Transitioning to New Medicare PPS for Community Health Centers

Medicare PPS Implementation: What FQHCs Need to Know 
Part 1: Medicare PPS Implementation: Understanding Your Implementation Date and Rates
On May 2, 2014, the Centers for Medicare and Medicaid Services (CMS) published a final rule establishing a new methodology and prospective payment system (PPS) for Federally Qualified Health Centers (FQHC) under Medicare Part B.  Currently, Medicare pays FQHCs an all-inclusive rate for medically-necessary professional services that are furnished face-to-face with an FQHC practitioner. The all-inclusive rate is now being replaced by an encounter-based-per-diem rate (PPS Rate) that is nationally standardized with some adjustments.
Implementation Date
Per requirements set forth in the Affordable Care Act (ACA), FQHCs began transitioning to the PPS rate for Medicare payments on October 1, 2014. FQHCs have been, and will continue to transition to the new payment system based on their cost reporting period. To determine the timing of your health center’s implementation and transition to the new PPS, refer to the table below:
Cost Report Year End Date                             Medicare PPS Implementation Date
September 30, 2014                                            October 1, 2014
October 31, 2014                                                   November 1, 2014
December 31, 2014                                              January 1, 2015
January 31, 2015                                                    February 1, 2015
February 28, 2015                                                 March 1, 2015
March 31, 2015                                                       April 1, 2015
April 30, 2015                                                         May 1, 2015
May 31, 2015                                                           June 1, 2015
June 30, 2015                                                          July 1, 2015
July 31, 2015                                                            August 1, 2015
August 31, 2015                                                     September 1, 2015
The new Medicare PPS base rate is $158.85 through December 31, 2015. The rate is a national, single encounter-based rate, per beneficiary per day and will be adjusted annually based on inflation. This rate may vary per FQHC based upon the FQHC Geographic Adjustment Factor (FQHC GAF) and per the type of service provided.
In order to calculate your health center’s specific new Medicare PPS rate based upon the FQHC GAF, use the following formula:

$158.85 x (FQHC GAF for your area) 

The list of FQHC GAF is on the CMS website:
Adjustments to PPS Rate
As mentioned above, there are other adjustments to the PPS rate other than the geographic adjustment to account for the geographic differences in the cost of services.  The adjusted FQHC rate can be increased by 34.16% to account for greater intensity and resource use when a patient is new to the FQHC, or to a beneficiary receiving a comprehensive initial Medicare visit (IPPE) or an annual wellness visit (AWV). The 34.16% is uniform across all FQHCs and does not vary by region.
A new patient is defined as someone who has not received any professional medical or mental health services from any practitioner or any site within the FQHC organization within the past 3 years from the date of service.
In order to calculate your health center’s adjusted Medicare PPS rate for new patients, IPPE and AWV visits, use the following formula:

$158.85 x (FQHC GAF for your area) x (1.3416) 

Read More:

  • Part 2: PPS Implementation: Payment Codes and Charges for Services
  • Part 3: PPS Implementation: Practical Implementation & Billing Processes
  • Part 4: PPS Implementation: Filing Your Cost Reports

Since the enactment of PPS, AAFCPAs has provided valuable guidance to FQHCs transitioning in accordance with their required implementation date.  Our team of healthcare advisors offers hands-on experience, providing solutions to help health centers execute a smooth and efficient transition to this new payment methodology. We advise FQHCs in identifying the bundle of services that are furnished to a Medicare beneficiary during an encounter, establishing a proper charge structure for each G-code, training and educating staff across all departments about PPS and its impact on the FQHC, and ensuring that claims are properly billed, paid and recorded in the financial records of the FQHC.
If you have any questions about the implementation of Medicare PPS, please contact your AAFCPA partner, or Matt Hutt at 774.512.4043,

About the Author

Matthew Hutt CPA
Matt leads AAFCPAs’ Healthcare Division, providing assurance, tax and advisory solutions for Federally Qualified Health Centers (FQHCs), behavioral health providers, home care agencies and hospices, nursing homes, and senior care living centers. Matt advises healthcare providers on consolidation and coordination of care, including the integration of behavioral health into the primary care delivery system. He also provides consulting solutions for providers transitioning to new value-based reimbursement models, and data driven patient care, including: developing business process and controls for collecting and advantaging data to provide analysis on: provider activity, delivery of care, and analysis of efficiency & cost effectiveness. Matt is also highly-sought after for his knowledge on issues related to affordable housing developers with requirements related to the US Department of Housing and Urban Development, MassHousing, Low Income Housing Tax Credits, Historical Tax Credits and New Markets Tax Credits. 

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