the PPS will convert to a calendar year update cycle.

Rural Health Clinic Contracting

As established by the Rural Health Clinic Services Act of 1977, RHCs are required to employ at least one nurse practitioner (NP) or physician assistant (PA).  CMS has previously interpreted this requirement to prevent payment for practitioners, other than physicians, who provided services to RHCs under contract.  The final rule provides that RHCs may receive payment for services furnished by contracted non-physician practitioners, so long as the RHC employs at least one NP or PA.  Non-physician practitioners include NPs, PAs, certified nurse midwives, clinical psychologists and clinical social workers.

Enforcement Actions for Proficiency Testing Referral

The Taking Essential Steps for Testing Act of 2012 (TEST Act) gave CMS the discretion to impose appropriate sanctions for cases of intentional referral of clinical laboratory proficiency testing (PT) samples to other laboratories.  Prior to the enactment of the TEST Act, a violation involving intentional PT referral resulted in automatic revocation of a Clinical Laboratory Improvement Amendments (CLIA) certificate and a resulting ban from owning or operating a CLIA-certified laboratory for two years.  The final rule creates three levels of sanctions for intentional PT referral, organized by severity and extent of the referrals.

  • For the first category of cases (which includes the most flagrant violations such as repeat referrals), CMS will impose a severe penalty, similar to the existing penalty, of an automatic revocation of the CLIA certificate for at least one year and a ban prohibiting the owner or operator of the laboratory from owning or operating a CLIA-certified laboratory for at least one year, with a possible civil monetary penalty.
  • In the second category of cases, a laboratory's CLIA certificate would be suspended or limited for less than one year, but not revoked.  A suspension of the CLIA certificate means that a laboratory may not test human specimens for health care purposes.  A limitation of the CLIA certificate means that the laboratory is not permitted to perform testing or to bill Medicare or Medicaid for the specialty of tests that has been limited, but it may perform all other testing under its own CLIA certificate.  Additionally, a laboratory in this second category would face alternative sanctions, including civil monetary penalties and staff training.
  • The third category includes the least severe cases.  For this category, the laboratory will be required to pay a civil monetary penalty and to comply with a directed plan of correction, including staff training.

Joseph Parise, an associate in New York, also contributed to this newsletter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions