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How the Affordable Care Act Supports a High-Performance Safety Net


The Affordable Care Act has the potential to help safety-net providers deliver accessible, high-quality care to vulnerable populations. To realize this potential, safety-net providers should take advantage of provisions that promote coordination and integration of care, capitalize on investments in the capacity of the safety net, and strive to fully understand and adapt to upcoming changes to safety net financing and payment.

For safety-net providers, implementing the provisions of the health reform legislation presents unique hurdles, given their financial constraints and the complex needs of their low-income and uninsured patients. Through a grant from The Commonwealth Fund, the National Academy for State Health Policy (NASHP) convened a workgroup of state and federal officials, safety-net providers, and health policy experts to examine the impact of health reform on safety net-providers and develop policy recommendations to better include safety-net providers in health reform implementation plans and policies. In a NASHP issue brief released today, authors Laura Grossman, Katharine Witgert, and Catherine Hess highlight health reform provisions pertinent to safety-net providers and identify major implementation issues. This post provides a broad overview of the Affordable Care Act provisions that can help put the safety net on a path to high performance. (Also see a related podcast.)

Coordinating and Integrating Care. Affordable Care Act provisions give the safety net numerous opportunities to promote coordination and integration of care (Table 1). First, the law funds various demonstrations and initiatives to evaluate new delivery system and payment models, many of which create incentives for providers to coordinate and integrate care for vulnerable populations. For instance, the Medicare Shared Savings Program offers incentives for providers to work together in networks, known as accountable care organizations (ACOs), to improve health care quality and efficiency. While there is not yet a specific ACO demonstration project for safety-net providers, the final regulations for the Shared Savings Program permit community health centers and other safety-net providers to sponsor ACOs under a payment model that entails lower financial risks than in other ACO models. In addition, the Affordable Care Act authorized the creation of the Center for Medicare and Medicaid Innovation, which will test and disseminate innovative payment and delivery system models, including medical homes. The Innovation Center recently launched the Federally Qualified Health Center (FQHC) Advanced Primary Care Practice Demonstration, which will help to determine what resources are required to assist FQHCs in making the transition to medical homes. While many safety-net providers have some of the attributes of the medical home, they also face significant challenges to becoming medical homes, such as not having adequate processes in place to schedule patients with a personal provider.

The law also gives states the option to receive an enhanced federal matching rate for expanding or implementing health home programs for Medicaid beneficiaries with chronic conditions, which are similar in concept to medical homes. The statute explicitly permits safety-net providers to be considered health homes. Provisions such as the Medicaid Global Payment System Demonstration Project will test alternative payment approaches for safety-net providers based on the quality and coordination of care, rather than volume of services (Table 1). Additional provisions make regulatory changes specific to community health centers to encourage integration and affiliation with other providers, which could help expand the scope and enhance the quality of services.

Financing and Payment. The Affordable Care Act increases financial support to safety-net providers but reduces supplemental payments for certain safety-net providers, leaving many uncertain whether they will have adequate resources to care for vulnerable populations (Table 2). Coverage expansions under the Affordable Care Act will significantly reduce the number of uninsured, so safety-net providers will likely serve fewer uninsured patients and provide less uncompensated care. In addition, the law requires qualified health plans offered in the health insurance exchanges to include essential community providers, such as community health centers, and mandates that payments to health centers be at least as high as those in Medicaid. However, for safety-net hospitals, these new sources of revenue may be countered by the cuts to Medicare and Medicaid disproportionate share hospital (DSH) payments mandated under the law. While the reduction in DSH payments makes the financial outlook for safety-net hospitals somewhat grim, the reductions may also motivate states to rethink how DSH funds are allotted to hospitals in order to target these funds to providers with high volumes of uncompensated care.

Improved Capacity. The Affordable Care Act includes several provisions designed to bolster the capacity of safety-net providers. First, the law includes $11 billion in new, dedicated funding over five years for the operation and expansion of community health centers. It also includes numerous provisions that create financial incentives to encourage medical professionals to train and work in the safety net, such as expanded opportunities for scholarships and loan repayment for primary care providers working in underserved areas (Table 3).

Safety-net providers serve a critical role by providing otherwise unaffordable care to vulnerable populations. They will continue to play an essential role after health reform is implemented by caring for the remaining uninsured, serving as willing providers for the expanded Medicaid population, and continuing to meet the health needs of people with complex health, behavioral, socioeconomic, cultural, and linguistic barriers to care that are more prevalent among vulnerable populations. Yet, in the current economic downturn, many safety-net providers are struggling to provide care to the growing number of low-income, uninsured, and Medicaid patients. As policymakers implement health reform provisions, they must keep in mind the challenges faced by safety-net providers and take steps to ensure the safety net can continue to provide quality health care to vulnerable populations in a post-reform era.

Table 1. Opportunities to Promote Coordination and Integration of Care for the Safety Net

 Provision Summary of Provision Impact on Safety Net 

Accountable Care Organizations (ACOs)

§ 3022 (Medicare)

§ 2706 (Pediatric)

Authorizes funding for the development of Medicare and Pediatric ACO demonstration projects. ACOs are networks of providers that take responsibility for the costs and quality of care provided to their patients. These networks can share in savings earned by reducing the cost of health care delivered, contingent upon meeting performance standards. ACOs encourage greater coordination and integration of care among providers, likely leading to improved quality and efficiency of care for patients as well as to lower costs. The final regulations for health reform’s Medicare Shared Savings Program permit community health centers, along with public hospitals, rural health clinics, and other safety-net providers, to sponsor ACOs.

The Center for Medicare and Medicaid Innovation (CMMI)

§ 3021

Authorizes creation of the Center for Medicare and Medicaid Innovation, a new agency under the Centers for Medicare and Medicaid Services that will test and disseminate innovative payment and delivery system models for Medicare, Medicaid, and the Children’s Health Insurance Program. The Innovation Center provides an opportunity to identify promising delivery and payment models that improve care and curb growing costs. For example, in 2011, the Innovation Center launched the Federally Qualified Health Center (FQHC) Advanced Primary Care Practice Demonstration, which will evaluate the impact of providing financial and technical resources to FQHCs to make the transition into medical homes. Other demonstrations relevant to safety-net providers may be forthcoming.

Medicaid Health Homes

§ 2703

Provides states with the option to receive an enhanced federal matching rate for expanding or implementing "health home" programs for Medicaid beneficiaries with chronic conditions. Health homes are designated primary care providers that work with teams of health professionals to coordinate medical, behavioral health, and social support services needed by those with chronic conditions. States that establish health homes may receive up to 90 percent federal matching funds for the coordination services for up to two years. This provides additional federal support for states to improve the quality and coordination of care provided to an especially vulnerable population with complex medical, behavioral health, and socioeconomic needs. States have flexibility in determining which providers are eligible to be health homes and receive payments for health home services.

Medicaid Bundled Payments

§ 2704

Authorizes a Medicaid demonstration project in up to eight states to test and evaluate "bundling" payments for episodes of care surrounding a hospitalization. A "bundled" payment is a single payment for multiple services provided by different providers during an episode of care. Payment bundling can encourage providers to work together across health care settings to better coordinate and integrate care, which can potentially improve health, improve the quality of care, and lower costs.

Medicaid Demonstration of Global Payments for Safety-Net Providers

§ 2705

Establishes a demonstration project for up to five states to set up Medicaid demonstration projects under which safety-net hospital systems or networks are paid under a global capitated payment. With participants limited to safety-net hospital systems or networks, this project will test an alternative payment approach that is based on quality—how well safety-net providers do in treating the patient—rather than payment based on the volume of services.

Community-Based Collaborative Care Networks

§ 10333

Authorizes as-yet-unfunded grants to support community-based collaborative care networks, defined as a consortium of health care providers with a joint governance structure that would provide comprehensive, coordinated, and integrated health care services for low-income populations. Such networks would encourage collaboration between safety-net providers, for example between FQHCs and public hospitals, to provide a range of integrated and enabling services to low-income patients, such as: health coverage enrollment assistance, care management, and transportation. They would also link their practices with community-based support services that facilitate access to health care and promote patient well-being.

Co-Location of Community Mental Health and Community Health Clinics

§ 5604

Authorized $50 million in grants in FY2010 for eligible community-based, behavioral health settings to provide coordinated and integrated services through the co-location of primary and specialty care. As-yet-unfunded for FY2011–14. This provision promotes clinical integration and coordination of physical and behavioral health services at a single location, which can help providers achieve lower overall health care costs for their most vulnerable patients.

Permitting Health Centers to Engage in Contractual Collaboration with Rural Primary Care Providers

§ 5601(b)

Permits community health centers to engage in contractual collaboration with rural primary care providers that agree to accept health center patients without discrimination and prospectively discount their charges in accordance with the health center's fee schedule. Eligible rural providers include: rural health centers, critical access hospitals, low-volume hospitals, and community hospitals. This regulatory change helps to diminish legal and governance barriers that often inhibit collaborations between health centers and potential partners. In particular, this change encourages collaboration and affiliation of safety-net providers with rural providers, which can help expand the scope of and enhance the quality of services.

 Table 2. Changes to Safety-Net Financing and Payment

 Provision Summary of Provision  Impact on Safety Net 

Reduction of Disproportionate Share Hospital (DSH) Funding

§ 2551

Reduces DSH payments incrementally between FY2014 and FY2020, with the largest reductions targeted to states with low percentages of uninsured and those that do not target DSH payments to hospitals with high volumes of Medicaid patients and/or uncompensated care. The reduction of DSH funding may threaten the financial sustainability of some public hospitals, which have a disproportionate share of uninsured and/or undocumented patients. New sources of revenue gained from coverage expansions may not be sufficient for public hospitals to sustain and meet the needs of vulnerable populations.

Health coverage expansions

§ 2001(Medicaid expansion)

§ 1311, § 1312 (Exchanges)

Requires expansion of Medicaid eligibility to nearly all residents under age 65 with incomes below 133 percent of the federal poverty level ($29,726 for a family of four). With this expansion of eligibility, Medicaid is expected to cover an additional 17 million low-income people by 2021.

Creates health insurance exchanges, which are state-based health insurance markets for affordable and regulated coverage options. For people purchasing insurance through the exchanges, income-based subsidies will be available to reduce the cost of premiums. It is estimated that an additional 24 million people will have health coverage by 2021 through the subsidized health insurance options offered in the exchanges.

Coverage expansions under the Affordable Care Act will significantly reduce the number of uninsured—a critical step in improving access to quality health care. Health reform coverage expansions mean that safety-net providers will likely provide less uncompensated care and receive greater revenue from newly insured patients.

Requirement that plans offered through the Exchanges contract with essential community providers

§ 1311(c)(1)(C)

Requires that qualified health plans participating in the Exchanges include in their provider networks a sufficient number of "essential community providers" that serve low-income and medically underserved populations. Regulations define essential community providers as all those highlighted in the law, including FQHCs and public hospitals. Thus, many safety-net providers will likely see new financial resources from previously uninsured patients who are able to purchase new subsidized coverage options through the Exchanges but continue to receive care from safety-net providers.

Requirement that qualified health plans reimburse FQHCs no less than the Medicaid Prospective Payment System (PPS) rate

§ 10104(b)(2)

Requires that qualified health plans participating in the exchanges reimburse health centers at or above their Medicaid PPS rate. This provision provides some financial protection for health centers against health plans who would otherwise pay a rate lower than the Medicaid PPS rate.

Addition of preventive services to FQHCs' Medicare payment rate

§ 5502(a)

Includes preventive services in the FQHC Medicare payment rate beginning in 2011. Medicare will reimburse FQHCs for the provision of preventive care services furnished to beneficiaries.

Elimination of the Medicare payment cap on FQHC payments

§ 10501(i)

Establishes a prospective payment system for Medicare payments to FQHCs and eliminates payment caps and screens for FQHCs under Medicare starting in 2014. FQHCs will have to adapt to the new payment system and financial incentives for their Medicare patients.

Table 3. Building the Capacity of the Safety Net

 Provision Summary of Provision  Impact on Safety Net 

Health center program expansion

§ 10503(c)

Authorizes $11 billion for community health centers, starting in FY 2011. Will direct $9.5 billion toward expanding operational capacity and $1.5 billion to fund the expansion and improvement of existing facilities. This provides health centers with additional financial support that will enhance their capacity to serve vulnerable populations, potentially providing services to nearly 20 million more patients. Most of the new funding will enable health centers to expand their operational capacity to accommodate the expected increase in patient volume as a result of health reform coverage expansions.

Program to develop and finance residency programs at health centers

§ 5508

Directs the Secretary of Health and Human Services to establish a grant program to support new or expanded primary care residency programs at teaching health centers (THCs) and authorizes $125 million for FY2010–12 to carry out this program. Also provides $230 million in funding over five years to cover the indirect and direct expenses of qualifying THCs related to training primary care residents in certain programs. Eligible THCs are community-based ambulatory patient care centers. This will likely increase the teaching capacity and thus strengthen the primary care workforce for community-based delivery settings, such as FQHCs and rural health clinics in remote areas.

Expansion of school-based health centers

§ 4101

Authorizes and appropriates $50 million each year for FY2010–2013 for a grant program to operate and develop school-based health centers, which will provide preventive and primary health care services for medically underserved children and large populations of children eligible for Medicaid or the Children's Health Insurance Program. This will offer communities with a disproportionate share of children who are uninsured, underinsured, or enrolled in public programs the opportunity to reduce access and affordability barriers to primary care and preventive services.

Program to support the development and operation of Nurse-Managed Health Clinics (NMHCs)

§ 5208

Funds the development and operation of Nurse-Managed Health Clinics, supporting nurse practitioner training and workforce capacity building. This will likely strengthen the health care safety net by expanding the primary care workforce to better accommodate the growing number of vulnerable patients.

Funding for National Health Service Corps

§ 5207

Authorizes $1.5 billion for the National Health Service Corps over five years to promote the expansion of primary care in Health Professional Shortage Areas (HPSAs) through scholarships and loan repayment programs for primary care physicians, nurse practitioners, and physician assistants practicing in these areas. This provision creates financial incentives for medical students to choose primary care specialties and practice in underserved areas, helping to reduce provider shortages and develop the workforce pipeline. It is estimated that this provision will increase the number of primary care providers in HPSAs by an estimated 15,000 new providers.

Health care workforce loan repayment for specialists in underserved areas

§ 5203

Establishes a loan repayment program for pediatric subspecialists and child or adolescent mental or behavioral health providers working in underserved areas. This encourages pediatric subspecialists to practice in underserved areas, likely helping to address safety net providers' current difficulty with referring vulnerable patients to specialty services.


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P. Riley, J. Berenson, and C. Dermody, How the Affordable Care Act Supports a High-Performance Safety Net, The Commonwealth Fund Blog, January 2012.