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Key Differences between FQHCs and RHCs


FQHCs and RHCs take up a unique niche among physician practices. And that affects compensation and billing.

The complexity of healthcare can make operating a regular physician practices at times a challenge. Then, add additional government regulations, requirements, and rules and you have a billing nightmare identified as a Federally Qualified Health Center (FQHC) or Rural Health Clinic (RHC). What are an FQHC and RHC and why are they different from any other clinic?

Many physicians have considered opening an FQHC or RHC for the big money. But before you can do this, it’s important to understand what they actually are.

Rural Health Clinics

Rural Health Clinics were established in 1977. Today there are approximately 4,000 clinics spread across the United States. They are located in underserved, non-urbanized areas (as defined by the U.S. Census Bureau) and provide primary care services using a team approach of physicians, nurse practitioners (NPs), physician assistants (PAs), and certified nurse midwives (CNM).

In order to be classified as a RHC the clinics must employ at least one NP or PA. The NP, PA, or a CNM must work at the clinic at least 50 percent of the time the clinic operates. While open they have to furnish routine diagnostic and laboratory services as well as have available drugs necessary for the treatment of emergencies.

RHC services include visits to the clinics, patients’ residence, assisted living facility, Medicare-covered Part A Skilled Nursing Facility or the scene of an accident (institutional claims).  Although the providers from these clinics can offer other services such as inpatient and outpatient consults, these types of visits are considered non-RHC services and billed separately (professional claims).

The clinics receive a cost-based reimbursement for a defined set of core physicians and certain non-physician outpatient services. These payments are based on an all-inclusive payment methodology and subject to a maximum payment per visit and annual reconciliation commonly referenced as an encounter rate. Even though the payments are based on an all-inclusive payment methodology, the Part B Deductible and coinsurance for Medicare patients is still 20 percent of the reasonable and customary charges except for certain services (i.e. outpatient mental health treatment). Meanwhile, for other services such as preventative services Medicare pays 100 percent of the costs for these services.

As a clinic for certain procedures, RHCs get one reimbursement rate regardless of services provided (Medicare and Medicaid only) that is billed on a institutional claim, however during the same visit other procedures and services are required to be billed separately on a professional claim. Let’s not forget all other payers’ (i.e. commercial payers) services are billed on professional claims with appropriate codes and requirements according to their contracts and fee schedules. This translates to an opportunity for a revenue cycle disaster without proper set-up, proper policies and procedures in place, and trained staff with strong reimbursement knowledge.


Federally Qualified Health Centers

Federally Qualified Health Centers were established in 1991. There are approximately 1,124 clinics (each could have multiple sites) spread across the United States. The main purpose of the FQHC program is to enhance the provision of primary care services in underserved urban and rural communities. They are required to be nonprofit corporations and are all under the control of a board of directors. Similar to RHC clinics, FQHCs receive cost-based reimbursement from Medicare based upon the same payment principles.

Unlike Rural Health Clinics, FQHCs :

are required to collect the 20 percent of usual and customary charges when applicable (Medicare claims);

are required to provide primary care for all life cycle ages (do not employ specialists such as pediatric care);

are created by Congress to ensure that grant dollars intended for uninsured were available for that purpose by allowing special Medicare and Medicaid payments;

are required to provide preventive dental services on site or through arrangements with other providers;

should provide professional coverage when the practice is closed, directly or through an afterhours care system;

are required to have hospital admitting privileges for physician in the practice or must document a hospital coverage plan that ensures continuity of care;

must utilize a sliding fee scale with varying discounts available based on patient family size and income in accordance with Federal poverty guidelines; and

have certain services that can be billed separately by utilizing the appropriate modifiers.


Similar to the RHCs, FQHCs are responsible for submitting certain claims in a professional claim format, while others are required to be sent in a institutional claim format. Even though Medicare and Medicaid will only pay one all-inclusive rate for the visit the clinic is still required to include all CPT and HCPC codes on the claim or the claim will be denied in its entirety.


In conclusion, cost-based and PPS reimbursement through the RHC and FQHC programs present an opportunity to provided enhanced services to underserved areas that in most cases would not have access. This does not come without a cost in which the clinics pays in hard work, headaches of additional rules and regulations, and required reporting – not to mention the effect that conversion to cost-based or PPS reimbursement has on clinic operations and staff. In order to succeed at such a challenge, appropriate modifications have to be made to the practice management system and EHR software. Additionally, staff have to be well trained and prepared, and the accounting firm has to be knowledgeable of their requirements, rules, and regulations. All of these challenges can be conquered when the right team and systems are in place.



Comparison of the Rural Health Clinic and Federally Qualified Health Center Programs, HRSA

Rural Health Fact Sheet, CMS, Medicare Learning Network

Federally Qualified Health Centers, CMS, Medicare Learning Network

Medicare Claims Processing Manual, Chapter 9- Rural Health Clinics/Federally Qualified Health Centers

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