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The Changing Landscape of California FQHC Payment Innovation for Value-Based Care

Updated: Jun 15, 2022

Federally Qualified Health Centers (FQHCs) and FQHC Look-Alikes are the foundation of primary care in California’s Medi-Cal system, serving over four (4) million Medi-Cal patients across the State. As frontline care providers, FQHCs are crucial to the State’s healthcare ecosystem. Health Center patients are among California’s most vulnerable. However, the type of care provided by Health Centers is still dictated by antiquated payment rules and has not kept pace with patients’ evolving needs or California’s health care priorities. Transitioning to a new patient-centered payment methodology will allow Health Centers to better serve vulnerable patient populations and create a range of solutions that collectively build and support healthy communities with seamless local access to much needed health care services.

In California, Health Centers are still primarily paid by volume. The proposed patient-centered payment methodology gives Health Centers the flexibility to deliver care in ways that patients need, vastly improving patient care and health outcomes. This new modernized patient-centered payment builds off the Alternative Payment Methodology program enacted in 2015. The proposed new program will include four categories of aid populations reflecting the majority of California’s FQHC users: children, adults, seniors and persons with disabilities, and Medicaid expansion adults. Under the proposed program, all eligible Medicaid beneficiaries must enroll in a Medi-Cal Managed Care Plan and designate a primary care provider. FQHC payments will transition from the State to one of these Medi-Cal Managed Care Plans. The State will make a PMPM clinic-specific payment to the Health Plans for members assigned to the participating health center. The participating FQHC in turn will receive, for each of their assigned members, an actuarially sound, clinic-specific capitated payment from the Medi-Cal Managed Care Plan.

This clinic-specific capitated payment will eliminate the existing Plan payment, wrap-around payment, and reconciliation payment, and replace it with one capitation payment equivalent to what the FQHC would have received under the FFS system. Under the new payment model, the Health Center will be responsible for providing all of the services for its members, including physical health services, behavioral health services, obstetrics, and pharmacy. This new patient-centered system also requires FQHCs to meet new standards of access, quality, and outcomes for patients and to report the applicable metrics to the State on a quarterly basis.

The goal of patient-centered payment modernization is to deliver reform that focuses on value and outcomes and acknowledges that investment in early intervention and primary care can result in per-capita cost decreases while allowing patients to receive needed services across an expanded range of services. Aligning measures between Medi-Cal Managed Care and FQHCs will ensure the greatest impact on quality targets and prompt a reduction in disparities giving Health Centers more flexibility to address member needs, including social determinants of health. Payment modernization should support data informed innovation that encourages deeper health information exchange between Managed Care Plans and FQHCs driving system transformation that cares for the whole person and focuses on value and outcomes.

Change is coming and the best strategy for the FQHCs in California is to get ready for it. The reimbursement models of the future have an increased focus on patient outcomes, quality, and cost reduction strategies----not volume (perfectly in line with their missions).

For more information about how FQHCs can sucessfully make the transition to Value Based Care, contact Rural Health Solutions at

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