The Clinic’s Tale: Chasing FQHC Status Not for the Faint-Hearted I n 1967, a young , C alifornia - trained quickly learned, achieving FQHC status can physician from Jamaica threw himself into saving spawn unexpected administrative and financial a struggling health clinic operating out of an problems and, in and of itself, provides no old furniture store near the edge of Watts in guarantee of financial stability. Los Angeles. Dr. Bassett Brown’s hard work and determination in the aftermath of the riots that Issue Brief swept the area — and through the intervening years — helped ensure basic health care services for “ he only way we were going to T generations of working poor and dispossessed in a 71-square-mile area of Los Angeles County. survive was to convert from a The Central Neighborhood Health Foundation for-profit to a nonprofit and become today remains an essential cord in the health care safety net of the county. And its future appears an FQHC.” secure, despite the precarious nature of funding — Bassett Brown, MD for the uninsured and the unrelenting needs of the Central Neighborhood Health Foundation clinic’s target population. Yet the organization’s survival until recently was very much in doubt. Ironically, it was a federal program designed to “The devil truly is in the details, especially after ensure the financial health of community centers you’ve been approved as an FQHC,” said Steven like Central Neighborhood that nearly triggered Rousso, a senior principal and co-founder with the clinic’s demise. Known as the Federally HFS Consultants in Oakland, California. “There Qualified Health Center program (FQHC), the is no handbook for all the requirements and tasks, initiative channels state and federal dollars to and no instructions. So if you don’t have the health care entities that provide a disproportionate expertise or don’t get it from someone who does, share of services to Medicaid patients and the you are almost certainly going to get in trouble.” uninsured. In California, nearly three million individuals are treated annually at more than Financial Morass 1,000 locations by the state’s 118 federally Rousso last year helped extract Central supported health centers. Neighborhood from a financial morass that threatened to swallow the clinic after it was The program has long been viewed as a panacea of certified as a so-called FQHC Look-Alike in sorts by inner-city clinics and represents a powerful August 2010. Missed opportunities, faulty filings, bulwark for stemming the erosion of uninsured and other administrative miscues resulted in total care funding. But as Central Neighborhood underpayments to the clinic of between $500,000 J uly 2012 and $750,000 over a 16-month period and brought the Consulting Group, a firm that provides management clinic to the brink of closing. consulting to public sector health care entities. Brown, Central Neighborhood’s founder and current “Keeping up with the reporting requirements is a chief executive officer, now 75, acknowledges that constant struggle, and I don’t think there is anyone who administrative shortcomings contributed to the difficulties would dispute that the system is far too complicated. the organization faced as it transitioned to FQHC But the reality is that everybody has their own rules. And Look-Alike status. But he says the process of applying everybody wants them followed.” for FQHC designation and then operating under the program’s guidelines would have been trying under the A Model Community Clinic best of circumstances. The origins of the health center date back to the 1920s, when it was opened by a Baptist church group to provide “If we had more resources, if we had more knowledge, if care for Southerners coming to Los Angeles in pursuit of we had more time, I’m sure we could have done this in a work. But the organization fell on hard times after the more thoughtful, deliberate, and effective way,” he said. Watts riots of 1965. Brown, then a recent grad of Loma “But it was, in fact, a very difficult process and a steep Linda University School of Medicine, was working as an learning curve. So we were left scrambling to put out fires emergency medicine intern at nearby Los Angeles County left and right just to keep the organization alive.” General Hospital in 1967 when he responded to a plea for help from the clinic. Brown quickly found his calling providing care to the “FQHCs are an extremely complex underserved and acquired what few assets the clinic owned in a non-cash transfer designed to keep the doors corner of an already complex system.” open. The physician was able to stabilize the clinic and, in short order, introduced new capabilities, including — Bobbie Wunsch Pacific Health Consulting Group lab services and an x-ray machine. The construction of a modern, 9,000-square-foot medical arts building — half of which Brown financed himself — was completed in 1970. For many, the clinic’s rebirth was seen as Consultants like Rousso and others underscore that the emblematic of the hoped-for recovery for Watts. The FQHC program remains an essential tool for meeting assistant U.S. surgeon general was among the dignitaries the health care needs of the underserved in California present for the grand opening ceremonies. and nationwide. But they also agree that the federal program’s sometimes convoluted requirements, coupled Through the years, Brown continued to strengthen with similarly elaborate — and often duplicative — and expand services for the largely Hispanic and Black state demands, can test even the most sophisticated populations in the area. The practice grew to 10 full-time organizations. primary care doctors, and specialist clinics were conducted on a regular basis. At its peak in the mid-1970s, Central “FQHCs are an extremely complex corner of an already Neighborhood employed over 100 and was seeing more complex system,” said Bobbie Wunsch, founder and than 300 patients a day. A visiting nurse program was partner of San Anselmo, California-based Pacific Health developed to provide follow-up care in the home. 2  |  California HealthCare Foundation A Changing Financial Landscape Federal community health centers originally were The road the clinic traveled from a funding standpoint, at complementary to — and independent of — the state- least in the early years, was relatively smooth. The newly federal Medicaid program, But that separation ended in created Medi-Cal program provided strong support, and 1989 when Medicaid revenues were harnessed to bolster a separate, prepaid contract from the state for indigent the federal grants. Medicaid dollars thus became the care — one of the first in California — lent further primary source of funding for community health centers. sustenance. But by the early 1990s, changes in the Medi-Cal program that essentially inserted subcontracting The Omnibus Budget Reconciliation Act of 1989 also IPAs and managed care companies between the state and drew a distinction between Federally Qualified Health community providers had the effect of spawning new Centers (known as 330s after the defining section of competition and diluting funds available for care. In an the Public Health Service Act) and FQHC Look-Alikes. attempt to adapt, the clinic entered into an arrangement The key differences were that, unlike 330s, Look-Alikes with Blue Cross to provide Medi-Cal managed care were not eligible for federal grants, nor could they take services. But the partnership was ill-suited. advantage of free malpractice coverage or gain special safe harbor protection under federal anti-kickback provisions. The net result was that Central Neighborhood lost many of its patients to other providers, and the clinic’s Otherwise, both 330s and Look-Alikes were entitled capitation rate — which had been $25 per member per to cost-based reimbursement calculated from allowable month — tumbled to $15. Because the clinic operated as health center costs in lieu of standard Medicaid and a for-profit entity, grant funding was unavailable. Medicare fee-for-service rates. The cost-based rates allowed FQHCs to pay for fixed and variable overhead “Our patient load was dropping, so we had to let doctors and infrastructure costs, in addition to primary care and personnel go, one by one,” Brown said. “Everything services, and proved a major financial boon for many was dying on the vine, and we realized that ultimately the clinics. But by 1999, cost-based reimbursement was only way we were going to survive was to convert from a deemed inflationary and was replaced by a prospective for-profit to a nonprofit and become an FQHC. But we payment system (PPS). This approach nonetheless knew it would take time.” continued to take into account clinic overhead expense, and Look-Alikes and 330s consequently were able 330s and Look-Alikes to maintain significantly higher per-visit rates than The forerunner of today’s FQHC program, the federal the Medicaid fee-for-service reimbursements paid to community health initiative was established in the 1960s non-FQHC providers. to provide federal grants to clinics located in medically underserved areas and treating patients regardless of their Chasing FQHC Status ability to pay. Two other qualifications for community It was that prospect of a major bump in cash flow — health centers were codified under Section 330 of the from $18 per basic Medi-Cal visit to a projected $155 — Public Health Service Act: The clinic also was required that drew Central Neighborhood Health Foundation to to provide a detailed scope of primary health care and the FQHC program. The clinic had struggled financially supporting services, and it had to be governed by a through much of the 1990s, and Brown worked majority of community members who represented the to sustain it with ever-increasing personal financial population served. contributions and loans. But the situation continued to worsen, and pursuit of FQHC designation consequently The Clinic’s Tale: Chasing FQHC Status Not for the Faint-Hearted  |  3 began in earnest in 2004. At the suggestion of a colleague, Central Neighborhood also had to secure licensure and Brown was able to recruit a group of graduate students certification as a primary care clinic from the California from the University of California, Los Angeles School of Department of Public Health (CDPH) before becoming Public Health to assess the clinic’s readiness for meeting an FQHC. Like the federal application, the state process the requirements of the FQHC program. took time and effort to complete. The grad students’ 215-page report was finished in late As part of the FQHC application process, Central 2004 and largely confirmed that, assuming the clinic’s Neighborhood was required to obtain letters of support successful conversion to nonprofit status, Central from other FQHCs operating in the same area. But of the Neighborhood was well-positioned to take advantage five L.A.-area clinics that Brown approached, only one of the FQHC program. However, the authors warned agreed to provide a letter to federal regulators on Central that the clinic’s documentation of clinical policies and Neighborhood’s behalf. processes needed to be strengthened to meet FQHC requirements. Administrative and financial management capabilities also were deemed deficient. Numerous policies and procedures, the report said, “were found to lack the Of the five L.A.-area clinics that Brown detail required to sufficiently and successfully maintain the accounting system, including billing, credit, and approached, only one agreed to provide collection processes.” The center further lacked “adequate internal controls that should ensure fiscal integrity of a letter to federal regulators on Central financial transactions and reports.” Neighborhood’s behalf. Brown said the clinic attempted to make the necessary management and financial reporting changes recommended in the report. “We understood that we needed to beef those areas up,” Brown said. “But cash “They were fearful of competition, but it was an insane flow was tight and it was difficult to take all the steps we fear,” Brown said. “I’ve been in the community for more needed to.” than 40 years, longer than any of them. It came down to the fact that they perceived us to be a competitive threat. Complicating the run-up to submission of the FQHC But the truth is, all of us together can barely put a dent in application was the need to simultaneously convert the overall need here. So that was very disappointing.” the clinic’s organizational structure from for-profit to nonprofit. The transfer of assets and contracts, including Central Neighborhood ultimately submitted its inch-and- a critically important county contract for indigent care a-half-thick FQHC application, in triplicate, in March awarded in 2005, effectively required the simultaneous of 2009. “It was extremely elaborate,” Brown said. “We operation of two parallel businesses for an extended had to show that we met all the requirements and that we period of time. understood the whole concept of managing care so as to achieve good outcomes.” 4  |  California HealthCare Foundation Missing Paperwork In reality, however, the state pegged the rate at a mere Approval of Central Neighborhood’s FQHC Look-Alike $30. Brown questioned the judgment, but the state was status came in August 2010 from the federal Health “adamant” in justifying the calculation, he said. Central Resources and Services Administration (HRSA), Neighborhood consequently accepted the decision, and the administrators of the FQHC program. An cash flow collapsed from projected levels. application submitted two months later to win the full 330 designation (and attendant annual grants of With the financial situation spiraling out of control, up to $650,000) was put on hold by HRSA, due to Brown turned to community health center experts shortcomings identified by the agency. at the California HealthCare Foundation for advice. The Foundation, in turn, recommended that Central Those problems included the absence of letters of Neighborhood work with Rousso, a consultant support from other FQHCs; failure to identify gaps in specializing in community health centers and FQHCs. health services or other private practices accepting public Rousso conducted a detailed review of the clinic’s insurance; along with the need for further development of documentation and quickly discovered the primary policies, procedures, strategic goals, objectives, outcomes, problem. evaluation measures, and plans for recruiting and retaining additional staff, according to a comment letter “Basically, the clinic hadn’t submitted the proper from HRSA. paperwork to the state to show what their Medi-Cal managed care plan reimbursements were, so the rate With Look-Alike status nonetheless secured and the was set at a very low level,” Rousso said. “It was a lack clinic’s prospective payment system (PPS) rate established of knowledge about the requirements on the part of the by HRSA at $155 per patient visit, the clinic next clinic, poor communication on the part of the state, and approached the Medi-Cal program about setting a also the absence of anyone advocating on the clinic’s so-called Code 18, or “wrap-around rate.” Under federal behalf.” law, the state is required to make a supplemental, or wrap-around, payment to cover 80 percent of the The consultant’s review uncovered other omissions. difference between what managed care organizations Two other state programs that offered enhanced reimburse the clinic and the clinic’s full PPS rate. The reimbursement for FQHCs — Healthy Families Code remaining 20 percent of the PPS can be recovered 19 and Medi-Medi Code 02 (for enrollees who are through a reconciliation process at year-end. both Medicare and Medi-Cal eligible) — had not been accessed by the clinic. The result was additional foregone The wrap-around rate represents an increasingly key revenue. component of the overall FQHC reimbursement structure as more Medi-Cal beneficiaries are shifted into Finally, the clinic had not been properly enrolled as a managed care plans. In Los Angeles, the Medi-Cal rate Medicare FQHC provider. Like Medicaid, Medicare for non-FQHCs is around $18 per visit. The clinic’s also pays an enhanced reimbursement rate to 330s and wrap-around, therefore, should have been, at minimum, Look-Alikes. But because Central Neighborhood was in the neighborhood of $110. unaware of this fact, the clinic was continuing to receive standard fee-for-service rates and thus leaving dollars on the table with each Medicare patient treated. The Clinic’s Tale: Chasing FQHC Status Not for the Faint-Hearted  |  5 `A Lot of Land Mines’ dealing with the Medicare fiscal intermediary. So right Central Neighborhood’s unfamiliarity with myriad there, you’re interacting with five or six organizations, and FQHC rules collectively cost the clinic between there is no real communication between them. That, in $500,000 and $750,000, Rousso estimated, the bulk of itself, is troubling.” which resulted from Medi-Cal underpayments. Yet the consultant said he didn’t fault the clinic’s management for “Dr. Brown is a physician and his main focus is the problems. Unfortunately, he said, it’s a scenario he’s medicine,” Rousso added. “He’s dedicated his life to encountered many times before. providing care to the underserved. How could he be expected to know this stuff? It’s like me trying to do a “I’ve seen these kinds of mistakes over and over again, colonoscopy.” particularly with new centers,” he said. “They get FQHC status, but no one tells them what to do after that, like Ongoing Demands how to enroll in Medicare and Medicaid, how to get Wunsch, founder and partner at Pacific Health the various rates, how to bill, the different codes to bill, Consulting, agreed that the application and enrollment provider numbers, how to get registered with the right processes associated with start-up FQHCs can seem agencies. And then there are ongoing reimbursement overwhelming. But the challenges don’t stop there. issues after start-up. So there are just a lot of land mines Once a clinic is operational, it must comply with a out there.” host of ongoing reporting requirements. These include detailed annual reports to both HRSA and Medi-Cal, as well as to the Office of Statewide Health Planning and Development (OSHPD) and county agencies. Each report typically has different parameters, questions, “ e’s dedicated his life to providing care H and terminologies, although there is frequent overlap to the underserved. How could he be between them. expected to know this stuff? It’s like me Moreover, because many FQHCs receive funding from private foundations, those entities likewise require reports trying to do a colonoscopy.” designed to account for, and justify, the grants. Finally, — Steven Rousso case, morbidity, outcomes, and quality information must HFS Consultants be collected and shared on a regular basis with multiple agencies to accommodate the larger quality objectives of the FQHC care model. One of the biggest problems facing new FQHCs, Rousso “A clinic literally could have up to 50 different funding said, is the fragmented nature of agency oversight and sources, and 50 different reports that must be turned in compliance. at different times of the year,” Wunsch said. “I think it’s every community health director’s dream that the process “You’re dealing with HRSA, you’re dealing with one be simplified.” state agency on licensing issues, another on provider enrollment, another for audits and investigation for rates; She added that although the vast majority of FQHCs with CMS for approvals on the Medicare side, and you’re ultimately get a handle on the reporting and compliance 6  |  California HealthCare Foundation demands, sustaining the appropriate level of oversight is something that could save these hospitals a lot of money,” an increasingly difficult task. Brown said. “In the last five years, a lot of FQHCs have brought in Meeting the clinic’s ongoing reporting requirements — compliance officers,” she said. “I think that illustrates particularly in the area of quality and outcomes data — perfectly the fact that the system has become so complex should get easier as Central Neighborhood’s automation that you basically need a whole department to make sure capabilities are strengthened. According to Brown, the you’re following the rules.” clinic was certified as a “meaningful user” of electronic medical records in 2011. As such, Central Neighborhood Back from the Brink will be eligible under the 2009 HITECH Act for financial Today, Central Neighborhood is steadily climbing back assistance over the next five years to help bolster its on solid financial ground. Rousso said corrected and information infrastructure. missing documentation is being resubmitted to Medicare, Medi-Cal, and other state agencies, and the odds are good Brown said he is enthusiastic about the medical home that a significant portion of the lost revenues from 2010 case management and disease tracking components of and 2011 can be recovered. The consultant has helped the FQHC program. “I think that once all the electronic Central Neighborhood clarify its Medi-Cal managed care medical records are in place, it’s going to be a huge utilization and reimbursements, and a new wrap-around step forward toward improving the health status of the rate has been set by the state at $132 per patient visit. community,” he said. Central Neighborhood is currently seeing about 200 And while the future of the Patient Protection and patients per day and employs five physicians, six physician Affordable Care Act remains very much up in the air, the extenders, and 12 medical assistants. Last summer, the prospect that many of the currently uninsured ultimately health center was awarded a Healthy Way L.A. contract to could receive care through an expanded Medicaid provide a medical home for low-income patients as part program raises the prospect of potentially significant of the Bridge to Health Care Reform established by the additional reimbursement for Central Neighborhood. Obama administration. Healthy Way provides free health care coverage to low-income, uninsured adult citizens and Building for the Future legal residents via a medical home delivery model. The As for the overall lessons gleaned from the clinic’s recent clinic likewise has secured a parallel Disability Assessment experience, Brown recommended that community Contract with the county’s Department of Public Social health centers considering a conversion to an FQHC Services. The contract will provide an opportunity for hire a qualified consultant or attorney at the outset hundreds of indigent and homeless patients to access and — both to work with the organization through the establish a medical home through Central Neighborhood. application process and to stay involved once operational status is achieved. One possibility, he said, was that Separately, Central Neighborhood is exploring the multiple clinics could band together to spread the cost possibility of working with area hospitals to decompress of a top-notch consultant. He added that retaining a crowded emergency departments by establishing satellite financial officer who was experienced in managing the clinics at the hospitals. The clinics could absorb uninsured reimbursement complexities of FQHCs likewise was patients through the Healthy Way L.A. program. “It’s essential. The Clinic’s Tale: Chasing FQHC Status Not for the Faint-Hearted  |  7 Although Central Neighborhood’s FQHC odyssey has been daunting, Brown said he feels positive about how the situation is playing out. “I can see light at the end of the tunnel now,” he said. “This work has been my life, and the job that needs to be done is enormous. I think I’ve always had good insight into the problem of treating the underserved and what the potential solutions were. And that’s why I pursued FQHC for the clinic. More than anything, I want to establish a solid foundation for the clinic’s future, so that it will continue when I’m gone, and not die with me.” About the F o u n d at i o n The California HealthCare Foundation works as a catalyst to fulfill the promise of better health care for all Californians. We support ideas and innovations that improve quality, increase efficiency, and lower the costs of care. For more information, visit us online at www.chcf.org. 8  |  California HealthCare Foundation