Federally Qualified Health Centers Can Make the Switch to Value-Based Payment, But Need Assistance

Federally qualified health centers (FQHCs) provide comprehensive primary care and preventive services to more than 31.5 million patients across the United States, regardless of their ability to pay. FQHCs have a unique financing structure that relies on federal grant funding and low Medicaid reimbursements. As a result, they operate on thin, often unpredictable financial margins, which limits their ability to implement and sustain improvements.

Value-based payment (VBP) models could help. Under VBP arrangements, payment is tied to the quality, cost, and equity of care rather than the volume of services delivered. Providers are often given an upfront lump sum for each patient, giving them greater flexibility to deliver the right care at the right time.

Experts have suggested that VBP could be particularly beneficial for FQHCs in the long run by making funding more predictable, freeing up resources for them to innovate, and supporting greater investment in infrastructure. It’s also seen as a critical step toward advancing health equity, as FQHCs disproportionately care for low-income and racially diverse patients. By moving to VBP, FQHCs could be further enabled to improve care delivery and outcomes for these patients — something they already excel at.

Few FQHCs have moved to VBP because of their unique governing regulations, but this is starting to change, with:

• several states successfully launching VBP models for health centers
• the Centers for Medicare and Medicaid Services prioritizing FQHC participation in VBP in a newly published strategy
• the Center for Medicare and Medicaid Innovation launching a “Making Care Primary“ model that allows for FQHC participants.

Insights from FQHCs are critical to ensuring these new models succeed. In 2023, the African American Research Collaborative, with support from the Commonwealth Fund, interviewed FQHC leaders and experts on issues, including their views on VBP. (Click here to learn more about how we conducted this study.)

FQHCs See VBP as the Future

Several health center leaders we spoke with said VBP is the future of health care payment and a necessary shift to improve patient care. A chief medical officer from an FQHC in New York said, “I believe in the principle that value-based care drives all of us, as providers, to really take a look at what we’re doing and how we’re delivering care, and that it is an incentive for us to strive to do better.”

Not only do FQHC leaders see VBP as important in principle, they feel primed to join the movement because they’ve long been required by the federal government to do many of the activities that are core to effective VBP. For example, VBP models encourage providers to coordinate patient care, offer behavioral health services, and connect patients to community-based social services. FQHCs already excel in many of these areas, given their directive to provide affordable, comprehensive care. As such, their payments should align with the way they are already delivering care.

FQHCs Have Concerns About Engaging in VBP

Despite their positive outlook on VBP in the long run, the health center leaders we spoke with still feared what it would mean for them on the ground, particularly in the short term with regard to payment levels and practice management. Their main concern was that without carefully designed models and payments, VBP could exacerbate FQHCs’ existing financial woes. “In New York, our reimbursement rates for funds have been flat for about 10 years. So how will [VBP] impact us? What will change?” said a chief medical officer in New York.

Health centers serve high-risk populations and are concerned about the prospect of taking on financial risk and being exposed to penalties. A chief medical officer from Tennessee said: “We worry that the [VBP models] will penalize people who take care of the sickest patients and the ones with the most social barriers to care.” This concern is not unique to health centers, but it is particularly worrying given their already limited financial resources and higher share of uninsured patients.

Successfully implementing VBP requires data systems for reporting and monitoring population health, changes to care delivery, and hiring and training staff. Given their already limited margins, FQHCs said that they would need initial financial support and technical assistance. A chief executive officer from a Texas FQHC said: “One barrier is the lack of funds to help position us to have the type of infrastructure, including the technological infrastructure, to be able to track and understand what needs to be reviewed and submitted. It also takes staff members understanding what value-based care means on a daily basis, operationally. There’s a lot of training needs.”

How Policymakers Can Help FQHCs Succeed

Health centers recognize that moving to VBP is a national priority. FQHCs feel uniquely positioned to deliver high-quality, comprehensive care, but models must be carefully designed. Our interviews with health center leaders point to key steps federal and state policymakers can take when designing VBP models for FQHCs:

• Provide onramps to financial risk. VBP models that include health centers can start by allowing FQHCs to gain financial rewards for strong performance in the first few years and wait to have them take on negative financial risk — if they do at all. The new federal Making Care Primary model has heeded this advice by allowing only upside risk for FQHC participants.
• Account for patient complexity. Consider the complexity of patient populations served by health centers when determining payment rates and assessing performance to avoid unfairly penalizing centers for caring for higher-risk patients.
• Offer initial financial support. To help health centers invest in the data infrastructure and staffing they need, payers can offer upfront financial support to get them ready for the transition.
• Offer tailored technical assistance and training support for FQHCs. Successfully implementing VBP takes time, culture change, and technical expertise in data reporting, care redesign, and other areas. Health centers need experts in VBP to help them successfully transition; for example, the National Association of Community Health Centers’ learning network is providing technical assistance to FQHCs adopting VBP.

Adoption of value-based payment is a long-term undertaking. Federally qualified health centers are ready and well positioned to innovate and transition to VBP. They will need financial support, resources, and time to succeed.