FQHC Value-Based Alternative Payment Methodologies

The National Academy for State Health Policy (NASHP) designed this toolkit to support states interested in developing a value-based alternative payment methodology (APM) for federally qualified health centers (FQHCs). The following section on value-based APM development discusses key considerations and promising strategies based on lessons learned from states during NASHP’s Value-Based Payment Reform Academy.
Key considerations for APM development include:

• Design an APM based on state-specific context, capacity, and alignment with other Medicaid initiatives.
• Consider how to manage and adjust for risk under the APM.
• Understand how the APM will interact with Medicaid managed care plans.
• Develop an attribution methodology that accurately reflects patient population and aligns with the goals of the selected APM.
• Determine what services to include in the model.

Explanation of PPS/Federal RequirementsSection 1902(bb) of the Social Security Act requires that state Medicaid programs reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit rates for clinics. PPS rates vary by clinic or clinic site (depending on the state) because they are based on average cost per visit rates.States can pursue value-based APMs with FQHCs within federal parameters as long as (1) individual FQHCs agree to the APM; and (2) each clinic’s total payments are equivalent to, or higher than, the total payments they would receive through PPS. As long as states meet the above requirements for APMs, they have the ability to implement value-based APMs to incentivize efficient, high-quality care. For more information on PPS, please see https://www.nachc.com/client// IB69%20PPS%20Complete.pdf.

Background
While Medicaid reimbursement to FQHCs is subject to specific federal requirements (see text box),[i] states are beginning to demonstrate that value-based payment reform for FQHCs is not only possible, but can be beneficial for both state Medicaid agencies and FQHCs.
The CMS Health Care Payment Learning and Action Network (HCP LAN) developed a framework for understanding APM models based on increasing clinical and financial risk. The framework categorizes these payment models across four categories, from lowest to highest risk, including:
Category 1: Fee for service (FFS) with no link to quality/value;[ii]
Category 2: FFS with a link to quality/value;
Category 3: FFS with potential for upside shared savings; and
Category 4: Population-based payments.[iii]
State Medicaid agencies are developing and implementing value-based APMs for FQHCs that fall across HCP LAN categories 2 through 4. State payment models for FQHCs include:

• Supplemental infrastructure payment for care coordination or practice transformation on top of PPS (category 2);
• Supplemental quality incentive payment on top of PPS (category 2);
• Opportunity to earn shared savings (when key cost and quality benchmarks are met) on top of PPS (category 3); and
• Population-based per member, per month (PMPM) payment methodology reconciled back to PPS (category 4).

Examples in this section illustrate that some states have developed value-based APMs with sufficient flexibility so that the majority of Medicaid providers, including FQHCs or groups of FQHCs, can participate, while others have developed FQHC-specific models.
Among states that have implemented value-based APMs that include FQHCs, category 2 APMs, where providers receive supplemental payments linked to quality and value, are most common presently in state Medicaid programs. As value-based APMs advance from add-on payments and pay-for-performance (P4P) to shared savings and finally to population-based payments, the capacity and infrastructure needed by FQHCs increases, as does the opportunity to impact quality and efficiency. Table 1 compares the different types of value-based payment and considerations for both states and FQHCs.
Table 1: Opportunities and Considerations for Value-Based APMs

HCP LAN Category	Payment Model	Medicaid		FQHCs
		Opportunities	Considerations	Opportunities	Considerations
Category 2: FFS with link to quality/ value	Supplemental payments: Supplemental PMPM P4P Providers can earn supplemental payments for meeting or exceeding specific quality or performance measures.	Focus on quality improvement.FQHCs at various stages of readiness can participate while building capacity for more advanced APMs.Incentives can be tied to quality.	Additional financial investment required.Cost savings (e.g., that result from improvements in care and are incentivized by performance measures, such as reduced inpatient admissions) are not guaranteed.Underlying payment still tied to FFS reimbursement.	Focus on quality improvement.Supplemental payments can be used to support non-billable services and/or infrastructure.	May require upfront investments, such as information technology (IT), registries, and/or staff.Supplemental payments conditional on performance on quality metrics.
Category 3: FFS with potential for shared savings	Shared savingsProviders can earn supplemental shared savings payments when they reduce health care costs below a target threshold and achieve specific quality or performance measures.	Focus on quality improvement.Incentivizes providers to reduce total cost of care across the health care system.	Underlying payment may still be tied to FFS reimbursement (varies).State solely responsible if total cost of care increases.	Focus on quality improvement.Additional revenue possible if cost and quality targets are met.Partnerships with other FQHCs and community organizations (e.g., community mental health centers, social service organizations) are possible.	May require upfront investments, such as IT, registries, and/or staff.May necessitate partnerships with hospitals or large health systems.Depending on performance on cost and quality targets, may not result in additional revenue.
Category 4:Population-based payment	Population-based PMPM or global paymentProviders receive one payment to provide care to each attributed patient for a defined scope of services.	Focus on quality improvement.Payment tied to unique patients served, not the types of services provided to each patient.Can be budget-neutral per capita. Predictable monthly FQHC costs.	Must calculate individual payment rate for each FQHC based on unique PPS rate.Must develop reconciliation process to ensure FQHCs at least receive total payments equivalent to PPS.At initial implementation, may have temporary increase in FQHC expenditures during claims run-out period.	Focus is on quality improvement.Payment tied to unique patients served. Ability to provide more flexible, person-centered care using team of providers and staff. Efficiencies and more flexible types of patient contacts (email, phone) could allow for increase in patient panel.	May require upfront investment in IT, data analytics, and/or staff.May require practice-wide changes in workflows.If the number of unique Medicaid patients served does not increase, FQHCs may not see an increase in revenue.

 
Key Considerations
Design an APM based on state-specific context, capacity, and alignment with other Medicaid initiatives. As Table 2, below, illustrates, states are taking diverse approaches to the development of APMs for FQHCs, and no one methodology will be appropriate for all states’ goals. Factors to consider when designing and implementing an APM can include:

• Provider readiness: The more advanced the APM, such as shared savings or population-based payments, the more capacity each FQHC will need for functions such as panel management, care coordination, and quality improvement. FQHCs will also need strong financial management and governance to be successful within a value-based APM.[iv]
• Small and/or rural FQHCs: Building the necessary capacity and infrastructure can be particularly challenging for small and/or rural FQHCs, which may have fewer financial and staff resources to invest. For Medicaid, it may be challenging to reliably calculate APM payment rates or performance on quality metrics because of small numbers of Medicaid patients. States will need to consider how to work with these challenges to ensure that over time all FQHCs have the option to take on value-based APMs.
• State staff and infrastructure capacity: Medicaid agencies will need to have processes in place to attribute patients to practices, calculate payment rates, and collect and analyze data to determine practice performance on quality and cost measures. They will also need a mechanism to report this information back to participating practices. Anticipating new internal staff and infrastructure needs to perform these and other functions can help ensure a smoother development and implementation process.
• State budget capacity: Some APMs, such as supplemental infrastructure or performance-based payments, can require states to make payments above and beyond PPS in order to create incentives for providers to focus on quality improvement and practice change. States will need to consider the capacity of their budgets, and potential opportunities to redirect funds, such as through Medicaid Section 1115 Delivery System Reform Incentive Payment (DSRIP) waivers,[v] when designing an APM.
• Alignment with other initiatives: FQHCs have begun to participate in delivery system transformation through models such as patient-centered medical homes (PCMH), health homes,[vi] and accountable care organizations.[vii] States will want to review how FQHC-specific reforms align with current initiatives in the state, such as Comprehensive Primary Care Plus (CPC+)[viii] and State Innovation Models (SIM) Initiative,[ix] to minimize additional burden on state staff administering these initiatives and any FQHCs participating in multiple efforts.

Academy states expressed greatest interest in population-based APMs, citing two reasons:

• The PMPM payment provides flexibility to manage the individualized health care needs of empaneled patients without always needing a face-to-face visit with a qualifying provider; and
• The model can be budget-neutral per capita when compared to payments under PPS.

Colorado and Oklahoma are in the active development stage with goals of launching in 2018. Beyond Academy states, California has been actively engaged in model development that proposes to convert site-specific PPS payments into PMPM payments. PMPM payments would be inclusive of all FQHC-provided services except oral health, but would vary based on four Medicaid eligibility categories (children, adults, seniors and people with disabilities, and Medicaid expansion adults).[x],[xi] It should be noted that moving from traditional PPS to a prospective PMPM payment can cause a temporary increase in Medicaid FQHC expenditures in the first year of implementation: the state will start PMPM payments while continuing to reimburse FQHCs for encounters submitted under PPS during the claims run-out period.[xii]
States may also combine different payment models. FQHCs in Ohio, for example, are eligible to receive supplemental PMPM payments and shared savings in addition to existing PPS payments under the state’s Medicaid Comprehensive Primary Care initiative.[xiii] Receiving supplemental PMPM payments are conditional on FQHCs meeting specific activity requirements (e.g., same day appointments, population health management),[xiv] as well as quality and efficiency performance measures.[xv]^,[xvi] FQHCs can also earn shared savings if they achieve cost reduction targets and meet the aforementioned requirements.[xvii]
Consider how to manage and adjust for risk under the APM.
It is important to note that while states can incentivize care, sharing downside risk[xviii] with FQHCs through an APM is challenging, given that an APM cannot pay FQHCs less than what they would have earned under PPS. However, upside risk is permissible under PPS.
States may also want to consider risk adjustment when structuring APMs, to account for differences among FQHCs that can impact cost and quality outcomes, such as patient acuity. FQHCs in the Academy expressed a particular interest in adjusting for social determinants of health, due to their populations’ often complex socioeconomic needs. Risk adjustment that takes these kinds of factors into account is just emerging, but could present an alternative way to assess acuity among complex populations like those commonly served at FQHCs.[xix] Incorporating actuarial expertise in the planning process will help in understanding and shaping different approaches to quantifying and managing risk.
Understand how the APM will interact with Medicaid managed care plans.
States with at least some populations enrolled in managed care will need to determine how the APM will interact with managed care contracts and payments to providers. Depending on the proportion of total Medicaid beneficiaries enrolled in managed care, states may decide to include both FFS and managed care beneficiaries as eligible populations in the APM or limit participation to one population or the other.
States that are interested in including managed care beneficiaries can incorporate contract language that requires plans to implement value-based APMs, or to do so for a certain percentage of payments to providers. This strategy could decrease some administrative burden for the Medicaid agency, but could result in different models across plans, and a lack of alignment of incentives with other Medicaid initiatives.
Alternatively, Medicaid agencies can develop a value-based APM and require managed care plans to make payments to practices on behalf of assigned members. Under this scenario, states can:

• Pass supplemental or population-based payments through the managed care plans, adjusting each plan’s capitation rates as necessary; or
• Pay supplemental or population-based payments directly to practices outside of the managed care plan.

Under the latter option, the Medicaid agency retains responsibility for attributing patients to practices, calculating payment rates, and collecting data and subsequently determining practice performance on quality measures or against cost targets. Note that in states that do not currently require managed care plans to pay FQHCs their PPS rates, Medicaid will still need to make wrap-around payments^[xx] to FQHCs so that they are reimbursed at their full PPS rate, in compliance with federal regulations.
Develop an attribution methodology that accurately reflects patient population and aligns with the goals of the selected APM.
Attribution, the process of identifying which patients can be assigned to a participating FQHC for the purposes of tracking both payment and quality measurement, can be complex.[xxi] As an initial question, states will want to decide whether they will be attributing patients to practices retrospectively or prospectively:

• Retrospective attribution assigns patients to providers or practices by looking back at claims and utilization during a defined performance period.
• Prospective attribution uses historic claims data to assign patients prior to a performance period. Prospective attribution can also be used to create the “day one” list of patients, with additional patients attributed on a rolling or monthly basis going forward based on a qualifying claim or event.

Developing criteria for patient attribution is also model-dependent. APMs that include hospitals and larger systems could incorporate factors such as hospital and emergency department use, health home enrollment, and plurality of primary care visits in the attribution process or algorithm. For FQHC-specific APMs, attribution could be tied more closely to primary care and clinic-related utilization. If states are only including managed care beneficiaries in an APM, they can consider using the chosen or assigned primary care provider on managed care plan rosters to attribute patients to FQHCs.
The attribution model can affect aspects of measurement and payment. Retrospective attribution can involve data lags due to claims run-out periods, affecting payment for savings tied to cost and outcomes. Prospective attribution models risk paying practices on behalf of patients no longer on a practice panel during the performance period. Some reconciliation of patient rosters may be needed.[xxii]
Determine what services to include in the model.
In population-based APMs, what services are included or excluded in the model (e.g., specialty mental health, oral health) will impact the calculation of PMPM payments. States will also need to determine how to pay for any services not included in the PMPM.
In APMs with a shared savings component, what services are included drives the calculation of total cost of care, which in turn determines whether an FQHC will share in any savings. Services included in the APM can also influence how FQHCs structure their services and partnerships to impact quality and cost.
States exploring PMPM models will want to consider what services FQHCs in the state most frequently provide in-house, as well as consider any services currently paid for outside of the PPS rate as a starting point for PMPM development. In contrast, shared savings APMs reward FQHCs for reducing cost for an identified population, often including costs incurred outside the clinic walls, such hospital and emergency department utilization. Select services included in Minnesota’s Medicaid ACO program, for instance, include primary care, some mental health, chemical dependency, vision, inpatient and outpatient hospital services in the total cost of care; however, it excludes long-term care and waiver services, oral health, transportation, foster care and child welfare case management as well as some mental health services.[xxiii]

Payment Methodology	Attribution	Services	Link to Quality
Ohio CPC: PPS + Per Member Per Month (PMPM) and Shared Savings[xxiv]
Underlying PPS payment, plus three different PMPM payments based on patient acuity.FQHCs with at least 60,000 attributed member months per calendar year are eligible for shared savings based on meeting cost and quality targets.	Prospective for PMPM payment, based on patient choice, plurality of visits/past 24 months, other factors (e.g., location).Retrospective for shared savings.	PPS services unchanged.FQHCs required to meet “activity requirements,” such as care coordination, population health management.Shared savings total cost of care (TCoC) calculation excludes some services (waiver services, oral health, vision, transportation; long term care costs after 90 days).	Practice receives PMPM payment for meeting quality benchmarks.Shared Savings: option for upside-only risk; 50% shared savings beyond 1%.
Minnesota: Integrated Health Partnerships (IHP): Shared Savings[xxv]
IHPs can choose to either take on upside risk only, and share in savings if cost and quality targets are achieved, or upside and downside risk.The IHP consisting of 10 FQHCs, the FQHC Urban Health Network (FUHN), takes on upside risk only.	Retrospective: at least one visit during the performance period; if multiple providers, patient is attributed based on the preponderance of claims for specific services, such as primary care or behavioral health home.	Retains PPS as base.Key services included in TCoC: primary care, some mental health, chemical dependency, vision, inpatient and outpatient hospital services. Excluded services from the TCoC include: long-term care and waiver services, dental, transportation, foster care and child welfare case management.[xxvi]	Shared savings (upside risk only) by meeting TCoC benchmarks for specific scope of services set by the state, and meeting quality benchmarks.
District of Columbia: Cost-based APMs + P4P
Separate APMs for primary care, behavioral health, dental, and others (in lieu of PPS), plus a performance-based payment (P4P) drawn from a bonus funding pool.	Retrospective: at least one visit during the performance period.	Retains cost-based APM rates as base.[xxvii]	Report on nine measures focused on access, hospital utilization, and transitions of care; can earn supplemental payments if meet at least 75th percentile or significantly improved from previous year.
Oregon: PMPM
PMPM payment rate calculated based on clinic’s PPS rate and encounters in 18-month look-back period.Both FFS and managed care beneficiaries are eligible populations. There are two different payment flows as a result:FFS: Medicaid pays entire PMPM to FQHC. Managed care: FQHCs continue to negotiate payments with Coordinated Care Organizations. Medicaid pays wrap-around payments as PMPM.	Prospective hybrid: Patient must have visit within past 18 months; can add patients through in-person visit.	PMPM includes primary care only; behavioral, dental and obstetrics reimbursed outside of the PMPM. State tracks non-billable services and reconciles payments to ensure PPS payment floor is met.	FQHCs must report on metrics that align with Coordinated Care Organization metrics, Care STEPS, patient satisfaction indicators, but performance not tied to PMPM payments.

For more resources about designing value-based APMs for FQHCs, see the resources tab. To view additional information about developing a value-based APM for FQHCs, return to the toolkit home.

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[i] The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 requires that state Medicaid programs reimburse FQHCs through the Prospective Payment System (PPS), which sets minimum per visit payment rates for individual clinics. PPS rates vary by clinic or clinic site (depending on the state) because they are based on average cost per visit rates. For more information on PPS, please see https://www.nachc.com/client//IB69%20PPS%20Complete.pdf.
[ii] Category 1, or fee-for-service payments with no link to quality and value, are not value-based and will not be discussed further in this toolkit.
[iii] For more information on the HCP LAN framework please visit: https://hcp-lan.org/workproducts/apm-framework-onepager.pdf.
[iv] Deborah Fournier, New Hampshire’s DSRIP Waiver Program and Safety Net Providers (Concord, NH: New Hampshire Department of Health and Human Services, 2016), https://custom.cvent.com/024D0492CF3C4ED1AEDC89C0490ECDEE/files/event/02A978D2532C47828E117BD62C4A8468/5a1fc8e4051f459dabee0b18c2af59cetmp.pdf.
[v] Melanie Schoenberg, et. al., State Experiences Designing and Implementing Medicaid Delivery System Reform Incentive Payment Pools (Portland, ME: National Academy for State Health Policy, 2015). https://www.macpac.gov/wp-content/uploads/2015/06/State-Experiences-Designing-DSRIP-Pools.pdf.
[vi] National Academy for State Health Policy. “State Delivery System and Payment Reform Map.” Accessed September 29, 2017, https://www.nashp.org/state-delivery-system-payment-reform-map/.
[vii] Center for Health Care Strategies, Inc. “Medicaid ACOs: State Activity Map.” Accessed September 29, 2017, https://www.chcs.org/resource/medicaid-aco-state-update/.
[viii]Centers for Medicare & Medicaid Services. “Comprehensive Primary Care Plus.” Accessed September 29, 2017. https://innovation.cms.gov/initiatives/comprehensive-primary-care-plus.
[ix]Center for Medicare & Medicaid Innovation. “State Innovation Models Initiative: General Information.” Accessed September 22, 2017, https://innovation.cms.gov/initiatives/state-innovations/.
[x] California Department of Health Care Services. “Federally Qualified Health Centers Alternative Payment Methodology Pilot.” Accessed September 29, 2017, https://www.dhcs.ca.gov/services/Pages/FQHC_APM.aspx.
[xi] Elena Thomas Faulkner, Stacey Moody, and Morgan Anderson, Spotlight on Health Center Payment Reform:
California’s Alternative Payment Methodology (APM) Pilot (Washington, DC: National Association of Community Health Centers, 2016). https://www.nachc.org/wp-content/uploads/2016/08/CA-APM-Pilot-NACHC-Case-Study-FINAL.pdf.
[xii] Communication with Don Ross, Oregon Health Authority. March 14, 2017.
[xiii] Ohio Department of Medicaid. “Comprehensive Primary Care (CPC) Program.” Accessed November 20, 2017. https://www.medicaid.ohio.gov/PROVIDERS/PaymentInnovation/CPC.aspx.
[xiv] Ohio Department of Medicaid. “Overview of CPC Activity Requirements.” Accessed November 20, 2017. https://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/ActivityRequirements.pdf.
[xv]Ohio Department of Medicaid. “Clinical Quality Requirements.” Accessed November 20, 2017. https://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/qualityMetricSpecs.pdf.
[xvi] Ohio Department of Medicaid. “Overview of CPC Efficiency Metrics.” Accessed November 20, 2017. https://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/efficiencyMetricSpecs.pdf.
[xvii] Ohio Department of Medicaid. “Shared Savings Payment Definition and Methodology.” Accessed November 20, 2017. https://www.medicaid.ohio.gov/Portals/0/Providers/PaymentInnovation/CPC/SharedSavingt-definition.pdf.
[xviii] Downside risk is a payment arrangement where health systems/providers agree to pay financial penalties back to the payer (e.g., Medicaid or Medicare) if they exceed an agreed upon cost threshold.
[xix] For more information on risk adjustment please review the webinar and slides from John Meerschaert of Milliman **NASHP Communications – please insert link to this from the toolkit once available.**. For more information on incorporating social determinants of health into value-based payment models, review the webinar and slides featuring the work of Dr. Dan Polsky of the University of Pennsylvania and Virginia’s Health Opportunity Index **NASHP Communications – please insert link to this from the toolkit once available.**
[xx] Rachel Donlon. “The Kentucky ‘Wrap’: Decreasing Administrative Costs for Medicaid and FQHCs in MCO Payment Reconciliation.” NASHP State Health Policy Blog. January 12, 2016. https://www.nashp.org/15032/.
[xxi] Rachel Yalowich, Barbara Wirth, and Mary Takach, Matching Patients with Their Providers: Lessons on Attribution and Enrollment from Four Multi-Payer Patient-Centered Medical Home Initiatives, (Portland, ME: National Academy for State Health Policy, 2014). https://www.nashp.org/wp-content/uploads/sites/default/files/PCMH_Attribution_and_Enrollment.pdf.
[xxii] Ibid.
[xxiii] Minnesota, memorandum from FORMA Actuarial Consulting Services, LLC., Payment Model Overview, January 17, 2013. https://www.dhs.state.mn.us/main/idcplg?IdcService=GET_FILE&RevisionSelectionMethod=LatestReleased&Rendition=Primary&allowInterrupt=1&noSaveAs=1&dDocName=dhs16_177106.
[xxiv] Ohio Department of Medicaid. “Comprehensive Primary Care (CPC) Program.”
[xxv] Minnesota Department of Human Services. “Integrated Health Partnerships (IHP) Overview.” Accessed September 29, 2017, https://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION&RevisionSelectionMethod=LatestReleased&dDocName=dhs16_161441. Additional information on Minnesota’s IHP attribution model can be accessed here: https://mn.gov/dhs/assets/2017-ihp-rfp-appendix-d_tcm1053-294444.pdf.
[xxvi] FORMA Actuarial Consulting Services, LLC. Memo to Marie Zimmerman, Medicaid Director, Minnesota Department of Human Services, Payment Model Overview, January 17, 2013. https://www.dhs.state.mn.us/main/idcplg?IdcService=GET_FILE&RevisionSelectionMethod=LatestReleased&Rendition=Primary&allowInterrupt=1&noSaveAs=1&dDocName=dhs16_177106.
[xxvii] District of Columbia Department of Health Care Finance, Notice of Emergency and Proposed Rulemaking, Governing Medicaid Reimbursement for Federally Qualified Health Centers, October 6, 2017. https://www.dcregs.dc.gov/Common/DCMR/SectionList.aspx?SectionNumber=29-4502.