Program Is Not Targeting Underserved Medicare and Medicaid Populations

The RHC program has grown rapidly since 1990, but not in those locations where Medicare and Medicaid populations are having difficulty obtaining primary care. Our analysis indicates that many of the areas in which RHCs are being certified are not only well-populated but also have existing—and extensive—primary health care systems. We found four problem areas that may result in unneeded expenditure of a portion of these Medicare and Medicaid funds: (1) no limit on payments made to facility-based RHCs, (2) no screening to determine if claimed costs are reasonable, (3) an inability to target cost-based reimbursement where needed for financial viability, and (4) no mechanism to discontinue cost- based reimbursement if the RHC’s location is no longer rural or underserved. Controls Are Lacking on Payments to Facility-Based RHCs

Nationwide data on ownership patterns show that nearly half of all RHCs are operated by a facility such as a hospital, skilled nursing facility, or home health agency. Merced’s 1990 population was more than 56,000—above the maximum of 50,000 under the program’s eligibility criteria. Recommendations to the Congress

To refocus the RHC program to meet its original purpose, the Congress should amend the law to restrict the cost-based reimbursement benefit of the program to (1) RHCs in areas with no other Medicare or Medicaid providers or (2) RHCs that can demonstrate that existing providers will not accept new Medicare or Medicaid patients and that the funding will be used to expand access to them and require periodic recertification to ensure that clinics continue to meet eligibility requirements for cost reimbursement. Major contributors to this report are listed in appendix V.

Objectives, Scope, and Methodology

	Improving Access to Care

Our first objective was to determine whether the RHC program was serving a Medicare and Medicaid population that would otherwise have difficulty obtaining primary care. The purpose of the program is to assist small rural areas relying on nonphysicians or overworked sole physicians for care. Controlling Program Costs

Our second objective was to identify whether controls were in place to ensure that costs claimed for reimbursement are reasonable and to target the cost-reimbursement benefit of the program effectively.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Rural Health Clinic (RHC) Program, focusing on: (1) whether the RHC program is serving a Medicare and Medicaid population that would otherwise have difficulty obtaining primary care; and (2) whether there are controls in place to ensure that costs claimed for reimbursement are reasonable and to target the cost-reimbursement benefit of the program to clinics needing it for financial viability.

What GAO Found

GAO found that: (1) the RHC program is generally not focused on serving Medicare and Medicaid populations having difficulty obtaining primary care in isolated rural areas; (2) the additional Medicare and Medicaid payments provided to RHCs increasingly benefit well-staffed, financially viable clinics in suburban areas that already have extensive health care delivery systems in place; (3) most RHCs are conversions of existing physician practices that generally do not need or use the benefits under the program to enlarge the size of the practice or take other actions to expand care provided to underserved portions of the area's population; (4) contributing to this problem are the extraordinarily high reimbursements that RHC providers receive for each patient visit for Medicare and Medicaid services at many clinics, the program's broad eligibility criteria, and the requirement that the Health Care Financing Administration (HCFA) reimburse all RHCs at cost, even if they are already financially viable; (5) HCFA is not using its authority to set maximum payment limits for nearly half of the RHCs that are operated as a part of a hospital or other facility or implementing screens necessary to determine whether claimed costs at independent or facility-based RHCs are reasonable; and (6) once certified, RHCs remain eligible for cost reimbursement indefinitely, even if the area they serve no longer qualifies as rural or underserved.