PMG’s FQHC Funding Predictions for 2017

Categories: FQHC, PMG Insights Blog

January 3, 2017

FQHC Crystal Ball for 20172016 was tumultuous to say the least, with the most divisive U.S. election in modern history topping the list. Despite the dire predictions of some pundits, the world didn’t end the day after the election. The sun still came up, and over 75,000 patients were seen at federally qualified health centers (FQHCs) across the United States. But make no mistake — in the next two years, our market will evolve at an even more dizzying pace. In fact, the outlook for FQHCs can be summed up in one word: uncertain.

To get a better perspective on what lies ahead, we asked Robert Skeffington, CHBME and Co-Founder of PMG, Inc., what the new landscape for FQHCs might look like in 2017-2018 and beyond. With over 15 years of experience working with FQHCs to improve their revenue cycle processes, Robert’s forecasts tend to be spot on. Read on to see what predictions his FQHC crystal ball is showing.

The Washington Effect

The past eight years have brought us the Affordable Care Act (ACA), more (and larger) FQHCs and many other positives for the healthcare industry. With the White House and both houses of Congress under Republican control, significant changes to Obamacare are likely coming. You can expect Congress to explore a continuation of cost controls with Medicare and Medicaid as well as more privatization in the insurance markets. Also look for the introduction of more bills to address corporate and personal tax reform along with a reduction in regulations and other attempts to make government as a whole much smaller.

It’s easy to forget that Democrats did pick up seats in both houses, so they will remain in a position to help shape the future of our market. In the Senate, the Democrats will have to rely more on the use (or threat) of the filibuster to slow the stated Republican desire for a wholesale “repeal and replace” of the ACA. Watch carefully to see how senators from both parties apply parliamentary procedure and various tactics and tools to effect legislation.

What’s Next for the Affordable Care Act?

FQHC organizations are understandably wary about the changing of the guard in Washington. Should one believe Republican promises to repeal and replace the ACA — and if so, what will the “replace” portion look like?

While calls to stamp out Obamacare make for strong campaign soundbites, actually doing so will prove very difficult. The first complication is the sheer size of the law, which contains over 1,000 pages of new or updated policies and regulations. President-elect Trump has already expressed a desire to preserve provisions such as blind enrollment (no limits on pre-existing conditions) and keeping children on their parents’ insurance plan until age 26. If history is any indication, leaders in Congress will also want to keep other portions of the law intact. So making any changes to the ACA will clearly be a huge, complex undertaking.

It’s worth noting, however, that Medicaid expansion, any tax increases contained in the law, and individual and employer mandates have all been hot-button issues in recent years. The Republicans may decide to address any or all of these in the first 100 days of the new administration. The expansion of private payers into both Medicare and Medicaid programs could also be explored soon.

Also on the way: a significant reworking of healthcare exchanges. With some insurers having dropped out of this market recently and the scattered nature of both state- and federal-run programs, an overhaul is probable. In 2015 a Republican-sponsored bill in the House that would have effectively banned the federal government from running any exchanges may have offered a glimpse of what is to come.

Insurance companies, with their legions of data analysis staff and actuaries, don’t much care for rapid change in their industry. So they are breathing a sigh of relief, as the President-elect and Congress seem to have no real appetite for a single-payer system to be in place nationally. (In addition, Colorado voters narrowly defeated a referendum to move to a single-payer system.) Expect to see private payers make significant inroads into the Centers for Medicare & Medicaid Services in the next two years, expanding their reach and decreasing government’s role, as previously discussed.

To say the least, implementing any major changes to the ACA will take significant time and negotiations. An additional wrinkle is the fact that Congress and the President-elect would presumably need to make the politically gut-wrenching decision to strip away healthcare coverage from millions of people. If Obamacare opponents don’t offer viable fixes to the provisions that are removed, a major uproar is sure to follow nationally.

Effects on Budgets

Those of us in the FQHC world know that every organization is run using a budget. With the changes looming, how will budgets be affected? Based on the information available today, it’s hard to say.

For example, let’s look at the 2010 – 2015 UDS Reports from the Bureau of Primary Care. The data is best viewed using a comparison of health center results nationally and from Medicaid expansion and non-expansion states such as Ohio and Florida. In the graphic below, you can see that national and Medicaid expansion states’ payment-per-visit are growing at a much faster rate than in Florida, which did not participate in Medicaid expansion.

The conclusion: Should the ACA undergo major changes, the effect on budgets will be greater in those states that have expanded Medicaid.

The bottom line: While it may be more incremental than many outspoken Republicans would have you believe, change is definitely on the way. FQHCs need to stay informed and plan accordingly.

Payment Methodology

Outside of the FQHC market, you hear a constant refrain: “lower cost and better outcomes.” In the coming months, this refrain will grow louder still.

Payment reform and pay-for-performance will remain front and center in the context of the broader healthcare discussion. Accountable Care Organizations and similar initiatives will continue to gain in importance as the new administration looks to slow the speed of growth in entitlement programs while maintaining healthy citizens.

Collaboration will be another common theme, with the goal of rooting out inefficiencies. For example, bipartisan support exists to continue progress of value-based payment initiatives in an effort to both reduce the cost of healthcare and improve patient outcomes.

One area of significant concern to FQHCs is the discussed transformation from the current Medicaid system to a state-controlled block grant program. If this were to come to fruition, it would have a major impact on FQHCs. Among other things, the current carve-out protections for FQHCs would be on the table for change or elimination. These include the elimination of the prospective payment system, which is the revenue lifeblood for FQHCs.

Final Thoughts

A few other predictions about what the future might hold for FQHCs:

  • Given that the current climate toward family planning agencies is not positive, FQHCs that expanded in this area will see changes in payment methodology and in reimbursement by visit type — as well as greater uncertainty as a whole.
  • While health organizations nationally have a more-diversified revenue stream than five years ago, many count on federal funding for over 30 percent (and sometimes much more) of total annual payments. Passage of a bill to avert the fiscal cliff drop-off of funding for FQHCs in the short term is expected, but the longer-term prospects are still clouded by uncertainty based on recent comments out of Washington.
  • Amid the noise concerning immigration reform is the issue of FQHCs’ treatment of undocumented immigrants. Medical providers have a duty to treat all patients regardless of legal status. Will they continue to adhere to their do-no-harm philosophy with regard to undocumented immigrants? It will be interesting to see, though it’s too early in the Washington changeover to project the outcome.

Time will tell how much of an impact the upcoming changes have on the FQHC marketplace. But one thing is for sure: FQHCs will continue to host over 75,000 patient visits today, tomorrow and the next day. So now is the time to ensure everyone in Washington is aware of the important work these organizations do day in and day out to serve our country’s most vulnerable populations.