Michigan Health Centers are Losing almost $100 with Every Visit

LANSING, Mich. – The Michigan Primary Care Association (MPCA) today released a new report highlighting that the Medicaid prospective payment rate for Michigan’s federally qualified health centers (FQHCs) has not kept pace with the actual costs incurred to provide healthcare, resulting in a substantial reimbursement gap of $97.95 or 36.6% on every Medicaid patient visit.

Read the full report, executive summary and one-pager.

“We’ve surveyed our members and found that without a change in reimbursement, FQHCs will need to look at cutting vital services in Michigan’s underserved communities for our most vulnerable residents,” said Phillip Bergquist, chief executive officer for the Michigan Primary Care Association. “Michigan’s prospective payment rates have been underfunded and outdated for a long time, a situation that has become dire following the last several years of significant cost increases. Our members need more resources to make up the gap in reimbursement and continue providing essential healthcare.”

As a result of the pandemic, like many other healthcare organizations, FQHCs also saw an increase in practitioner and staffing costs which grew over $70 million annually from 2020 to 2023, a 19% increase on average with some roles like nurses and mental health providers topping 25% increases. If no action is taken to adjust the Medicaid reimbursement rate, health centers are projecting losses in 2023 and 2024 that range from $200,000 to over $1.5 million annually per center, and 54% of health centers will be forced to reduce staffing, impacting their ability to maintain healthcare services their patients currently rely on. Additionally, 21% of health centers will have to discontinue entire service lines, like obstetrics or dental care, and 17% will be forced to close one or more locations.

The report, conducted by Health Management Associates, underscores the financial challenges faced by Michigan’s FQHCs due to inadequate reimbursement rates, rising costs, and the need for more accurate inflation adjustments in the reimbursement methodology. The report suggests that using the Medicare Economic Index (MEI) for annual inflation adjustments may not accurately reflect the cost growth in FQHC services.

Without addressing the reimbursement gap identified by this report, some of Michigan’s most vulnerable populations stand to lose access to important primary, preventive, and integrated care. Michigan’s FQHCs include 40 community health centers that provide primary and preventive care services to 1 in 15 Michiganders annually, tailored to fit the unique needs of the communities they serve. Michigan health centers provide essential health care services regardless of patients’ ability to pay and charge for services on a sliding fee scale.

“The patients that we see in our center every day rely on us to provide essential health care services, no matter what their financial situation is,” said Dr. Brenda Coughlin, President and CEO of Great Lakes Bay Health Centers. “We, along with every health center across the state, need more resources in order to continue to provide a safety net for our most vulnerable patients who don’t have anywhere else to seek care.”

Over the four-year period examined in the report from 2017 to 2021, the total costs to FQHCs to deliver care increased significantly, with direct care costs increasing by 13.6% and indirect costs rising by 26.2%. Direct care costs account for salaries and related costs for healthcare providers and pharmacy costs, while indirect care costs include salaries and related costs for support staff members, employee benefits, medical supplies, facility and equipment costs, transportation, and administrative services.

Community health centers are patient-centered local healthcare organizations that provide care to people who live in underserved areas and areas with shortages in health professionals. The majority of the people served by Michigan FQHCs are uninsured or publicly insured, with 65% covered by Medicaid or Medicare, and 14% uninsured. In 2020, Michigan health centers served more than 648,000 residents living in poverty, 230,135 children, 15,512 veterans, and 39,092 homeless.