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California's FQHCs Transition to Value-Based Care. What Steps Should Be Taken Now?

The future is clear---value-based care models are here to stay in California and will inevitably replace FFS reimbursement. Ultimately, all FQHCs in California must embrace this change and convert to this new patient-centered payment mechanism. The current program plan to move MediCal Fee-For-Service to a Value-Based Reimbursement begins January 1, 2023 with complete conversion of all FQHCs targeted by the end of 2025.

For California FQHCs, we believe that the time to begin the conversion is now. To ensure success in converting to a value-based reimbursement strategy, FQHCs' should take these steps to begin the journey.


Preparing for value-based care is stressful and confusing. Converting to and surviving in a value-based environment is daunting for any organization. For mission-based organizations, the concept of Value-Based Care is quite consequential.

To smooth out the transition, overcome the challenges, and ensure success, the FQHC should collaborate with an established partner. An outside partner with experience in driving delivery system transformation through value-based initiatives can move the Health Center through a seamless transition, reduce complexity, and ensure prospective, predictable payments and efficient use of resources.


Caring for a vulnerable patient population under a finite capitation system will require an aggressive population health management system aligned with funding, data reporting, quality, and infrastructure mobilization. Participating in these new reimbursement models can provide significant benefits, but there are significant inherent risks involved given the necessary infrastrure changes in roles, processes and partnership management.

Even though value-based care financial risk is not a pleasant thought to FQHCs in this post-COVID era of reduced revenues and shrinking margins, these risks can be minimized by implementing changes that promote growth and improve patient care/outcomes, such as better access to providers, leveraging providers utilization, efficient clinical workflow, and optimizing technology.


The proposed payment modernization act is designed to eliminate variations across payment plans, and provide consistent and timely payment that will ensure a strong and resilient California safety net.

A major risk characteristic of Health Centers is their negligible ability to shift costs, given their payer and patient mix. Health Centers tend to have a small percentage of privately insured patients and usually rely primarily on Federal, State, and grant funds to subsidize care for the poor and uninsured. Moreover, unlike private practitioners, FQHCs cannot pass on their revenue shortfalls in the form of patient cost sharing. Not only do their patients not have the ability to pay, certain legal and/or mission-based obligations prevent this reallocation of financial responsibility.

Organizational and transitional success in a value-based care model is contingent upon Health Centers understanding the total cost of care delivered across all service lines and taking specific actions for each payor group. This cost-structure knowledge is also necessary as organizations consider developing new service lines and partnerships.

To assess this data, organizations must access and analyze more detailed population health statistics and payor claims data. Enhanced population health analytics and reporting systems are necessary to accomplish these goals. It is crucial the appropriate infrastructure, hardware, and software are in place to obtain the data needed to successfully manage the value-based payment landscape. Managing a high-risk patient population under a value-based reimbursement model relies on data that is usable and reliable.


As FQHCs morph into a value-based care delivery model, they will need to develop a cost-effective, responsive care delivery network. To achieve the common goals of a value-based care model, primary care physicians, specialists, post-acute providers, and community organizations must work together.

The need to collaborate with providers outside their organizations and other third-party providers will determine each organization's long term financial success. Partners must share a like vision, must be focused on quality and improving patient outcomes, must be cost efficient, and must all agree on the values that promote effective healthcare. Organizations need to understand per member per month (PM/PM) cost models for all of their partners to effectively manage their costs.

Improving quality of care requires reducing operational and clinical variation and collaboration with the most efficient community providers. FQHCs use of detailed population health analytics will enable the Health Center to monitor the well-being of their patient populations with different community provider groups. They can then determine which community organizations/ partners are the most cost effective for each service and can evaluate clinical interventions to improve quality of care and patient satisfaction.

Developing cost-effective care delivery networks with preferred providers is the best way to provide integrated care that improves patient outcomes, while simultaneously lowering the overall costs of FQHC care.


Continuous workflow improvement and revenue cycle optimization are key drivers of enhanced patient access, care outcomes, and financial success in this new payment environment. Innovative clinic optimization programs and care coordination program are necessary components for success.

Internal process redesign is another key to success in a value-based model of care. Reviewing and enhancing internal processes from front desk workflow to clinical throughput, to comprehensive documentation, to claim lifecycle go hand in hand with cost efficiency and ensuring success.

Prior to compensation model transition, a comprehensive revenue cycle management system assessment should be performed to ensure that financial processes and compliance issues as well as potential revenue opportunities are identified and addressed.


California is preparing to launch its new patient-centered payment methodology with the goal of simplifying and improving the State’s FQHC payment structure. This new payment structure provides FQHCs greater flexibility in delivering better care to their patients but shifts financial management risks to the FQHCs.

Understanding the impact of this innovative payment restructuring on stakeholders, anticipating and addressing potential implementation challenges, and engaging relevant outside experts are critical pieces to success through this transition. California FQHCs can decide to ignore this sweeping trend and postpone dealing with it until they have no choice. Or they can proactively get in front of the change to position themselves to not only survive in the value-based reimbursement world, but to thrive.

About Rural Health Solutions

Rural Health Solutions is a physician-led organization that has successfully changed outcomes for more than 200 hospitals and ambulatory enterprises and can ensure a smooth transition to the proposed reformed payment model through its clinic optimization and care coordination programs, specialty staffing, and revenue cycle improvement programs.

Rural Health Solutions can provide Consulting, Care Providers and Advisory Services Team to help FQHCs manage their value-based conversion, including:

1. Evaluation of the operations on the clinical and non-clinical side to identify cost reduction opportunities, care improvement opportunities, better quality outcomes.

2. Leveraging Providers relationship with payors, physician networks, post-acute partners, and other networks.

3. Evaluation of payor and provider contracts.

4. Review of technology systems and provide specialty vendors to help ensure full advantage of automated systems.

5. Implementation of care coordination programs, including Enhanced Care Management (ECM), optimization of PMPM and promoting better patient outcomes.

6. Optimization of clinic workflows to improve patient access and re-engineer the revenue cycle to improve cash flow.

To learn more about Rural Health Solutions and how we can support your FQHC, please see us at or give us a call at 800.901.7889.

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