Proposed Rule for New FQHC Prospective Payment System

On September 23, 2013, the Centers for Medicare and Medicaid Services (“CMS”) will publish a proposed rule for a new Medicare prospective payment system (“PPS”) for Federally Qualified Health Centers (“FQHCs”). 

Currently, FQHCs are paid using a cost-based, all-inclusive rate (“AIR”) per visit, for medically-necessary professional services that are furnished face-to-face with an FQHC practitioner, with technical components such as x-rays, laboratory tests, and durable medical equipment being billed separately to Medicare Part B.[1] 
However, the Affordable Care Act added §1834(o) of the Social Security Act, which establishes, effective October 1, 2014, a new system of payments for the costs of FQHC services, under Medicare Part B, based on prospectively set rates.  The rule proposes the methodology for the new FQHC PPS,  which is 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 will be based on the average cost per visit (total FQHC cost divided by total FQHC encounters) using Medicare cost report and claims data.  The rule proposes to adjust the encounter-based payment rate: (1) for geographic differences by using a geographic practice cost index (GPCI); (2) when a FQHC furnishes care to a patient that is new to the FQHC; or (3) when a FQHC furnishes care to a beneficiary receiving a comprehensive initial Medicare visit.   The rule states that the proposed FQHC PPS is estimated to have an overall impact of increasing total Medicare payments to FQHCs by approximately 30 percent.
For further questions on FQHCs or this new prospective payment system please contact Kristen Gentry at or Meghan Linvill McNab at

[1] 42 CFR 405.2463.