issues with states’ implementation of the BIPA PPS. First, some states’  BIPA PPS payment rates may be inappropriate because the states did not  include all Medicaid-covered FQHC and RHC services in the rates. States implementing an  alternative methodology generally used either cost-based reimbursement  or a PPS with features that differed slightly from the BIPA PPS. While a few states had yet to completely implement their BIPA  PPS as of June 1, 2004, it took the remaining states an average of 15 to 16  months to complete implementation of their methodologies. We found two  issues with some states’ BIPA PPSs. Of the states using the BIPA PPS,  more than a third reported that they did not include all Medicaid-covered  FQHC and RHC services in their BIPA PPS payment rates and over half  had either not defined procedures for adjusting FQHCs’ and RHCs’ BIPA  PPS rates for a change in scope of services, an adjustment required by  BIPA, or not specified what would constitute such a change. Second, as of June 1, 2004, over 3 years after the passage of BIPA, over  half of states using the BIPA PPS had either not defined procedures for  adjusting payment rates for a change in scope of services or not specified  what would constitute such a change; states are required by BIPA to adjust  BIPA PPS rates for a change in scope of services. Evidence to Date Is Insufficient about the Need to Rebase or Refine the BIPA PPS

Sufficient evidence is not available to determine whether there is a need to  rebase or refine the BIPA PPS. Other indexes often used to reflect medical care inflation, however,  have a similar shortcoming. The ability to  determine the need for rebasing or refining is further complicated by an  increasing lack of comprehensive and current cost data because many  states no longer require all FQHCs and RHCs to submit Medicaid cost  reports. Like the  MEI, four other indexes commonly used to reflect changes in medical care  inflation do not reflect the services typically provided by FQHCs and  RHCs. Analysis of Rates from Selected States Provided Inconclusive Evidence on the Need to Rebase or Refine the BIPA PPS

Our comparison of cost-based and BIPA PPS rates for FQHCs and RHCs  from selected states provided inconclusive evidence concerning the need  to rebase or refine the BIPA PPS. However, the extent of the difference between cost-based and  PPS rates varied considerably both within and among the states reviewed  (see fig. CMS Guidance and Oversight Did Not Ensure Consistent State Compliance with BIPA

CMS guidance to states and regional offices and its oversight of states’  implementation of the new BIPA-mandated payment requirements for  FQHCs and RHCs did not ensure consistent state compliance with the law. As a result of this limited oversight, CMS was unaware of several  compliance issues we identified regarding payment to FQHCs and RHCs. In addition, CMS guidance did not address certain BIPA  requirements such as how rates were to be adjusted for a change in scope  of services. On the basis of our recommendations that CMS better ensure consistent  state compliance with the BIPA-mandated Medicaid payment requirements  for FQHCs and RHCs, CMS said that it would take the following actions:  request that SPAs clearly identify whether states intended to implement a  BIPA PPS or an alternative methodology,    contact states to ascertain which Medicaid services they are excluding  from the BIPA PPS rate determination and assist each state in complying  with BIPA requirements for determining the BIPA PPS rate or in  establishing alternative payment methodologies, and  remind states that BIPA requires that alternative payment methodologies  pay at least as much as the BIPA PPS rate. We followed this approach since the Medicare, Medicaid, and  SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) required  states using an alternative payment methodology to ensure that their  methodology resulted in payment no lower than payment under the BIPA  PPS. We selected states for the targeted review if, according to their responses  to our survey, they met the following four criteria for both FQHCs and  RHCs:  implemented cost-based reimbursement as their alternative payment  methodology,  required FQHCs and RHCs to submit cost reports and the state audited  them,    had at least 1 year of audited cost reports following the implementation of  their alternative payment methodologies, and    determined what the FQHCs’ and RHCs’ payments would have been if the  state had implemented the BIPA PPS.
Why GAO Did This Study

The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) established a prospective payment system (PPS) for Medicaid payments to Federally Qualified Health Centers (FQHC) and Rural Health Clinics (RHC), giving providers a financial incentive to operate efficiently. BIPA requires that BIPA PPS rates be adjusted for inflation and changes in scope of services. States also may use an alternative methodology if it pays no less than the BIPA PPS rate. In response to a BIPA mandate, GAO reviewed states' implementation of the new payment requirements, the need to rebase or refine the BIPA PPS, and the Centers for Medicare & Medicaid Services' (CMS) oversight of states' implementation. GAO surveyed the states about their payment methodologies, did a targeted review in four states, and reviewed indexes used to reflect medical care inflation.

What GAO Found

GAO's review of states' implementation of Medicaid's new payment system--the BIPA PPS and alternative methodologies--for FQHCs and RHCs identified certain issues regarding the appropriateness of some states' methodologies. Most states used the BIPA PPS and about half of states used an alternative methodology--generally cost-based reimbursement or a PPS with features slightly different from those required for the BIPA PPS--to pay at least some of their FQHCs, RHCs, or both. States took an average of slightly more than a year from the legislation's January 1, 2001, effective date to implement their BIPA PPS, and a few states had not completed implementation as of June 1, 2004. GAO identified three significant issues with states' new Medicaid payment systems. First, some states' BIPA PPS payment rates may be inappropriate because they did not include all Medicaid-covered FQHC and RHC services in the rates as required by law. Second, as of June 1, 2004, over half the states using the BIPA PPS had not determined how they would make the required adjustment to BIPA PPS rates for a change in scope of services. Third, some states did not ensure that their alternative methodologies resulted in payments no lower than what the FQHCs and RHCs would have received under the BIPA PPS. Evidence to date is insufficient to determine the need to rebase or refine the BIPA PPS. Concerns exist that the statutorily specified annual inflation index used to adjust the BIPA PPS is inappropriate because it not only increases more slowly than do many FQHCs' and RHCs' costs but also does not reflect the services these providers deliver. Other indexes GAO reviewed had a similar shortcoming. GAO's analysis determined that no inflation index has been developed that reflects the services typically provided by FQHCs and RHCs. Because many states no longer require FQHCs and RHCs to submit cost reports, comprehensive and current Medicaid cost data are no longer available to help inform an evaluation of the need to rebase or refine the BIPA PPS. Although GAO's comparison of cost-based and BIPA PPS rates from four states showed that cost-based rates generally exceeded BIPA PPS rates, not all factors contributing to the higher rates are known. Differences between cost-based and BIPA PPS rates varied widely within and among the states reviewed, which also limited the ability to draw conclusions about the need to rebase or refine rates. CMS guidance and oversight regarding the new BIPA payment requirements were inadequate to ensure consistent state compliance with the law. CMS guidance did not fully address certain requirements, and as states developed their new payment systems, they lacked important information clarifying the new requirements. As a result, uncertainties exist regarding how states were to implement some BIPA requirements, such as how to adjust BIPA PPS rates to account for a change in scope of services. CMS has conducted limited oversight of states' implementation and therefore was unaware of compliance issues with some states' payment systems.