For Kentucky Primary Care Centers (“PCCs”), Rural Health Centers (“RHCs”), and Federally Qualified Health Centers (“FQHCs”), getting the run-around from Medicaid on wrap-around payments is not so unusual.  Frequently, these providers complain that supplemental payments distributed by the Kentucky Department for Medicaid Services’ (“Medicaid”) are too low, too late or both.

Last week the situation got worse for PCCs who received a slap in the face from Medicaid in the form of a letter declaring that PCCs who do not carry a federal designation as a rural health care provider, will no longer receive Medicaid wrap-around payments as of February 1, 2013.

• The History

The establishment of FQHCs and RHCs was precipitated by the need for primary health care services in rural areas.  In addition to other requirements, these providers must be located in an area that has been designated as medically underserved (“MUA”) or having a shortage of health care professionals (“HPSA”).  To encourage providers to serve patients in these areas, federal law provides that these services are reimbursed using a prospective payment system (“PPS”), which is determined separately for each individual FQHC or RHC, calculated on a per-visit cost basis, and does not include any adjustment factors other than a growth rate to account for inflation and a change in the scope of services furnished during that fiscal year.

Years ago, Kentucky established an additional type of licensed health provider, the PCC, which often looks like a RHC in its service delivery model but is not located in a MUA or HPSA and therefore not eligible for certification as a RHC or FQHC.  For payment purposes, Medicaid has always treated PCCs like RHCs and FQHCs—using a PPS rate.  State Plan Amendments filed by Medicaid and approved by CMS clearly document Kentucky’s decision to reimburse PCCs using the same methodology that is used for FQHCs and RHCs.  Importantly, PCCs have always been a creature of Kentucky, not federal, law.

• The Wrap-Around

In November 2011, Medicaid began contracting with Managed Care Organizations (“MCOs”) to provide coverage to Kentucky’s Medicaid population. These MCOs reimburse FQHCs and RHCs for their services not on a PPS rate basis but in accordance with their individual fee schedules.  The wrap-around payment was introduced by The Balanced Budget Act of 1997 when the law: (1) relieved MCOs of the responsibility to pay FQHCs and RHCs their cost-based rate and instead required the MCOs to pay these providers “not less” than they would pay non-PPS reimbursed providers for the same medical services, and (2) required that PPS-reimbursed providers were compensated by Medicaid the difference between the amount paid by the MCO and the facility’s PPS rate.  As a result, State Medicaid Programs are required to make  “wrap-around payments” at least every four months.

Because Medicaid pays wrap-around payments for PPS reimbursed providers, and PCCs are paid using the same PPS methodology as FQHCs and RHCs, Medicaid distributes wrap-around payments to FQHCs, RHCs, and PCCs.

• The Slap-Around

Medicaid is funded with state and federal dollars and apparently, as stated in last week’s letter to providers, which can be accessed via this link (20130109152243687), CMS has drawn a line and is requiring the Kentucky’s Medicaid cut-off wrap-around payments for Kentucky PCCs.  This means that unless a PPS-reimbursed primary care provider has a federal designation as a MUA or HPSA and is certified as a RHC or FQHC, it will only receive reimbursement from the MCOs.  In other words, as of February 1, 2013, PPCs’ PPS rates will no longer be recognized as a basis for supplemental payments from Medicaid.

• What Next?

This blow leaves the owner/operators of PCCs shaking their heads—especially in light of the astounding costs expended to establish and defend a viable PPS rate that is soon to be meaningless.  What’s more, Medicaid’s helping hand is nowhere to be found.

This conundrum requires fast and creative action which could include: seeking an injunction in Franklin Circuit Court to stop Medicaid from acting in violation of Kentucky law and basic due process; collaborating with another provider that is located in an area designated as a MUA or HPSA or is already certified as a RHC; or corporate restructuring to become a non-profit with a community-board that is eligible to become a FQHC, to name a few.   There is no simple solution.  For PCCs, this is much more than the usual wrap-around run-around.