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Developing Federally Qualified Health Centers into Community Networks to Improve State Primary Care Delivery Systems

Across the nation, states are seeking to bolster the performance of Medicaid primary care providers in order to hold down costs while improving beneficiaries' health. In particular, more than 37 states are developing or implementing strategies that seek to improve primary care delivery through the creation of medical homes. A majority of U.S. physicians work in small to medium-sized practices, which often do not have the resources to provide complex care coordination, behavioral health care, extended hours, and other services needed to function as medical homes. As a result, such practices are frequently left out of medical home reform efforts. Connecting such practices to federally qualified health centers (FQHCs)—which provide comprehensive primary care services—could help improve the health of vulnerable populations and potentially reduce costs by achieving efficiencies and sharing scarce resources.

What Is a Federally Qualified Health Center?

Federally Qualified Health Center is a designation from the Bureau of Primary Health Care and the Centers for Medicare and Medicaid Services given to a nonprofit public or private clinic that is located in a medically underserved area or provides care to a medically underserved population. FQHCs must provide a detailed scope of primary health care as well as supportive services to all patients, regardless of their ability to pay. They must be governed by a board, of which the majority members must come from the community served by the FQHC. Most, but not all, FQHCs receive federal grant funds under the Health Center Program, Section 330 of the Public Health Service Act.

By fostering connections between FQHCs and other Medicaid providers, states may be able to connect beneficiaries with services needed to help them manage their health and reduce costly visits to hospitals. FQHCs' mandate to provide a detailed scope of primary and preventive health care and support services, coupled with their access to federal funds, gives them expertise and resources that might be leveraged in collaborative relationships with states and private practices. In addition, FQHCs may find that by entering into collaborative relationships with states and private practices, they strengthen their own financial position, advance their quality goals, improve their staffing mix, enhance the continuum of care and the kinds of services available to their patients, and further their mission.

With support from The Commonwealth Fund, the National Academy for State Health Policy sought to identify states and FQHCs that are collaborating to build community networks to make medical home services available for vulnerable populations. This report features three such collaborations, which offer important lessons for states to consider as they work to improve their primary care delivery systems.

Montana Health Improvement Program

In 2009, Montana Medicaid shifted its management of complex patients from an out-of-state disease management vendor to 13 FQHCs and one tribal health center in the state. The agency collaborated with the Montana Primary Care Association to develop a Health Improvement Program (HIP) in which Medicaid pays these health centers $3.75 per member per month to hire care managers to serve beneficiaries. Approximately 90 percent of the Medicaid patients served through this program receive their primary care from a private, non–health center provider.

Patients are identified for HIP care management through predictive modeling software and provider referrals, based on their risk for complications or inappropriate utilization of services. Trained HIP care managers, based at the health centers, coordinate care with patients and their providers either by meeting patients face-to-face or by telephone. They teach self-care skills, review medications, manage transitions between care settings, remind patients of upcoming appointments, and often arrange transportation.

Relationships between the FQHCs and private practices have been evolving over the past two years. Although data collection is limited, Montana Medicaid has been able to show cost savings from the program through better management of chronic conditions and avoidance of acute care utilization. In addition, the state has been able to extend care management services to a broader Medicaid population.

Community Care of North Carolina

Over the past 13 years, North Carolina Medicaid has cultivated a robust system that has grown from an initial pilot of eight community networks to a statewide operation of 14 Community Care of North Carolina (CCNC) networks covering all 100 counties. The state Medicaid agency left the network design in the hands of large Medicaid practices but provides payments to the participating private practices and networks, which vary according to the size of the population served.

One large practice, Gaston Family Health Services, an FQHC, partnered with the public health department and a community hospital to form an affiliated nonprofit network, Community Health Partners. Gaston Family Health Services provides the management and staffing for 25 employees to operate the Community Health Partners network. Network staff members include a medical director, network manager, nurse clinical manager, care managers, a pharmacist, and a psychiatrist. These individuals work directly with practices to improve patient care. Community Health Partners services span two counties and serve 47 practices and more than 33,000 Medicaid patients. Practices are each assigned a network-based care manager to provide services such as patient education, disease management, and medication review. The network also provides support for transitional care as well as data analysis and feedback to bolster practices' efforts to improve the quality of care. Although preference is given to patients of Gaston Family Health Services, patients involved in the network practices also have access to Gaston's dental clinic, HIV case managers, and diabetes nutrition and education center.

The effectiveness of the CCNC model has been documented in independent reports showing that it has controlled costs and improved health outcomes. The FQHC participating in this network has been able to strengthen its position as a community leader, improve care for its own patients, and better fulfill its mission of serving
its community.

Indiana's Open Door Health Center

The Open Door Health Center, an FQHC in east–central Indiana, operates an urgent care center that serves patients of FQHCs as well as patients of private primary care providers (including insured and uninsured patients). In 2006, Open Door Health Center took over operations of the Southway Urgent Care Center. Today, Southway offers expanded access to treatment for traumas and illnesses that are not life-threatening but demand quick attention.

Most Southway patients—about 44 percent—receive primary care from private providers. About 23 percent of Southway patients receive their primary care at Open Door, and about 33 percent lack a usual source of primary care. For the latter group, Southway works to establish a regular source of primary care by referring them to the FQHC or another primary care practice, if it is more convenient for the patient.

Indiana Medicaid's role in developing Open Door's urgent care center was indirect. A Medicaid managed care payment policy that paid providers on a capitated basis created an environment in which urgent care centers could flourish.

Developing FQHC-Based Networks

Traditionally, the role of FQHCs has been to provide primary and preventive care services for the uninsured, underinsured, and underserved populations who walk through their doors. Fulfilling this mission requires a great deal of effort and resources, and there are many federal, state, and institutional barriers that make it difficult for FQHCs to assume broader roles in their communities by forming collaborative networks with private practices. These include:

  • large differences in capabilities from one FQHC to the next;
  • lack of incentives for private practices to participate in an FQHC-based network;
  • need for the involvement of multiple payers;
  • lack of information-sharing between providers;
  • limited capacity to collect quality data for an entire episode of care;
  • Centers for Medicare and Medicaid Services (CMS) productivity requirements for FQHCs; and
  • visit-based fee schedules that discourage innovation.

Federal health reform offers opportunities to overcome such barriers. The Affordable Care Act creates opportunities for states and FQHCs to pilot community networks, including:

  • the Center for Medicare and Medicaid Innovation;
  • enhanced funding for FQHCs;
  • funding for community health teams;
  • a new Medicaid state plan option for health homes for those with chronic conditions; and
  • primary care extension programs.


The creation of community-based networks to provide care management and greater access to health care services may enable states to hold down Medicaid costs while providing better care for beneficiaries. With the expansion of Medicaid through the Affordable Care Act, already-stretched primary care practices will need to take on additional Medicaid patients. Helping practices function more efficiently as medical homes—particularly for patients with chronic illnesses—can help improve access to high-quality care and control costs. In order for practices to function as medical homes, they will need resources to ensure the delivery of timely, coordinated, and comprehensive primary care. Many FQHCs have the infrastructure and expertise to help practices meet medical home requirements and may be ready partners for states to develop as community networks.

Publication Details



M. Takach and J. Buxbaum, Developing Federally Qualified Health Centers into Community Networks to Improve State Primary Care Delivery Systems, National Academy for State Health Policy and The Commonwealth Fund, May 2011.