Medicare Program; Payment for Federally Qualified Health Center Services

[[Page 14640]]

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405 and 491

[BPD-728-F]

RIN 0938-AF14

Medicare Program; Payment for Federally Qualified Health Center

Services

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: These regulations establish, as a Medicare benefit, outpatient

services furnished by a Federally Qualified Health Center (FQHC) and

establish requirements for coverage and payment of FQHC services. An

FQHC is one of the following: An entity that is receiving a grant under

section 329, 330, or 340 of the Public Health Service (PHS) Act; a non-

grant receiving entity that is determined by the Secretary to meet the

PHS Act requirements for receiving a grant; certain native American

health centers; and certain facilities that have previously been

identified as Federally funded health centers.

These regulations implement certain provisions of the Omnibus

Budget Reconciliation Act of 1990 and the Omnibus Budget Reconciliation

Act of 1993.

EFFECTIVE DATE: These regulations are effective on May 3, 1996.

FOR FURTHER INFORMATION CONTACT: Helen Klein, (410) 786-4641 (FQHC

coverage issues) Randy Ricktor, (410) 786-5650 (FQHC payment issues)

SUPPLEMENTARY INFORMATION:

I. Background

On June 12, 1992, we published in the Federal Register, at 57 FR

24961, a final rule with a comment period, which established a new

Medicare benefit, outpatient services furnished by FQHCs. This benefit

is authorized by section 4161(a) of the Omnibus Budget Reconciliation

Act of 1990 (OBRA '90), which amends section 1861(aa) of the Social

Security Act (the Act). The statutory provisions are effective on

October 1, 1991.

OBRA '90 defines an FQHC as an entity that is receiving a grant

under section 329, 330, or 340 of the PHS Act; is receiving funding

from such a grant under a contract with the recipient of such a grant

and meets the requirements to receive a grant under section 329, 330,

or 340 of the PHS Act; based on the recommendation of the Health

Resources and Services Administration (HRSA) within the Department of

Health and Human Services, is determined by the Secretary to meet the

requirements for receiving such a grant; or was treated by the

Secretary, for purposes of Medicare Part B, as a Federally funded

health center (FFHC) as of January 1, 1990.

Subsequent to the June 12, 1992 regulations, the Omnibus Budget

Reconciliation Act of 1993 (OBRA '93) further amended section 1861(aa)

of the Act relating to the definition of FQHCs. Section 13556 of OBRA

'93 expanded the definition of FQHCs to include outpatient programs

operated by tribes, tribal organizations under the Indian Self-

Determination Act, or by an urban Indian organization receiving funds

under Title V of the Indian Health Care Improvement Act. This provision

was effective as if it had been included in the OBRA '90 legislation.

Thus, such organizations may qualify for FQHC status, and under certain

circumstances, as early as October 1, 1991. We are implementing this

provision in a separate Federal Register rule.

The Act defines FQHC services as the same type of services provided

by rural health clinics (RHCs) under the Medicare program, plus

preventive primary health services.

II. Provisions of the Final Rule With Comment Period

The rule described in considerable detail the requirements an

entity must meet to qualify as an FQHC, what services the FQHC must

furnish, and the methodology we will use to determine how much we pay

an FQHC. We provided that an entity that meets the requirements must

enter into a signed agreement with us and must terminate any other

Medicare provider agreement.

Under provisions of our final rule, services that are payable under

the Medicare program when furnished by an FQHC are the same outpatient

services that are currently covered as RHC services, plus preventive

services. FQHC services do not include services furnished to hospital

patients. RHC services include services furnished by physicians,

physician assistants, nurse practitioners, nurse-midwives, qualified

clinical psychologists, clinical social workers, and services and

supplies furnished incident to professional services of these

practitioners. In certain home health agency shortage areas, RHC

services may also include visiting nurses' services.

Preventive services include medical social services, nutritional

assessment and referral, preventive health education, children's eye

and ear examinations, prenatal and post-partum care, well child care,

including periodic screening, immunizations, voluntary family planning

services, and services outlined in the recommendations of the U.S.

Preventive Services Task Force for patients age 65 and older.

Preventive services do not include eyeglasses, hearing aids, group or

mass information programs or health education classes, or preventive

dental services. Preventive services covered under special provisions

of Medicare, such as screening mammography, may be provided by an FQHC

only if the center meets the special provisions that govern those

benefits.

Our regulations state that qualified clinical psychologists and

clinical social workers who furnish FQHC services must be legally

authorized to perform those services under State law. We clarified that

nurse-midwives, clinical social workers, and clinical psychologists are

employees of the FQHC.

Payment provisions for FQHCs parallel the provisions for payment of

RHCs. We pay freestanding FQHCs on an all-inclusive rate basis, subject

to a test of reasonableness. We apply payment limits to the all-

inclusive rate per visit. We pay provider-based FQHCs in accordance

with 42 CFR parts 405 and 413 of the Medicare regulations. For

additional description, see the June 12, 1992 final rule (57 FR 24961).

Issues regarding the interaction between managed care and Medicare

entities, such as FQHCs, are under consideration by us, and therefore,

not addressed in this final rule.

III. Analysis of and Responses to Public Comments

In response to the publication of the final rule with a comment

period in the Federal Register on June 12, 1992, we received 48 public

comments. The comments were submitted by a wide variety of health care

centers, consultants and local and national organizations. We reviewed

all the comments, and the comments and our responses are in the order

that the issues appeared in the June 12, 1992 rule.

Qualification Requirements

Comment: A few commenters objected to application of the conditions

for coverage requirements in 42 CFR part 491 to FQHCs and believed it

is without legal basis. They noted that the language in the Medicaid

law is nearly identical, and Medicaid does not place health and safety

requirements on FQHCs. The commenters argued that by virtue of

receiving grants under the PHS Act, these centers already must meet

[[Page 14641]]

stringent standards established by HRSA and further standards are

unnecessary.

Response: When the Congress created the FQHC benefit, it envisioned

that FQHC services would be provided under the same conditions as RHCs

services are furnished. Thus, FQHC services are defined in section

1861(aa)(3)(A) of the Act as ``services of the type described in

subparagraphs (A) through (C) of paragraph 1 of section 1861(aa).'' As

a result, the services of FQHCs are to be identical to those of RHCs.

Similarly, section 1861(aa)(3)(B) of the Act provides that ``any

reference to a rural health clinic or a physician described in

paragraph (2)(B) is deemed a reference to a Federally qualified health

center, respectively.'' This means that physician-directed FQHCs are to

be treated identically to their RHC counterparts. Finally, section

1861(aa)(5) of the Act provides the same definitions of physician

assistants, nurse practitioners and clinical nurse specialists for RHCs

and FQHCs.

These provisions of the Act indicate that the Congress built upon

the statutory and regulatory provisions for coverage and payment of

RHCs and intended that we use those provisions as a model for the FQHC

program. Therefore, we believe that the Congress expected us to apply

the same rules to FQHCs that we apply to RHC services and to

professionals providing RHC services.

Based on the above, we believe there is a rationale for applying

all or part of the RHC requirements to the services furnished in FQHCs.

While HRSA may monitor the health and safety standards for a subset of

FQHCs that are grantees, for some FQHCs (in other words, ``look-

alikes,'' which are entities that are not receiving grants under the

PHS Act but meet grant requirements, and some former FFHCs), there is

no other alternative for monitoring the quality of the service

furnished. Without our oversight, there would be no assurance that

facilities furnish safe services.

In addition, the Congress has given us the responsibility to

establish standards to ensure the health and safety of beneficiaries in

all other statutorily-created types of facilities, and it would be

extraordinary to interpret the law as preventing application of such

standards in regard to FQHCs. There is nothing in the law that would

support the view that the Congress intended for us to be without the

power to assure the safety and efficacy of FQHC services.

We believe the health and safety requirements we established are

minimal and are not a burden on the vast majority of centers that want

to provide high quality care. In fact, we informally surveyed RHCs and

FQHCs regarding the difficulties involved in participating in the

Medicare program, and no one noted concerns with the health and safety

requirements we extended to FQHCs. Likewise, no commenters on this

document raised concerns with any particular requirement. However,

should further correspondence indicate documented difficulties with a

specific condition, we will be open to considering refinement, as

appropriate.

Finally, we note that we are implementing the requirements in a

fashion that is as administratively simple as possible. That is, we are

not surveying potential FQHCs prior to participation or on a routine

basis. Rather, centers merely attest to meeting the requirements. The

standards thus establish a set of expectations for FQHCs to monitor

themselves and provide an enforcement mechanism for those very few

centers that do not take adequate health and safety precautions. In the

absence of such health and safety standards, we would have no means to

protect beneficiaries from potentially serious health and safety

threats that have materialized with other types of providers and

suppliers over time. Given the statutory provision referencing RHC

procedures, we are confident that the Congress intended that we place

health and safety requirements on FQHCs.

We concede that Medicaid currently has no regulations for FQHCs, so

it is premature to argue that the Medicaid program does not have health

and safety requirements for FQHCs. However, the Medicaid program does

require provider agreements between the State agency and an FQHC before

the Medicaid program pays the FQHC.

Although the Medicare and Medicaid FQHC legislation is similar in

language, the two programs are separate and autonomous. The Medicaid

program is a Federal and State partnership and allows more flexibility

in determining FQHC approval. Since Medicaid regulations have not yet

been issued, we are not in a position to discuss any additional

requirements that may be added.

Comment: Several commenters noted that the statutory provisions for

FQHC eligibility refer to FQHCs using the term ``entity.'' The

regulations require that each site be approved, which the commenters

believed exceeds our statutory authority. If site-specific approval is

maintained, the commenters suggested that we clarify that an entity may

submit combined cost reports and use a combined payment rate for all

sites within that entity.

Response: While we independently approve each site for Medicare

participation and assign it a unique provider number, each site of a

potential FQHC need not independently meet the PHS Act grant

requirements. The fact that a site is within the scope of a grant or

approved look-alike application is sufficient. However, each site must

independently attest to meeting the conditions in part 491 subpart A.

We believe the site specific requirement also has advantages for

Medicare beneficiaries and FQHCs and is supported by law. Section

1861(aa)(2)(K) of the Act gives us the authority to establish standards

to ensure the health and safety of beneficiaries receiving services at

RHCs, and consequently, we believe, at FQHCs. We believe that

establishing specific requirements for individual site approval allows

us to fulfill this role. If facilities are not independently approved,

it is difficult to determine if each site is adequately meeting the

required health and safety standards.

There are advantages to the FQHC in this policy. The site-specific

approval requirement allows each site in the entity to continue to

operate despite individual problems that may arise in other sites under

the same corporate entity. Corporate entities are typically large

private or public organizations which have, as their organizational

components, facilities that must independently meet the conditions

established in 42 CFR part 491, subpart A. By requiring individual site

approval, all of the sites of an entity are not jeopardized if one site

does not meet health and safety requirements. If we were to use entity-

based approval, as suggested by the commenter, we would not allow an

individual site that continues to meet all of the conditions to provide

FQHC services if another site in that parent entity did not meet the

Medicare safety standards. In addition, requiring site-specific

approval enables us to provide enhanced service to our beneficiaries.

Specifically, we are able to respond to beneficiary requests for the

names and addresses of approved facilities that are providing Medicare

FQHC services.

Although each site within a corporate entity is independently

approved and given a unique Medicare provider number, entities have the

option to file a single consolidated cost report for the entire entity

or individual cost reports for each site within the entity. We provided

instructions in the intermediary and RHC/FQHC manuals

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that address payment for FQHC network entities.

Finally, we do not believe that the law intended that every site

operated by an entity be entitled to FQHC status, especially if the

sites are not within the scope of the PHS Act grant, without

independently qualifying as ``look-alikes.'' Only by using site-

specific approval can we carry out the statutory intent of providing

FQHC status to a site that meets the conditions of the law, while

excluding a site that is part of an entity, but falls outside the scope

of a PHS Act grant or does not otherwise meet the FQHC eligibility

criteria.

Comment: One commenter requested clarification of our position

regarding provider-based FQHCs, which are not receiving grants under

the PHS Act, but meet grant requirements as ``look-alikes.'' The

commenter noted that the definition of a provider-based FQHC as an

integral and subordinate part of a provider and HRSA governance

requirements have prompted some centers to establish independent

governance and yet remain located at or near hospital grounds. The

commenter requested assurance that such co-location would not result in

provider-based designation.

Response: Section 405.2462 defines a provider-based FQHC as a

clinic or center that is an integral and subordinate part of a

hospital, skilled nursing facility, or home health agency participating

in Medicare (that is, a provider of services). The clinic or center is

operated with other departments of the provider under common licensure,

governance, and professional supervision. These stipulations must be

met for us to consider an FQHC as provider-based. Simply being located

in or near a hospital does not qualify an entity as a provider-based

facility. The converse is also true. An entity may be provider-based

despite the fact that it is located outside of the provider. A center

with independent governance cannot be considered a provider-based FQHC.

The basis for HRSA governance requirement is to ensure that the

services that are provided are responsive to the community. Therefore,

HRSA requires that a center approved under sections 329 and 330 of the

PHS Act have a governing board, the majority of which are users of the

facility.

Comment: One commenter urged that we review the definition and

scope of authority of community governing boards in FQHCs. The

commenter noted that the requirement for community governing boards

excludes from the FQHC benefit clinic facilities that are owned by

academic health science centers.

Response: The definition and scope of authority of community

governing boards are found in sections 329(f)(3)(G) and 330(e)(3)(G) of

the PHS Act. The sections specify that the center has established a

governing board which (1) is composed of individuals, a majority of

whom are being served by the center and who, as a group, represent the

individuals being served by the center, and (2) selects the services to

be provided by the center, schedules the hours during which such

services will be provided, approves the center's annual budget,

approves the selection of a director for the center, and, except in the

case of a public center, establishes general policies for the center.

The purpose of an FQHC is to provide community-based, family-

oriented primary care. The statutory governance requirement ensures

that the services that are provided are responsive to the health needs

and concerns of the community. An academic health science center can

qualify as an FQHC if its board meets the requirements of sections 329,

330 or 340 of the PHS Act and the provisions of this regulation.

Comment: One commenter noted that Sec. 491.5 requires that a center

be located in a rural or urban area that is designated as a shortage

area. The commenter requested that shortage area be clearly defined in

the regulations. Several commenters noted that the PHS law does not

require the FQHC to be located in a medically underserved area, but

merely to document that it serves a medically underserved population.

Response: Section 491.2 defines a shortage area as a geographic

area designated by the Department as having either a shortage of

personal health services (under section 1302 of the PHS Act) or a

shortage of primary medical care manpower (under section 332 of that

Act). The designation of shortage areas is quite complex and is handled

by HRSA.

Section 491.5(d) specifies the criteria for designation of shortage

areas. Factors considered include the ratio of primary care physicians

practicing in the area to the resident population and the infant

mortality rate.

The commenter is correct in that HRSA does not require that the

FQHC be located in a shortage area. Rather HRSA requires that the FQHC

either be located in a medically underserved area (MUA) or serve a

medically underserved population (MUP).

According to 42 CFR 51c.102(e), an MUP is defined as the population

of an urban or rural area designated by the Secretary as an area with a

shortage of personal health services. This designation was developed

because there were populations that required medical care but were

located in areas that did not receive MUA designation. The Secretary

analyzes the demographics and medical manpower of the population to

determine whether or not the population should receive designation.

Therefore, an MUP can be located in an area that is not an MUA.

In response to the concern expressed by this commenter, we are

revising Sec. 491.5(a) to specify that an FQHC may be located in a

shortage area or may serve a medically underserved population. We are

also adding a new paragraph (e) that defines medically underserved

population in the same way as HRSA does, as indicated above.

Comment: Two commenters objected to application of the ``four walls

test'' in Sec. 491.5 to an FQHC. They believed that this provision

limits cost-based payment to only those services provided at the clinic

or center site. The commenters noted that it may be difficult to have

some specialists come to the center site to provide care and

recommended that all services furnished under arrangements with the

FQHC be payable on a cost basis.

Response: The ``four walls test'' requires that the objects,

equipment and supplies necessary for the provision of the services

furnished directly by the clinic or center be housed in a permanent

structure or mobile unit that has fixed, scheduled locations. The

requirement that the clinic or center be housed in a permanent

structure ensures that the equipment, records, supplies and whatever

else is necessary to provide the defined services are in one permanent

place.

The ``four walls test'' is not a requirement that limits cost-based

payment to only those services provided at the clinic or center, and it

does not restrict a physician from providing services off-site. A

physician, including any specialist under contract to the FQHC, can

have an agreement with the FQHC to provide FQHC services off-site.

For reasons discussed later in this preamble, we have reconsidered

our policy on contracting for professional staff members other than

physicians. FQHCs may provide services of physician assistants, nurse

practitioners and other professionals under contract. These

professionals may provide services in skilled nursing facilities or in

the homes of beneficiaries. However, an FQHC may not bill services

provided to hospital patients as FQHC services.

Comment: Several commenters noted that Sec. 491.8 requires that

nurse practitioners or physician assistants be

[[Page 14643]]

available to furnish patient care services at least 60 percent of the

time. However, the Omnibus Budget Reconciliation Act of 1989 (OBRA '89)

changed the requirement to 50 percent. They recommended that we revise

the regulation to state that such coverage is required 50 percent of

the time.

Response: We note that the referenced RHC requirements pertaining

to staffing mix percentages in Sec. 491.8 do not apply to FQHCs. When

the FQHC regulations were published on June 12, 1992, the existing RHC

regulations had not been updated to include changes from the Omnibus

Budget Reconciliation Act of 1987 (OBRA '87), OBRA '89 and OBRA '90. As

a result, the FQHC regulations were incorporated into the existing RHC

regulations, which still reflected earlier statutory thresholds for

such coverage. We are preparing to issue a proposed rule that

incorporates these changes and will update the RHC provisions in

Sec. 491.8 and solicit public comment. We are, however, authorized by

OBRA '90 to issue a final rule for FQHCs that includes only the OBRA

'90 amendments.

Comment: One commenter objected to the exclusion of psychologists

from the list of practitioners in Sec. 491.8(a)(6), which specifies

staff that must be available in order for the center to be open. The

commenter recommended that we revise the regulation to include

specialty providers in all areas of operation of the centers. Further,

the commenter was concerned that the language with regard to medical

direction in Sec. 491.8(b)(1)(i) could be interpreted to require that a

physician may supervise psychological services that are within the

scope of the psychologist to furnish without medical direction.

Response: As noted above, OBRA '90 authorizes us to implement the

FQHC regulations as a final rule. We do not have authority under that

law to modify the RHC provisions without publishing a notice and

soliciting public comment. When the FQHC regulations were published

June 12, 1992, the existing RHC regulations had not been updated to

include any changes in the law. As a result, the regulations concerning

the policy board and medical supervision did not contemplate

involvement of psychologists, as psychologists' services were not RHC

covered services at the time the regulations were promulgated.

Section 1861(ii) of the Act provides coverage for clinical

psychologist services that would otherwise be covered if furnished by a

physician or as incident to a physician's service. In addition, under

this statutory provision clinical psychologists can provide services as

authorized under State law without the supervision of a physician. We

are revising Sec. 491.8(b)(1) to clarify that clinical psychologists

can provide services, as permitted under State law, without the

supervision of a physician in FQHCs.

Comment: Two commenters objected to the requirement in

Sec. 491.9(b)(2) regarding the development of patient care policies.

This paragraph requires that the policy development committee of the

center include at least one member who is not on the center's staff.

They expressed concern that the use of non-staff personnel is an

unnecessary expense and is burdensome. They also believed the

requirement is unnecessary given the level of review already in place

by HRSA for its grantees.

Response: We believe that the provisions of Sec. 491.9(b)(2) are

necessary to ensure the health and safety of beneficiaries. Patient

care policies were developed to provide guidelines on how a facility

will care for its patients. In addition, the policies ensure that the

providers adhere to appropriate procedures and protocols. The

requirement for a non-staff representative to assist in developing

patient care policies is necessary to ensure that the services are

responsive to the needs of the community. The non-staff representative

does not have financial interests in the provider and, as such, will

likely be more objective and unbiased in favor of the provider in the

decision making process. This requirement is intended to ensure that

the concerns of the population served will be paramount and that the

provider will address the specific health needs of the community. Given

the HRSA governance requirement for a constituent majority board, we

believe this requirement will not be burdensome to most FQHCs.

Comment: One commenter objected to annual surveys of RHCs and FQHCs

as wasteful.

Response: We are not planning to conduct routine surveys of FQHCs,

and FQHCs will not be routinely required to submit documentation to

HCFA demonstrating compliance with program requirements. However, we

plan to survey an FQHC if we receive a complaint about a health and

safety issue at the FQHC. During the survey, the FQHC must provide

documentation of compliance with the requirements in part 491.

Comment: Two commenters noted that FQHC grantees are subject to

extensive review by the HRSA on an annual basis. They believed this

review is sufficient to meet any evaluation assurances that should be

necessary. Therefore, the requirement in Sec. 491.11 that a clinic or

center carry out or arrange for an annual evaluation of its total

program should not be applicable to FQHCs.

Response: An FQHC is expected to conduct annual evaluations in

accordance with Sec. 491.11, which specifies what the annual program

evaluation must include and what the evaluation must determine, but it

does not prescribe how the annual program evaluation must be conducted

or the kind of evaluation that must be conducted. The purpose of the

annual evaluation is to evaluate utilization of services, evaluate

compliance with established policies, and determine if changes are

needed. We would expect that every organization would conduct this

self-assessment at least annually regardless of Medicare requirements.

With regard to the concern that HRSA reviews are adequate and, in

support of elimination of this requirement for FQHCs, we note that not

all FQHCs are grantees under the PHS Act; thus, all FQHCs would not be

subject to the HRSA standards. In support of retaining the requirement,

we note that the standard should not be burdensome to the centers

because, to the extent that HRSA reviews cover the scope of the

requirement, additional evaluation and documentation will not be

necessary. Thus, should we survey an FQHC for compliance with part 491

conditions in response to a complaint, documentation submitted to HRSA

for HRSA program purposes would be acceptable as evidence of compliance

with 42 CFR 491.11 if the review included the items specified in the

requirement.

Comment: Another commenter was in favor of annual compliance

reporting and recommended that, to ease administrative burden, HCFA and

HRSA use a single form, and HCFA provide additional details specifying

when such reporting is to be completed and where it is to be forwarded.

Response: We are not requiring annual compliance reporting. FQHCs

must review themselves, and they must maintain documentation of their

review in the event that we choose to survey a center. We will evaluate

an FQHC only if we discover a problem or receive a complaint. In such

cases, the review would encompass only the matter addressed in the

Medicare regulations, but we would coordinate the review with HRSA to

avoid duplicative efforts. Section 491.11 requires that an FQHC perform

an annual self-evaluation of its program. We believe this is a

reasonable requirement so that an FQHC assesses utilization of

services, compliance with

[[Page 14644]]

established policies, and determines if changes are needed.

Comment: One commenter wanted to know when a listing of FQHCs would

be available.

Response: There is a list of FQHCs currently available from the

Health Standards and Quality Bureau, System Management Branch, 6325

Security Blvd., Baltimore, Maryland, 21207. The charge for the list is

$25.00. For more information, you may telephone Mike Moran at (410)

597-5851.

Content and Term of the Agreement

Comment: One commenter requested that we clarify the

recertification process for FQHCs.

Response: For Medicare purposes, there will be no routine

recertification of FQHCs. Once a facility is approved, it will remain a

Medicare-participating FQHC until termination of the agreement, as

provided in Sec. 405.2436. We plan to survey an FQHC if we receive a

complaint about a health and safety issue at an FQHC or if a health and

safety problem is identified in another way.

HRSA has an annual process to determine eligibility for FQHC

status. For grantees, this consists of an application process for

funding, and for look-alikes, this consists of an annual application

and review, either of which could result in HRSA recommending

decertification of the FQHC to HCFA.

Comment: Two commenters noted that the RHC law and regulations

provide that an RHC retains its status even if the area in which it is

located loses its rural shortage area designation. They requested

similar protection for FQHCs.

Response: Section 1861(aa)(2)(K) of the Act specifies that an RHC

may maintain its approval even if the area in which it is located loses

its rural shortage area designation. In accordance with the Act,

Sec. 491.5(b)(1) allows an RHC to retain its approval. The Act,

however, does not include a similar provision for an FQHC.

We note that the current language in the regulation does not

clearly state that the protection for area designation applies

exclusively to RHCs. Therefore, we are revising Sec. 491.5(b)(1) to

clarify this.

Comment: One commenter objected to the requirement that centers

must terminate other provider agreements prior to, or simultaneous

with, signing an FQHC participation agreement. The commenter believed

that there is no statutory support for this requirement, and this

requirement may adversely affect some centers. One example cited by the

commenter is that an RHC could be adversely affected if it gave up its

RHC status to become an FQHC and the area is redesignated from

medically underserved because the protection afforded an RHC is not

offered to an FQHC.

Response: We are revising Sec. 405.2430(a)(1)(iii) to clarify that

a freestanding FQHC must terminate other provider agreements for

entities that operate at the same time as the FQHC. The intent of this

provision is to prohibit an entity from using the same space, staff,

and resources simultaneously as two distinct provider types. We believe

this provision is necessary to ensure the health and safety of our

beneficiaries and to avoid program abuse.

We do not intend by this provision that an FQHC and another

provider/supplier type may not be commonly owned or housed in the same

building. Rather, the intent of the provision limiting freestanding

FQHCs to a single provider agreement is to prevent the entity from

using the same staff, space, and resources for two or more different

provider types at the same time.

We believe that this provision is necessary to ensure the health

and safety of our beneficiaries. That is, if an FQHC is using the same

space, staff and resources as two different providers at the same time,

there is no assurance that the staff will be devoting its efforts to

the FQHC operation and not the other provider type. Without these

assurances, it is possible that beneficiaries could come to the FQHC

expecting to receive adequate health care, only to learn that the other

provider type is using the FQHC's resources at that time.

In addition, we established a very simplified cost report mechanism

for FQHCs. This cost report does not permit the allocation of costs

among multiple provider types. If we were to allow the simultaneous use

of the same space, staff and resources as multiple providers, we would

need to develop a more sophisticated cost report. A more complicated

report could place an administrative burden on the centers, the vast

majority of which do not wish to engage in multiple provider

activities.

We note that the Medicare program does not generally allow the

concurrent use of a facility as multiple health care providers. For

example, the regulations require that ambulatory surgical centers be

used exclusively for providing surgery to patients who do not require

hospitalization. Furthermore, the skilled nursing facility regulations

require separate space, staff and resources (or distinct part) for its

non-certified portion. Thus, we believe there is ample precedent for

the requirement we are establishing.

Coinsurance

Comment: One commenter noted the distinction between the basis of

coinsurance (charges) and the basis of payment (all inclusive rate) and

asked for clarification.

Response: The commenter is correct. There is a difference between

the basis of coinsurance and the basis of payment. In accordance with

section 1833(a)(3) of the Act, payment for FQHC services may not exceed

80 percent of its cost. Section 1866(a)(2)(A) of the Act, referred to

in section 1830(a)(3), addresses coinsurance liability of

beneficiaries, providing that coinsurance be based on charges.

Consequently, our regulations provide that an FQHC may not charge

beneficiaries more than 20 percent of the charge for the service

furnished regardless of the payment the FQHC receives from Medicare.

We believe that, on average, many FQHCs will recover their costs

under this provision. While it is possible that, in situations

involving minimal services, the FQHC will recover less than its cost,

it will recover more than its costs in certain other visits involving

high charge services.

We acknowledge that FQHCs must use a sliding fee schedule for

beneficiaries within 200 percent of poverty levels. Thus, FQHCs with a

high proportion of Medicare beneficiaries subject to the sliding fee

could receive less than cost from their Medicare population. However,

we believe that the law is clear regarding Medicare payment and

beneficiary coinsurance liability.

Effective Date

Comment: One commenter requested clarification of the effective

date for those centers that had previously obtained ``look-alike''

status under the Medicaid program.

Response: In accordance with Sec. 405.2434(b)(2), an FQHC's

effective date may be October 1, 1991, if it met all Federal

requirements on that date and if it applied to be a Medicare FQHC by

August 11, 1992. An entity that requested to become an FQHC by filing a

signed agreement within 60 days of publication of the regulation could

elect to choose an effective date from October 1, 1991 (the effective

date of the law) up to and including August 11, 1992. An entity does

not qualify as an FQHC on October 1, 1991 unless it met all Federal

requirements on that date. The preamble to the June 12, 1992 regulation

states that Medicare will pay for FQHC

[[Page 14645]]

services furnished on or after October 1, 1991 by entities that met the

criteria in the regulation on that date and file a signed statement

within 60 days of the date of publication.

More specifically, an entity that is not receiving a grant under

the PHS Act but meets grant requirements, and applied for and obtained

FQHC status under the Medicaid program, and was approved without a

waiver could be paid for services from October 1991 if the entity met

the requirements in part 491 and applied to Medicare timely. The

earliest date for which an entity can qualify is October 1, 1991. HRSA

makes a recommendation about an entity's status after the entity has

applied and met all HRSA requirements, and we make the decision to

approve the entity as an FQHC. If an entity was approved as a Medicaid

FQHC ``look-alike'' without waiver after October 1, 1991, the earliest

date of FQHC approval for such a center is the date we approve the

entity as an FQHC.

Comment: One commenter objected to the August 11, 1992 date for

filing for approval as an FQHC from October 1991. The commenter

believed that we should permit exceptions to the August 11, 1992, date

for centers that provide a ``good cause'' explanation for their delay.

Response: We and the National Association of Community Health

Centers (NACHC) have made extensive efforts to assist centers in

applying to become FQHCs. Letters were sent to each grantee, ``look-

alike,'' and FFHC to make them aware of the process for FQHCs to

receive payment as an FQHC from October 1, 1991.

We have already processed payment adjustments to take into account

entities that acted timely to apply for FQHC status effective October

1, 1991. Making payment to 1991 for FQHCs that did not file in time

would be administratively burdensome because it involves the entity

refunding previously collected deductibles to beneficiaries and billing

for past preventive services. We believe the ``window'' we permitted

for FQHCs to qualify to October 1991 was generous, and we believe that

our letters and the letters from NACHC gave facilities adequate time

and information to apply and qualify. Therefore, we are maintaining the

policy in our 1992 rule.

Scope of Services

Comment: One commenter believed the law defines FQHC services as

those generally furnished by community health centers (CHCs). He noted

that this is considerably different from RHC services and recommended

revision of the scope of services to reflect this.

Response: The Act does not define FQHC services as the services

provided by CHCs. Section 1861(aa)(3)(A) and (B) of the Act defines the

scope of FQHC benefits in terms of those benefits enumerated in the RHC

law (section 1861(aa)(1)(A)-(C) of the Act) and preventive primary

health services that a center is required to provide under sections

329, 330 and 340 of the PHS Act. The law does not require that a center

be a CHC to qualify as an FQHC; it does provide that a facility may

qualify as an FQHC if it meets the requirements to become a CHC under

section 330 of the PHS law. We do not have the authority to expand the

FQHC scope of benefits beyond those specified in the law.

Comment: Several commenters objected to the regulation's definition

of preventive primary health services. Some commenters believed that

all services required under section 330 of the PHS Act, such as

transportation services, should be covered as preventive services.

Response: Section 1861(aa)(3) of the Act specifies that FQHC

services include those benefits defined as RHC services in section

1861(aa)(1)(A)-(C) of the Act and preventive primary health services

that are required under sections 329, 330 and 340 of the PHS Act. A

service must first be recognized as a preventive primary health service

under PHS law and HRSA guidelines to be included as a preventive

primary health service for Medicare FQHC purposes. If a service is not

included as a primary preventive service under the PHS Act and the HRSA

guidelines, there is no authority for Medicare to cover the service.

42 CFR parts 51c and 56 define preventive services as medical

social services, nutritional assessment and referral, preventive health

education, children's eye and ear examinations, prenatal and post-

partum care, perinatal services, well child care (including periodic

screening), immunizations and voluntary family planning. Based on the

U.S. Preventive Services Task Force Report for persons age 65 or older,

HRSA further requires its grantees to provide additional preventive

services that are specified in Sec. 405.2448.

Transportation services are helpful in promoting access to

preventive health care, especially for individuals living in

underserved areas. Such services, however, are not defined as

preventive services by HRSA, thus we do not have the authority to

include such services as FQHC preventive services.

Comment: One commenter recommended that the rule be clarified to

allow for the inclusion of advanced practice mental health nurses under

the FQHC benefit. The commenter believed it was the intent of the law

to include these practitioners under ``specialized nurse

practitioners;'' however, they are not all technically classified as

nurse practitioners.

Response: The Act does not recognize or specifically refer to the

services of advanced practice mental health nurses. We do not have the

authority to expand the FQHC scope of benefits beyond those the

services of practitioners described in the Act. The FQHC scope of

benefits includes some, but not all, categories of advanced practice

nursing. For example, it does not include clinical nurse specialists.

Other categories of advanced practice nursing such as physician

assistants and nurse practitioners may provide mental health services

covered under the FQHC benefit. Services provided by clinical nurse

specialists, for example, could be covered only if they were ``incident

to'' services as provided in section 1861(aa)(1)(B) of the Act. This

section provides for coverage of services furnished incident to the

services of physicians, certain mid-level practitioners, clinical

psychologists, or clinical social workers.

Comment: Numerous commenters objected to the provision that limits

FQHC services to those furnished outside a hospital. FQHCs routinely

follow their patients to the hospital setting and noted that it is

burdensome to bill the carrier separately for these services as non-

FQHC services. Further, this mechanism provides an opportunity for

duplicate billing. Some commenters noted that RHCs may bill for

hospital services and believe the same policy should be applicable to

FQHCs.

Response: There are two reasons why FQHC services are limited to

those furnished outside of the hospital: (1) Section 1861(aa)(3) of the

Act requires that FQHC services be provided only to outpatients, and

(2) section 1862(a)(14) of the Act prohibits payment for services

furnished to hospital patients, except as specified in the law. Section

1862(a)(14) of the Act, in enumerating those who may receive payment

for services furnished in a hospital, does not include either RHCs or

FQHCs. Therefore, payment cannot be made for FQHC services to hospital

patients.

The Social Security Amendments of 1983, Pub. L. 98-21, on April 7,

1983, added section 1862(a)(14) to the Act. This section prohibits

payment under Medicare for any service provided to a hospital inpatient

that is not furnished by the hospital itself or furnished under

arrangements made by the hospital with

[[Page 14646]]

the entity furnishing the service. Section 1862(a)(14) of the Act also

states that certain services are specifically excluded from this

prohibition. The exclusion is limited to physicians' services, services

described by section 1861(s)(2)(K)(i) of the Act (certain physician

assistant services, nurse practitioner, clinical nurse specialist, and

nurse-midwife services), qualified psychologist services, and services

of a certified registered nurse anesthetist.

Section 1862(a)(14) of the Act was further revised by section

9343(c) of the Omnibus Budget Reconciliation Act of 1986 (OBRA '86),

Pub. L. 99-509, to apply to hospital outpatients as well as hospital

inpatients. As a result, the law now prohibits payment, except as

specifically enumerated, for both hospital outpatients and inpatients.

By its terms, then, section 1862(a)(14) of the Act prohibits Medicare

payment for FQHC services provided to a hospital patient.

However, we do not believe it is the intent of the law to prohibit

FQHC practitioners from following their patients to a hospital setting.

The law provides two alternative payment mechanisms for such services.

First, the FQHC may look to the hospital for payment for the services.

Second, FQHC practitioners can follow patients to a hospital and

provide services, but the practitioner may not bill those services as

FQHC services. Instead, FQHC physician visits are covered under other

Part B provisions of Medicare as physician services, and the FQHC

practitioner must bill the Medicare carrier to receive payment.

Section 1842(b)(6) of the Act provides that a facility, under

certain conditions, may bill the program for the services of its

employees. In such a case, it is not necessary that a FQHC practitioner

employed by an FQHC bill for the services provided in hospitals;

rather, the FQHC may bill the program on behalf of its employees using

the form HCFA-1500. These bills must be sent to the local carrier

instead of the intermediary processing cost-based claims are paid using

the routine part B payment methodology (in most cases resource-based

relative value system fee schedules).

Despite the commenters' allegations to the contrary, an RHC cannot

bill for hospital services. The same statutory requirements that extend

to an FQHC apply to an RHC as well.

Comment: Several commenters objected to the exclusion of diagnostic

x-rays from the definition of FQHC services. They supported inclusion

of such services under the FQHC benefit as incident to a physician's

service. They argued that this would promote administrative ease in

bill submission.

Response: Section 1861(aa)(1)(A) of the Act defines RHC (and, thus

FQHC) services to include physicians' services and such services and

supplies as are covered under section 1861(s)(2)(A) of the Act if

furnished as an incident to a physician's professional service and

items and services described in section 1861(s)(10) of the Act

(pneumococcal and influenza vaccine).

The technical component of x-ray services, as distinct from

physician services, is covered under section 1861(s)(3) of the Act.

Therefore, it is not included in the definition of FQHC services. We

have no authority to change this requirement under current law.

However, we are interpreting the law as permitting the professional

component of the x-ray to be included as an FQHC-covered service as a

physician service. Moreover, though the technical component of x-ray

services is not covered under the FQHC benefit, it may be claimed under

Part B of Medicare by billing the carrier.

Comment: One commenter noted that the exclusion of radiology and

hospital services from the scope of FQHC services presents a problem in

waiver of the deductible. By virtue of its mission, an FQHC is treating

a population that generally has insufficient funds to meet necessary

medical expenses. The exclusion of some services from the scope of FQHC

services will result in a deductible liability for those excluded

services and present a financial hardship for low income beneficiaries.

The commenter recommended that we waive the deductible for all services

provided in an FQHC, regardless of whether they are FQHC services or

not.

Response: Section 1833(b)(5) of the Act provides that the Medicare

deductible does not apply to FQHC services. Section 1861(aa)(3) (A) and

(B) of the Act defines the scope of FQHC services in terms of those

services furnished by an RHC and preventive primary health services

that a center is required to provide under the PHS law and HRSA

guidelines.

The rationale for excluding the technical component of radiology

services to hospital inpatients from the definition of FQHC services

has been discussed in the prior two responses. Section 1861(s)(3), and

not 1861(s)(2)(A), of the Act is the basis for the diagnostic x-ray

benefit; thus, the technical component of x-ray services is not

included within the FQHC benefit. In accordance with sections

1861(aa)(3) and 1862(a)(14) of the Act, FQHC services cannot be

provided to hospital patients. We have no authority to waive the

deductible for these services, which are not FQHC services.

We acknowledge that paying the deductible for these services may be

difficult for some beneficiaries. Beneficiaries suffering financial

hardship may be eligible for assistance under the Qualified Medicare

Beneficiaries (QMB) Program. A qualified Medicare beneficiary is an

individual who is entitled to Medicare hospital insurance benefits

under Part A, with or without payment of premiums, who also has an

income that does not exceed 100 percent of the Federal poverty level

and has resources that do not exceed twice the maximum amount

established for Supplemental Security Income eligibility.

Under the QMB program, Federal financial participation is available

to State Medicaid agencies for medical assistance for the beneficiary's

Medicare cost sharing expenses. The expenses include Medicare Part A

and Part B deductibles and coinsurance. Medicaid pays the coinsurance

and the deductible. This will help beneficiaries to avoid the out-of-

pocket costs. The QMB program provides a mechanism to assist those

beneficiaries with limited means to pay the deductible.

Comment: One commenter noted that although nurse-midwives are

mentioned in several places throughout the FQHC regulation,

Sec. 405.2446, which defines the FQHC covered scope of services, does

not include nurse-midwives.

Response: We agree with the commenter and are revising

Sec. 405.2446 to include the services of nurse-midwives as covered FQHC

services. We intend to propose a change to the definition of nurse-

midwife in a proposed rule on RHCs currently in process, which will

also affect FQHCs. In the meantime, State law governs which nurse-

midwives qualify to provide services in FQHCs.

Comment: One commenter recommended coverage of clinical nurse

specialists as FQHC practitioners. These health care practitioners are

registered nurses with master's degrees in a defined clinical area of

nursing. They are similar to nurse practitioners and are educated and

trained to provide preventive services and primary care. OBRA '90

recognizes these health care practitioners as independent providers in

rural areas. Therefore, the commenter believed that we should cover the

individual services of these practitioners within the scope of FQHC

services. In addition, the commenter wanted the phrase ``clinical nurse

specialist'' added to the definition of an FQHC visit.

[[Page 14647]]

Response: The Act does not clearly provide coverage for clinical

nurse specialists services in an RHC or FQHC. Although the definition

of a clinical nurse specialist is included in section 1861(aa)(5) of

the Act, the Act does not explicitly include these practitioners in the

scope of the benefit.

Comment: One commenter recommended that the adjective

``specialized'' be removed as a modifier to nurse practitioner as most

States do not use this term in licensing nurse practitioners.

Response: We have been advised by nursing associations that the

term ``nurse practitioner,'' which is defined in Sec. 405.2401(c)(17),

encompasses all specialties among nurse practitioners. Consequently, it

is not necessary to use the term ``specialized'' and we are removing

the definition of ``specialized nurse practitioner'' from

Sec. 405.2401.

Primary Preventive Services

Comment: Several commenters objected that we did not include dental

services as preventive care covered under the FQHC benefit. They noted

that the U.S. Preventive Services Task Force Report includes an oral

health component and argued that such services are essential for

elderly patients. Further, preventive primary dental services are

separately mandated in section 329 and 330 of the PHS Act. Therefore,

the commenters believed that the Congress did not intend to exclude

dental services from the FQHC benefit and that its failure to amend

section 1862(a)(12) of the Act was a technical oversight.

Response: Dental services are not included in the HRSA definition

of preventive primary health services; they are considered a separate

benefit under HRSA services. The PHS Act provides for preventive dental

services as a primary health care benefit separate from preventive

primary health services. That is, section 329(a)(6)(C) of the PHS Act

defines preventive primary health services, while a different section

of the law, section 329(a)(6)(F), defines preventive dental services.

In defining the scope of FQHC preventive services, the Act specifically

refers only to preventive primary health care services in sections 329,

330 and 340 of the PHS Act.

Further, section 1862 of the Act contains an exclusion for dental

services, prohibiting payment for services in connection with the care,

treatment, filling, removal or replacement of teeth or structures

directly supporting the teeth. OBRA '90 did not amend section

1862(a)(12) of the Act to remove the exclusion of dental services for

FQHCs. However, it did amend other provisions of section 1862(a). As a

result, the regulations exclude dental services from the definition of

FQHC preventive primary health services and will continue to do so.

Although the U.S. Preventive Services Task Force Report includes an

oral health component for the elderly, that oral component is

categorized as a counseling service by the Task Force. The report

intended that a primary care practitioner would briefly examine a

patient's mouth for visible signs of disease and counsel the patient to

see a dentist if there is a need for routine prophylactic services. If

the beneficiary had need of prophylactic or other dental services, he

or she would be referred to a dentist. The oral health component is not

the same as dental services.

Comment: Several commenters objected to the exclusion of screening

mammography services as an FQHC preventive service. Although this

service is payable under Part B, they note that application of the

deductible and having to make an appointment to have the mammogram

performed at another facility would deter some of the most needy

population from getting this valuable service.

Response: Sections 1834(c) and 1861(s)(13) of the Act provide for

coverage of screening mammography for certain women entitled to

Medicare, subject to frequency limitations, quality standards and

special payment rules. The Act provides coverage of screening

mammography services only in a facility that meets the Medicare

requirements for certification. An FQHC may provide and bill for

screening mammography services under the mammography benefit as long as

it meets the applicable quality standards and coverage requirements.

The quality standards are designed to protect the health and safety of

Medicare beneficiaries.

As explained above, the scope of benefits under FQHCs does not

include radiological services. In addition, the Act contains special

provisions for the coverage of screening mammography as a Medicare

benefit, and those provisions apply to FQHCs in the same manner as they

apply to other entities.

Comment: One commenter believed that we should recognize services

listed in the U.S. Preventive Services Task Force Report for people

under age 65 as preventive services for purposes of the FQHC benefit.

Response: By definition, the Medicare program is a Federal health

insurance program for people age 65 or older and certain disabled

individuals. Section 1861(aa)(3)(B) of the Act specifies that FQHC

services include preventive primary health services that a center is

required to provide under sections 329, 330 and 340 of the PHS Act. A

service must first be recognized as a preventive primary health service

under HRSA guidelines in order to be included as an FQHC preventive

primary health service.

HRSA defines preventive primary health services in 42 CFR parts 51c

and 55 as medical social services, nutritional assessment and referral,

preventive health education, children's eye and ear examinations,

prenatal and post-partum care, perinatal services, well child care

(including periodic screening), immunizations, and voluntary family

planning services. These are the required preventive primary health

services as defined by HRSA. Thus, these are the preventive primary

health services that we require in an FQHC.

In preparing the final rule with comment period for FQHC preventive

services, we noted that this list of services was not likely to

significantly benefit the majority of Medicare beneficiaries. We worked

with HRSA to expand the HRSA-required preventive primary health

services. The ``Guide to Clinical Preventive Services,'' prepared under

the supervision of the U.S. Preventive Services Task Force, provides

further recommendations for clinical practice on additional preventive

interventions. HRSA adopted the policy that the list of preventive

primary health services recommended by the task force in the ``Guide to

Clinical Preventive Services'' for people aged 65 or older is

consistent with the preventive primary health services that its

grantees are already required to provide.

The commenter believed that we should recognize services

recommended for people under age 65 as preventive services for purposes

of the FQHC benefit. The ``Guide to Clinical Preventive Services''

lists the same preventive services for both the under age 65 and the

over age 65 populations, with the exception of counseling regarding

sexual practices. The sexual practices category includes sexually

transmitted diseases, partner selection, contraceptive devices, and

unintended pregnancy. Since, the HRSA regulations at 42 CFR part 55

already include the majority of these services under preventive health

education and family planning, we do not believe it is appropriate to

explicitly include these in the list of preventive primary care

services under Medicare.

Comment: One commenter noted the value of proper nutrition in

health outcomes, particularly with diseases of

[[Page 14648]]

hypertension, obesity and diabetes. The commenter requested

clarification regarding the provision of dietician services under the

``incident to'' provision if they are provided by a consultant.

Response: The FQHC benefit includes services furnished by certain

professionals. Section 1861(aa)(1) of the Act defines these

professionals as a physician, nurse practitioner, physician assistant,

clinical psychologist or clinical social worker. The benefit also

includes services furnished ``incident to'' the services of these

professionals as long as the individual furnishing the service is an

employee of the FQHC.

Dietician services could be covered FQHC services if provided to

the beneficiary as ``incident to'' services. Dietician services must

meet the criteria for ``incident to'' services established in sections

406 and 410 of the Medicare RHC and FQHC Manual. These sections state

that services and supplies incident to a physician's or mid-level

practitioner's professional services are covered as FQHC services as

long as they are: furnished as an incidental, although integral, part

of a professional's services; of a type commonly furnished either

without charge or included in the FQHC's bill; of a type commonly

furnished in a physician's office; services provided by clinic

employees other than those services listed in section 400A of the

Medicare RHC and FQHC Manual furnished under the direct, personal

supervision of a physician or mid-level practitioner; and furnished by

a member of the clinic or center's staff who is an employee of the

clinic or center. These criteria follow the longstanding criteria for

services ``incident to'' physician services.

The Medicare RHC and FQHC Manual provides that there must be a

physician's or mid-level practitioner's personal service furnished to

which the non-physician's services is an incidental, although integral,

part. This does not mean, however, that each occasion of service by a

nonphysician need also always be the occasion of the actual rendition

of personal professional services by the physician or mid-level

practitioner. This requirement is also met for nonphysician services

furnished during a course of treatment in which the physician or mid-

level practitioner performs an initial and subsequent service with a

frequency that reflects his or her active participation in, and

management of, the course of treatment. This means that there must have

first been a direct, personal, professional service furnished by a

physician or mid-level practitioner to initiate the course of treatment

of which the nonphysician service is an incidental part. In addition,

there must be subsequent services performed by the physician or mid-

level practitioner of a frequency that indicates his or her continuing

active participation in and arranging the patient's course of

treatment.

Dietician services that are provided in an FQHC may be covered if

they are provided directly by a physician or appropriate mid-level

practitioner or are incident to his or her services. This does not

include services that are provided independently by a dietician without

the active involvement of the FQHC physician or mid-level

practitioners.

Consistent with our longstanding policy, as reflected in section

406 of the Medicare RHC and FQHC Manual, ``incident to'' services must

be furnished by a member of the clinic staff who is an employee of the

clinic. Thus, in order for dietician services to be covered FQHC

services, the dietician must be an employee of the FQHC. To determine

the employer/employee relationship, the ``usual common law rules,''

that are referred to in section 210(j)(2) of the Act, are applied. In

applying these rules, we consider not only who pays a person's salary

and fringe benefits but also other factors including who has hiring and

firing authority and who pays Federal Income Contributions Act (FICA)

taxes and withholds income tax.

The requirement that personnel who perform ``incident to'' services

must be employees of the clinic or center for purposes of coverage is a

longstanding Medicare policy. The basis for this requirement is in

section 1861(s)(2)(A) of the Act. This section limits coverage of

``incident to'' services to those services that are commonly furnished

in physicians' offices and are commonly either furnished without charge

or included in the physicians' bills. We have consistently interpreted

this provision to exclude coverage of ``incident to'' services provided

by non-employees of physicians, and in this case, of clinics. In

addition, the employer/employee relationship requirement ensures that

physicians will have the authority to exercise appropriate medical

supervision and management control over the qualifications and

performance of non-physicians for whose services he or she will be

billing Medicare. Since the PHS Act encourages FQHCs to contract to

provide services, we do not wish to create barriers to, and burdens on,

FQHCs that wish to contract for non-physician professional services.

Therefore, payment may be made for services provided by FQHC contracted

professionals. However, this FQHC provision does not apply to RHC

services. We plan to address this issue in a future proposed rule.

Comment: One commenter recommended that nutritional education and

counseling be listed as a separate preventive primary health service.

Response: As noted above, the Act links preventive primary health

services to the PHS requirements. Although HRSA guidelines include

nutritional assessment, they do not include nutritional counseling and

education. Because the HRSA guidelines do not specifically include

nutritional education and counseling as a preventive primary health

service, we do not have the authority to include these as preventive

services in the FQHC regulations.

Nutritional education and counseling are tools to maintain or

improve an individual's nutritional status. Generally, nutritional

education and counseling can be defined as a means of educating the

patient. Nutritional education and counseling for a Medicare

beneficiary could be covered if it is provided to the beneficiary as a

service that is ``incident to'' the service of a particular

practitioner. The beneficiary must see an attending FQHC professional

for a medical reason to which the nutritional education and counseling

is incident. For example, nutritional education for a diabetic patient

being actively monitored by an FQHC practitioner could be covered as an

``incident to'' service.

We note that encounters with a nurse or dietitian that are not

associated with a visit by an FQHC practitioner are not billable as

visits. The costs of the personnel providing the educational services,

however, may be included in the center's allowable costs.

Comment: One commenter requested clarification of what is meant by

nutrition assessment and who could perform the assessment. The

commenter recommended that a registered dietitian is the best qualified

professional to provide the service.

Response: HRSA guidelines include nutritional assessments and

referrals as preventive primary health services; therefore they are

covered as FQHC preventive primary health services. Because nutritional

assessments are FQHC covered preventive services, any professional in

an FQHC can provide these services. We believe that most physicians,

nurse practitioners, and physician assistants, have the skills

necessary to conduct a nutritional assessment as a preventive primary

health service for Medicare beneficiaries.

[[Page 14649]]

However, the physician may use the services of a dietician employed

by the FQHC for those beneficiaries who require extensive assistance in

making dietary changes. As noted above, the services of a dietician may

be covered under the FQHC benefit when the service is provided to the

beneficiary as ``incident to'' the services of a physician, nurse

practitioner, or a physician's assistant service. An FQHC professional

must see the beneficiary for a medical reason to which the services of

a dietician are incident. The initial face-to-face encounter with the

attending professional is necessary for the service to be billed as an

FQHC visit. The definition of a visit is discussed at Sec. 405.2463.

Comment: Several commenters voiced strong objections to the

exclusion of group counseling as a preventive service. They believed it

is more efficient for the center to furnish needed counseling services,

such as diabetic education, in a group setting rather than to use

valuable physician time.

Response: As noted above, the Act links the definition of

preventive primary health services under the FQHC benefit to the PHS

law. Group counseling is not included as a preventive primary health

service in the PHS law. As a result, we do not have the authority to

include such services as FQHC preventive services.

In addition, group counseling is seldom a medical service, and

generally, no active medical treatment is provided during a classroom

situation. Moreover, there is an absence of scientific evidence that

group counseling, such as smoking cessation classes, alters behavior or

health status of individuals. Although group counseling services, such

as diabetic education, are not covered preventive services, individual

counseling services could be considered covered FQHC services if they

are provided to the beneficiary as an ``incident to'' service.

Comment: One commenter noted that items five and six in the

preventive services list both say prenatal. The commenter believed that

one of the preventive services should be perinatal care.

Response: Section 1861(aa)(3)(B) of the Act specifies that FQHC

services include preventive primary health services that a center is

required to provide under sections 329, 330 and 340 of the PHS Act. In

developing the FQHC regulations, we looked to 42 CFR parts 51c and 56

of the HRSA regulations. These regulations are repeated in

Sec. 405.2448 exactly as they are in the HRSA regulations; the HRSA

regulations do not include perinatal services. However, the PHS law

(see 45 U.S.C 329(a)(6)(C)) does provide for perinatal services.

Therefore, we are revising Sec. 405.2448 to include perinatal care as a

covered preventive service.

Comment: Several commenters objected to the requirement in the

preventive services definition that services be furnished by a

physician or an employee of the center. The commenters noted that many

centers make extensive use of contract services in the provision of

preventive care services that may not be needed on a daily basis.

Response: The FQHC benefit includes a provision for services

furnished ``incident to'' the services of FQHC professionals as long as

the individuals furnishing the services are employees of the FQHC. As

we noted above, it is a longstanding Medicare policy, based on our

interpretation of section 1861(s)(2)(A) of the Act, that an individual

who performs ``incident to'' services must be an employee of the clinic

or center for purposes of coverage.

The list of FQHC preventive primary health services includes the

type of services that does not generally require the skill level of a

specialist. It is our intent that preventive primary health services,

for the most part, involve a screening process to detect health

conditions that could indicate adverse health outcomes. Patients should

be referred for diagnostic services if the initial screening indicates

a potential problem. Thus, we believe that the preventive primary

health services specified in the regulations can be provided by the

staff of the FQHC. As a result, we are retaining the requirement that

FQHC preventive services be provided by either a physician or an

employee of the center.

Comment: One commenter questioned how his facility, which provides

noninvasive diagnostic services can be reimbursed through FQHCs.

Response: It is not clear what the commenter meant by ``noninvasive

diagnostic services.'' Diagnostic laboratory services must be billed by

the entity providing the services. Consequently, if the commenter

intended to refer to laboratory services, the entity must bill for such

services itself. As noted previously, diagnostic radiological services

are not covered FQHC services. Thus, an entity could not be paid under

the FQHC benefit for the technical component of radiological services.

Although diagnostic radiological services are not covered FQHC

services, a supplier can be paid for these services furnished to FQHC

patients under normal Medicare Part B payment rules.

Comment: One commenter expressed concern that physicians and nurse

practitioners are untrained in hearing testing and the fitting of

hearing aids. The commenter recommended that Medicare ensure that

beneficiaries have access to hearing aid distributors either for the

initial FQHC covered hearing screening service or for follow-up

services. The commenter suggested that we require that any patient

whose screening shows that follow-up care is necessary be referred to a

State licensed or National Board for Certification-Hearing Instrument

Sciences (NBC-HIS) certified hearing aid distributor.

Response: According to section 1862(a)(7) of the Act, diagnostic

audiological services for the purpose of fitting a hearing aid are not

Medicare covered services. It would be inappropriate for the Medicare

program to regulate referrals for such noncovered services.

The HRSA guidelines provide that hearing screening is a preventive

primary health service. The skills that are needed to provide

diagnostic services for hearing screening are minimal, and they can be

acquired by staff with minimal training. Therefore, we believe that

FQHC staff generally are qualified to perform hearing screening

services for Medicare beneficiaries.

According to the Medicare Carrier's Manual, section 2070.3,

additional diagnostic services beyond hearing screening are covered by

Medicare when a physician orders such testing for the purpose of

obtaining additional information necessary for his or her evaluation of

the need for or appropriate type of medical or surgical treatment for a

hearing deficit or related medical problem. However, additional service

is not covered when the medical or surgical treatment is already known

by the physician or is not under consideration and the diagnostic

services are performed only to determine the need for or the

appropriate type of hearing aid.

Comment: One commenter advised us of an upcoming HRSA directive

requiring testing for tuberculosis of certain high risk patients. Since

this will be a required preventive primary health service for all

grantees, the commenter recommended that the Medicare list of

preventive services be similarly amended.

Response: Since the Act links the definition of primary preventive

services in an FQHC to the services required by HRSA of its grantees

under sections 329, 330 and 340 of the PHS Act, we believe that the

regulations should reflect HRSA guidelines. HRSA has sent a memorandum

to grantees to

[[Page 14650]]

notify them that tuberculosis testing will be included as a preventive

primary health service. Therefore, we are revising Sec. 405.2448 to

specify that FQHC covered preventive primary health services include

testing of certain high risk patients for tuberculosis.

Clinical Psychologist and Clinical Social Workers

Comment: One commenter requested clarification as to why the RHC

regulations were not similarly amended to include clinical

psychologists and clinical social workers in accordance with changes

made in the law years earlier.

Response: OBRA '87 added coverage of clinical psychologists in RHCs

and OBRA '89 added coverage of clinical social workers in RHCs. We are

in the process of developing a proposed rule to make those changes to

the RHC regulations. Unlike the OBRA '89 provisions affecting RHCs,

OBRA '90 authorized us to issue final regulations and add coverage of

FQHCs without first issuing a proposed rule and soliciting public

comment.

Comment: One commenter noted that the regulations state that

clinical psychologist and clinical social worker services are covered

if provided by a center employee. The commenter believed that it is

often more efficient to contract for such service in the FQHC setting

and recommends modification of the regulations to cover such purchased

services.

Response: Previously, we permitted facilities to contract only for

physician services. After considering the comment, we came to the

conclusion that it would be inconsistent with the provisions of the PHS

Act (as explained elsewhere in this preamble) to prohibit an FQHC from

contracting for the services of clinical psychologists and clinical

social workers. Therefore, we are revising Sec. 405.2450 to provide

that the services of clinical psychologists and clinical social workers

may be covered if they are furnished by an individual who owns, is

employed by, or furnishes services under contract to the FQHC. We are

also revising Secs. 405.2468 and 491.9(a)(3) to clarify that a clinical

social worker or clinical psychologist may furnish services under

contract to the FQHC.

Comment: One commenter objected to the limitation on clinical

social worker service to those necessary to the diagnosis or treatment

of mental illnesses. They noted that, given the special needs of the

patient population served by FQHCs, social workers may perform other

health related services for patients.

Response: Section 1861(hh)(2) of the Act provides that clinical

social worker services include services performed by a clinical social

worker for the diagnosis and treatment of mental illnesses. The Act

does not indicate that any different definition of services provided by

a clinical social worker should apply for purposes of the FQHC benefit.

The comment implies that the services of clinical social workers

are needed to provide non-medical services to the FQHC population. Even

if such services might be helpful to the FQHC population, non-medical

services are not covered by Medicare under any circumstances.

Comment: Several commenters objected to the application of the

62\1/2\ percent mental health limitation to the FQHC clinical

psychologist and clinical social worker. They argued that if the

Congress had intended this limitation to apply, it would have

explicitly stated so in the Act.

Response: Section 1833(c) of the Act states:

Notwithstanding any other provision of this part, with respect

to expenses incurred in any calendar year in connection with the

treatment of mental, psychoneurotic and personality disorders of an

individual who is not an inpatient of a hospital at the time such

expenses are incurred, there shall be considered as incurred

expenses for purposes of subsections (a) and (b) only 62\1/2\

percent of such expenses.

This section of the Act clearly indicates that there is a mental health

treatment limitation of 62\1/2\ percent for clinical psychologist and

clinical social worker and other practitioner treatment services

consistent with State law and makes clear that the limitation applies

unless it is explicitly waived elsewhere in the law. This result is

consistent with section 1861(hh)(2) of the Act, which defines clinical

social worker services as services performed by a clinical social

worker for the diagnosis and treatment of mental illnesses.

Since there is no statutory exception for FQHCs, the limitation on

payment for mental health treatment applies to all FQHCs, free-standing

and provider-based.

Payment Issues

Productivity Screening Guidelines

Comment: A commenter stated that the productivity standard of 4200

visits for a full time equivalent physician is not a reasonable

standard and acknowledged that HRSA uses this standard but stated that

HRSA applies the standard differently in regard to HRSA's encounters as

opposed to HCFA's visits.

Response: Our use of the term ``visit'' is meant to be synonymous

with the term ``encounter'' used by HRSA. The same concern about

conflicting use of terms by us and HRSA was raised when we implemented

productivity screens for the RHC program. At that time, we and HRSA

agreed on the meaning of the terms ``encounter,'' as used by HRSA, and

``visit,'' as used by us; they were to be used interchangeably. (This

issue was addressed in a final notice, Rural Health Clinic Payment

Limits and Productivity Screening Guidelines, published in the Federal

Register on December 1, 1982 at 47 FR 54165). We and HRSA agreed to a

common definition of these two terms to eliminate any difficulties

caused by the use of different terms. Clinics also found it difficult

to comply with the separate productivity guidelines and reporting

requirements used by us and HRSA. As a result we adopted the

productivity screening guidelines used by HRSA. We continue to use the

HRSA guidelines.

Since the time that we and HRSA originally reached agreement on the

common meaning of ``encounter'' and ``visit,'' the RHC program has

expanded and the FQHC program has been implemented. We have reexamined

our definition. We are modifying the definition of a ``visit'' to

accommodate the addition of clinical psychologists and clinical social

workers (Sec. 405.2463). This change is discussed in more detail in

answer to other comments. We will continue to use the HRSA productivity

guideline of 4200 visits for full time equivalent.

Comment: A number of commenters stated that the screening

guidelines are not appropriate for all FQHCs. For instance, a commenter

stated that, without special attention, small rural health centers and

those in frontier areas would be penalized by the productivity and

overhead screens. Two other commenters stated that the standard should

be lowered and that separate and lower standards should be developed to

apply to FQHCs with home visiting and teaching programs. The commenter

stated that Federal policy is clearly moving in the direction of

providing incentives to increase the number of primary care physicians

and that health centers will be increasingly asked to take on the role

of residency training and argued that a productivity standard should

not impede this policy direction. Additionally, two other commenters

stated that the hourly standard, used in the past by the FFHCs, of 2.4

visits per hour is a more realistic standard than the one we had

published.

[[Page 14651]]

Response: We use the same guidelines applied by HRSA in the grant

review process and the ongoing monitoring of its programs. We believe

it is appropriate to use uniform productivity guidelines rather than

developing separate guidelines. If, however, an FQHC cannot meet these

guidelines, the FQHC's intermediary has the authority to modify the

productivity guidelines. An FQHC that has atypical circumstances may

request exceptions to the guidelines from its intermediary.

Provider-Based/Freestanding FQHCs

Comment: Commenters questioned the need for different payment

methodologies for freestanding and provider-based FQHCs and why

provider-based FQHCs use an intermediary other than the intermediary

used by the freestanding FQHCs and stated that the Act does not provide

for a distinction between provider-based and freestanding FQHCs.

Response: As we stated in the June 12, 1992 final rule, the same

qualification and coverage rules apply to both provider-based FQHCs and

independent FQHCs. Section 1833(a)(3) of the Act allows the Secretary

latitude in defining the payment methodology for FQHCs. Consistent with

the RHC payment methodology, we believe, at this time, that two

different methodologies should apply to provider-based and freestanding

FQHCs, as well. Like an RHC, an FQHC that is an integral part of a

provider should follow the rules applicable to the provider, since it

is a provider component. Having the provider's intermediary pay the

FQHC under the same cost reporting and payment procedures used by other

components of the provider is more efficient, both from the standpoint

of the intermediary and the provider. This promotes consistency and

rationality in the payment system, eliminates duplicate audits and

minimizes the possibility of program abuse.

Comment: A commenter pointed out that there is a cap for payment to

freestanding FQHCs but not provider-based FQHCs.

Response: While there is no payment limit (cap) for provider-based

FQHCs as there is for freestanding FQHCs, the allowable costs of

provider-based FQHCs' are controlled by the Medicare principles of

reimbursement. These principles permit us to determine if costs are

reasonable and limit reimbursable costs to those that are allowable and

necessary for the efficient delivery of services.

Comment: One commenter stated that freestanding FQHCs electing

payment on a reasonable charge basis will not be reimbursed for

preventive services and requested that the regulation clarify that

provider-based FQHCs will be paid for preventive services. Another

commenter suggested that the payment for these additional preventive

services be specifically addressed and recommended that payment for

these services be on an actual cost basis.

Response: All freestanding FQHCs are paid on an all-inclusive rate

basis subject to tests of reasonableness. Freestanding FQHCs do not

have the option to elect payment on a reasonable charge basis. Further,

Sec. 405.2446(b) specifies that FQHC services that are paid for under

the Medicare program include preventive services specified in

Sec. 405.2448. This coverage applies to all FQHCs, freestanding as well

as provider based. In addition, we do not believe that it is necessary

to address specifically the payment method for these preventive

services. Except for their purpose, these preventive services do not

differ from the other services provided in a provider-based FQHC and

therefore, are paid under the same reasonable cost principles as all

other services.

Comment: One commenter questioned whether the lesser of costs or

charges limitation, which currently is applied to provider-based FQHCs,

should be applicable to any type of FQHC, as section 1833(a)(2) of the

Act specifically provides that this limitation does not apply to FQHCs.

Response: Section 1833(a)(2) of the Act requires that the lesser of

costs or charges limitation apply with respect to the facilities not

excepted under that subparagraph; the requirement simply does not apply

to FQHCs. Authority for payment for FQHCs is contained in section

1833(a)(3) of the Act, which provides that payment for FQHCs is based

on reasonable costs that are ``related to the cost of furnishing such

services or which are based on such other tests of reasonableness as

the Secretary may prescribe in regulations * * *''.

Given this broad grant of authority to use ``other tests of

reasonableness,'' we are authorized to apply tests of reasonableness

that are required to be applied to other Medicare facilities, such as

the lesser of costs or charges provision.

Visits

Comment: Several commenters expressed concern with the number of

visits per day we allow for payment purposes. They suggested that if a

patient sees more than one physician or practitioner or has a medical

and mental health service on the same day more than one visit should be

allowed.

Response: We have considered the comments, and we are amending the

regulations to permit payment for more than one visit per day under

certain circumstances. We are revising the definition of visit in

Sec. 405.2401 and moving it to Sec. 405.2463, ``What constitutes a

visit.'' We now provide that Medicare pays for an additional visit per

day if a patient has a ``medical visit'' and an ``other health visit''

on the same day. A ``medical visit'' is defined as a face-to-face

encounter between a clinic or center patient and a physician, physician

assistant, nurse practitioner, nurse-midwife, or visiting nurse. An

``other health visit'' is defined as a face-to-face encounter between

an FQHC patient and a clinical psychologist, clinical social worker, or

other health professional for therapeutic mental health services. This

change permits payment for more than one visit, but it does not change

any other part of the method for determining allowable visits. We still

would allow only one medical visit per day. Readers should note that an

increase in visits will affect the FQHC all-inclusive rate calculation,

as provided in Sec. 405.2464.

Pneumococcal Vaccine

Comment: A commenter noted that the preamble stated that

pneumococcal vaccine would be paid at 100 percent of the Medicare

reasonable cost of the vaccine and its administration. However, the

Annual Reconciliation section of the regulation did not address how we

would pay for pneumococcal vaccine.

Response: We are revising Sec. 405.2466(b), Annual Reconciliation,

to provide that, for RHCs and FQHCs, payment for pneumococcal vaccine

and its administration is made at 100 percent of Medicare reasonable

cost.

Additionally, we are making a corresponding revision to the Annual

Reconciliation section of the regulation for influenza vaccine. In

accordance with sections 4071 and 4072 of OBRA '87, influenza vaccine

and its administration became a covered Medicare service under section

1861(s)(10)(A) of the Act effective May 1, 1993.

Section 1833(a)(3) of the Act specifies that services described in

section 1861(s)(10)(A) are exempt from payment at 80 percent of

reasonable costs. For RHCs and FQHCs, payment for influenza vaccine and

its administration is at 100 percent of reasonable cost. Like

pneumococcal vaccine, influenza vaccine will be treated as a pass

through

[[Page 14652]]

and not included in the all-inclusive rate or subject to the payment

limit.

Prior to this change, costs of influenza vaccine were included in

the calculation of the all-inclusive rate and subject to the FQHC

payment limit. Therefore, the FQHC payment limit(s) has been adjusted

to reflect the removal of influenza vaccine from the calculation of the

all-inclusive rate. Removal of the influenza vaccine and its

administration results in a reduction of approximately 1 percent to the

FQHC payment limits.

Note: Influenza vaccine costs were included in the original

calculation of the preventive service adjustment as discussed in the

June 12, 1992 final rule, at 57 FR 24972.

Contracted Services

Comment: A commenter stated that if a physician is an independent

contractor on the staff of the facility and not a physician whose

services are purchased on a limited basis the physician should not be

characterized as a contracted physician that is subject to the fee

schedule.

Response: To determine whether a physician is considered an

employee, the ``usual common law rules,'' referred to in section

210(j)(2) of the Act, are applied. These rules not only consider who

pays the practitioner's salary but other factors such as who has hiring

and firing authority, and who pays FICA taxes and withholds income tax.

When a physician is considered staff of the FQHC, the physician's

salary is included on the cost report and is used in determining the

facility's all-inclusive payment rate.

Comment: A commenter stated that the allowable cost of contracted

physician services is limited to the resource based relative value

scale (RBRVS) fee schedule for the Medicare program, which is

significantly below market. The commenter further stated that this

limit would restrict the FQHCs' ability to attract needed physicians

and specialists to their communities. The commenter stated that we

should establish another test of reasonableness.

Additionally, another commenter stated that a more appropriate test

of reasonableness for contracted services would be the amount that non-

participating physicians may receive for services they provide to

Medicare beneficiaries.

Response: We believe that payment for contracted physician services

should be limited to amounts accepted by the large majority of

physicians. According to the Report to Congress on Physician

Participation, Assignment, and Extra Billing in the Medicare Program,

dated October 2, 1992, there has been a continuing increase in the

number of physicians accepting assignment on claims. When a physician

accepts assignment on a claim, he or she agrees to accept the Medicare

allowed amount as payment in full for the services provided to the

beneficiary. The Report to Congress stated that allowed charges for

Medicare assigned claims represented 83.6 percent of the total allowed

charges in 1991. This is consistent with trends indicating that

physician assignment rates have increased and have maintained a high

level. Moreover, readers should note that the limit on contracted

physician services is a screening guideline and not an absolute payment

limit. The guideline is applied to assess the reasonableness of

payments for physician services purchased by the center. The fiscal

intermediary may modify application of this screen for atypical

circumstances. For example, the screen may be modified if the

intermediary determines that access to care is significantly affected.

We believe that the amounts paid under the physician fee schedule are

appropriate limits for contracted physician services.

Payment Limit

In response to the FQHC payment methodology published on June 12,

1992, we received comments from 18 commenters regarding the application

of a payment limit. Six of these were from health centers and eight

were from organizations and persons representing the health centers'

interests. The remaining four commenters were organizations

representing hospitals, physicians, and nurses. Discussion of comments

regarding the FQHC payment limit have been organized into the following

categories: General Payment Limit; Adjustment For Projected FQHC Visit

Mix; Primary Care Family Practice Adjustment; Urban and Rural

Determination; Urban and Rural Payment Difference; and Exceptions

Option.

General Payment Limit

Comment: Many of the commenters questioned the method used to

calculate the payment limits. Commenters stated that a payment limit of

this nature is not required by the Congress, is not consistent with

Congressional intent and exceeds statutory authority. Commenters were

concerned that we used the RHC payment limit as a base for determining

the reasonable costs for FQHC services. In addition, commenters stated

that the payment limit methodology is not based on empirical data, not

based on cost and is not equitable.

Response: The same statutory payment authority applies to RHCs and

FQHCs. This authority provides the Secretary latitude in determining a

payment methodology and in determining costs based on tests of

reasonableness defined in regulations. In order to implement this new

benefit in a manner consistent with the language of the law, we adopted

the RHC methodology for use in the FQHC program. We believe that the

Congress designed the FQHC program as a parallel program to the RHC

program. Not only is the payment authority identical but the core

services are also the same. The Congress added preventive services to

this core set of services for FQHCs, and these services are unique to

the FQHC program.

Inherent in the adoption of the RHC methodology is the use of the

productivity screens and an overall limit on payment. The RHC payment

limit established for independent facilities in 1978 and updated in

1982 was not only accepted by the Congress, it was written into law in

OBRA '87 as a test of reasonableness for costs of RHC services,

including clinical psychologist services, which were added to the

benefit in the same legislation. The law provided for an update to the

limit for 1988 and an annual update each year thereafter. We agree that

an annual update is important for the viability of both the RHC and

FQHC benefits. We also believe that, while it is critical to apply an

overall limit to ensure efficiency and economy, we must establish a

limit that takes into account the differences in the two benefits.

The FQHC methodology we created adjusts for differences between the

RHC and FQHC benefits using available cost data. We have made

adjustments to the RHC limit accounting for the general increase in

physician payments resulting from the physician fee schedule amounts, a

projected higher ratio in FQHCs than in RHCs of physician visits

compared to mid-level practitioner visits, the addition of primary

preventive services, and the fact that some FQHCs are located in urban

areas.

In constructing our preventive service adjustment, we used

allowable charge data. We believe that the calculation of this

adjustment is consistent with the methodology used to compute the RHC

limit, which used allowable charge data and is now statutorily set. We

do not see any conflict between our methods and the intent of the

Congress.

Comment: One commenter stated that the payment limits are

unreasonable with respect to actual reasonable costs. The commenter

stated that FFHCs in

[[Page 14653]]

Massachusetts received rates in the $78 to $88 range with a limit of

approximately $96. The commenter contended that the FQHC payment limits

understate the actual cost per visit for these section 329 and 330

grantees that were previously paid as FFHCs. Another commenter

recommended that we adopt the FFHC State-wide payment limits for the

next 3 years while the reasonable costs of FQHCs are studied. The

commenter stated that a limit should be developed based on future data.

Response: We do not believe it is appropriate to compare FFHC and

FQHC limits. The FQHC payment methodology and scope of services is

different from those in the former FFHC program. The comments indicate

confusion regarding the differences between the two benefits. Even with

these basic differences, we are concerned that we do not disadvantage

centers that were paid as FFHCs and that is why we are allowing an

exception for these entities for a 3-year period.

FFHCs were formerly paid on a ``cost related to reasonable charge

basis,'' which also resulted in an all-inclusive rate per visit based

on facility-specific costs. Application and computation of the FFHC

all-inclusive rate is significantly different from application and

computation of the FQHC rate. The FQHC all-inclusive rate is paid when

there is an encounter between a patient and a physician, physician

assistant, nurse practitioner, clinical psychologist, or clinical

social worker. The FFHC all-inclusive rate was paid only when there was

an encounter between a patient and a physician. The FQHC all-inclusive

rate per visit is calculated based on total allowable FQHC cost divided

by physician, physician assistant, nurse practitioner, clinical

psychologist, and clinical social worker visits. The FFHC rate per

visit was calculated based on total allowable FFHC costs divided by

physician visits. As a result, the FFHC all-inclusive rate formula had

a divisor of only physician visits thus yielding a higher rate per

visit.

Further, the scope of services for the FQHC and FFHC benefits is

different. Section 1861(aa)(3) of the Act identifies FQHC services as

physician, physician assistant, nurse practitioner, clinical

psychologist and clinical social worker services, and services and

supplies incident to the services of these practitioners. In addition,

preventive primary health services that a center is required to provide

under sections 329, 330 and 340 of the PHS Act are also included as

FQHC services. Medicare freestanding FQHCs are paid an all-inclusive

rate for these services for each encounter that meets the definition of

a visit. FQHCs could receive additional payment for Medicare covered

services that are outside of the FQHC scope of services.

The FFHC scope of services could potentially have included all

Medicare Part B services. Therefore, total allowable FFHC services

could have included a broader array of services. Medicare Part B

services outside of the FQHC scope of services (such as other

diagnostic and therapeutic services that a clinic obtains from an

independent laboratory) were covered FFHC services, and included in the

rate paid to FFHCs. All Medicare Part B services performed in an FFHC

were included in determining the all-inclusive rate and paid for under

the FFHC methodology for each FFHC visit. For these reasons, we do not

believe the FFHC payment limits are appropriate for the FQHC benefit.

Comment: One commenter stated that the use of FFHC information in

combination with RHC data to develop the FQHC payment limits does not

assure adequate reasonable cost reimbursement for all FQHCs. The RHC

and FFHC programs are optional programs in which organizations choose

to participate. Entities granted FQHC status under OBRA '90 that did

not participate in the FFHC program may be significantly different from

FFHCs and RHCs in case load.

Response: As discussed in a prior response, we believe that the

Congress designed the FQHC program as a parallel program to the RHC

program, and we used the RHC payment limit as a basis for developing

the FQHC payment limits. We adjusted the RHC payment limit based on

FFHC data for a projected higher physician visit mix and for the urban

differential. We understand the concern that the cost experience of

FFHCs may not necessarily be representative of the costs of FQHCs as a

whole. We analyzed 1990 data provided by the Public Health Service's

Bureau of Primary Health Care Common Reporting Requirements (BCRR)

Report to determine whether the cost per encounter would differ for

FFHCs and other section 329 and 330 grantees. The data indicate that

the median cost per visit for FFHCs was slightly higher than the median

cost per visit for community and migrant health centers that were not

paid as FFHCs. Since FFHC costs were actually higher than other section

329 and 330 grantees, we believe that using FFHC data would result in

adequate reasonable cost payments.

We also considered the application of a case mix adjustment;

however, we do not believe one is necessary given the FQHC scope of

services. We believe that, since the primary mission of the FQHC

program is to provide outpatient primary care services, the services

should not vary substantially from one patient population to another.

As discussed in the preamble to the June 12, 1992 final rule with

comment period, we will collect and analyze FQHC cost report data to

determine if a payment limit adjustment is necessary. If after

analysis, we find it necessary to adjust the methodology used to

determine the FQHC limits currently in place, we will issue a proposed

notice and the public will have an opportunity to comment.

Comment: One commenter stated that we should describe the specific

tests of reasonableness in regulation text so that these methods may

not be changed without public review and comment.

Response: We agree that a change in specific tests of

reasonableness used to determine the all-inclusive rate should receive

the benefit of public notice and comment. We will issue a proposed

notice and the public will have the opportunity to comment if it is

necessary for us to change the productivity or utilization screens used

to determine the FQHC all-inclusive rate or to change the methodology

used to calculate the FQHC payment limit.

Adjustment for Projected FQHC Visit Mix

Comment: One commenter stated that the Secretary did not use

factual data to determine the difference in cost created by the

projected difference in case mix. The commenter believed there is no

evidence that the ratio of physician to mid-level payments made under

Part B have any relation to cost.

Response: Since entities eligible for section 329, 330, and 340

grants will comprise the majority of entities qualifying for the FQHC

program, we anticipate that the frequency of physician services in

FQHCs will be comparable to the frequency of such services in the

former FFHC program, which consisted of section 329 and 330 grantees

paid an all-inclusive rate. As discussed in the preamble to the June

12, 1992 rule, we studied RHC and FFHC visit data to determine whether

there is a difference in the number of physician visits as a percentage

of total visits between the RHC benefit and FFHC program. Visit data

from RHC cost reports indicated that physician visits were 59 percent

of total visits while data from FFHC cost reports indicated that

[[Page 14654]]

physicians visits were 83 percent of total visits.

We recognize that no specific FQHC study has been conducted to

determine the differences in costs between the services of a physician

and those of a mid-level practitioner. We used the amount of payment

for nurse practitioners and physician assistants under usual Part B

rules as a measure of the cost differences between a physician and a

mid-level practitioner. Under Medicare Part B, the amount of payments

for nurse practitioners (section 1833(r)(2)(B) of the Act) and

physician assistants (section 1842(b)(12)(B) of the Act) are generally

75 percent (in the case of services provided in a hospital) and 85

percent (in the case of other services) of what a physician would be

paid for the same service. We used the midpoint of these two

percentages to arrive at 80 percent as proxy for the cost differences

between mid-level practitioners and physicians.

Lacking more specific FQHC cost data, we believe that the payment

amount under Medicare Part B is a reasonable basis for determining

average cost differences between visits of physicians and mid-level

practitioners and for increasing the payment limit to account for the

projected higher number of physician visits under the FQHC benefit as

compared to the RHC benefit. As discussed earlier, we plan to evaluate

actual FQHC cost data. After analysis, we will determine the

appropriateness of the visit mix adjustment.

Primary Care Family Practice Adjustment (15 Percent)

Comment: Section 6102 of OBRA '89 added section 1848 of the Act,

which is the authority for the physician fee schedule. During the first

year of transition to the physician fee schedule there was a general

increase in payment of 15 percent for services provided by primary care

and family practice physicians. As discussed in the preamble to the

interim final rule, we made an adjustment to the FQHC payment limits

accounting for this increase.

One commenter stated that the 15 percent adjustment to the payment

limit only covers the first year of the transition to the fee schedule.

The remaining 4 years to fully implement the fee schedule will result

in further increases. These increases should be recognized.

Response: We have given consideration to the commenter's position.

By 1996, the average payment amount for services typically provided by

family practice physicians will increase by an estimated 28 percent

under the fee schedule, as compared to reasonable charge payments.

Since our intent in creating and applying the family practice

adjustment is to reflect the circumstances of physicians being paid

under the fee schedule, we have decided to provide a comparable

increase to the FQHC payment limits. We are increasing the practitioner

component of the FQHC payment limits by 13 percent to bring the total

increase amount to 28 percent to simulate the estimated increase in

average payment amounts for primary care physicians. This adjustment

will be phased in over 3 years. For calendar year 1994, we have

increased the practitioner portion of the FQHC payment limits by 6.5

percent to correspond with the increase in payments for primary care

services which has resulted from the continued transition to the full

physician fee schedule. We previously announced this increase in the

RHC/FQHC Manual. We will increase the payment limits by 3.25 percent in

calendar year 1995 and calendar year 1996 to account for the full 28

percent increase.

The 28 percent increase is based on estimates published in the

Federal Register (56 FR 59618) regarding the physician fee schedule

regulation dated November 25, 1991; Table 1--Physician Fee Schedule

Impact By Specialty. The 28 percent increase reflects the original

estimation of the difference in payment amounts between what would have

been paid under the reasonable charges payment methodology as compared

to payments under the RBRVS fee schedule for services typically

provided by family practice physicians. We believe it provides the most

appropriate representation of the estimated differences in payment

amounts. We have decided not to reflect the impact of the Medicare

Volume Performance Standards since FQHC services are not subject to

these targets. By adjusting the FQHC limits, we would avoid

disadvantaging FQHC physicians and practitioners relative to physicians

paid under the fee schedule.

Comment: One commenter stated that payments for other practitioners

should also reflect the 15 percent increase.

Response: Implementation of the physician fee schedule resulted in

a general estimated increase of 15 percent in 1992 for family practice

physicians. We applied this increase to the practitioner component of

the payment limit which resulted in a $6.99 increase for fiscal year

1991. This increase applies to the payment limit for each FQHC visit,

mid-level practitioner covered visits, as well as physician visits.

Urban and Rural Determination

Comment: Two commenters indicated that the determination of urban

and rural is unclear. Specific concerns focused on the need for

clarification of specific population standards and whether adjustments

to the classification (as provided for hospitals in Sec. 412.230) are

applicable to FQHCs.

Response: The definition of urban and rural is based entirely upon

the most recent available data from the Bureau of Census and issued by

the Office of Management and Budget. To be classified as an urban

center, an FQHC must be located in a Metropolitan Statistical Area

(MSA) or New England County Metropolitan Area (NECMA). Primary

Metropolitan Statistical Areas (PMSAs) and Consolidated Metropolitan

Statistical Areas (CMSAs) are considered as urban for FQHC

classification purposes. FQHCs that are not in an MSA, PMSA, CMSA or

NECMA cannot be reclassified as an urban FQHC.

Urban areas can either be ``large'' or ``other.'' A large urban

area means an urban area with a population of over one million (or more

than 970,000 in NECMAs). An ``other'' urban area is an urban area that

is not a large urban area and at a minimum includes a city with a

population of 50,000 or more provided that the component county/

counties of the metropolitan statistical area have a total population

of at least 100,000. The intermediary classifies FQHCs based on these

criteria.

Urban and Rural Payment Difference

Comment: Many commenters expressed concerns regarding the urban

payment differential. Specific concerns include:

Historical differences in payment policy have affected the

recruitment and retention of qualified health professionals and have

caused a false perception that rural areas are less expensive.

Labor, transportation and other costs can be higher in

rural areas.

Rural centers may expand services to compensate for the

closing of small rural hospitals. Thus, they may be providing the only

available radiology and laboratory services in the area.

The FFHC study used to determine urban and rural cost

differences was not appropriate. Urban and rural visit mix and services

are not necessarily comparable and cost differences are not related to

location; cost differences are more likely the result of rural

facilities providing a more limited scope of

[[Page 14655]]

services. Therefore, we do not think this factor is relevant to payment

limits.

Response: Our analysis of FFHC all-inclusive rates indicates a

difference in urban and rural costs. FFHCs were authorized to provide

the same scope of services regardless of urban or rural status. The

analysis of FFHC all-inclusive rates included 128 urban and 85 rural

FFHCs throughout the country. The analysis indicates that the median

all-inclusive rate for FFHCs located in urban areas (as determined by

using Bureau of Census data) is 16.3 percent higher than the median

all-inclusive rate in rural areas. Since FFHCs were subject to the same

State-wide payment limit without regard to urban/rural location, rural

FFHCs did not have different incentives than urban FFHCs to hold down

costs. Further, we obtained data from the Public Health Service based

on the BCRR Report data and compared the cost per visit of 129 urban

and 260 rural Community/Migrant Health Centers (section 329/330

grantees) that did not participate in the FFHC program. The BCRR Report

cost data indicated that the cost per visit for services was

significantly higher in urban centers as compared to rural centers.

While different costs are reported on the BCRR Report as compared to

the Medicare cost report, we believe these data support our use of FFHC

cost data as proxy for urban and rural FQHC cost differences. We will

closely study urban and rural cost differences in the FQHC cost data

analysis.

We understand that rural centers might expand services to

compensate for the closing of small rural hospitals and that many of

these services may be outside of the FQHC benefit. While the expansion

of services may extend beyond the FQHC scope of services, the Medicare

per visit payment limits apply to covered FQHC services only. Medicare

FQHCs can receive additional payments through the carrier for Medicare

Part B services that are not included as FQHC covered services.

Therefore, we do not think this factor is relevant to setting the

payment limits.

Comment: Some commenters believed that the urban and rural payment

limit difference is inconsistent with general Federal policy direction.

They stated that the Congress recognized that urban and rural providers

should be treated equally by terminating the urban and rural

Prospective Payment System (PPS) payment differential in fiscal year

1995.

Response: We would like to clarify that the Congress has not

eliminated geographic payment differences for payment of PPS hospitals.

Effective in fiscal year 1995, there will be two PPS standardized

amounts, large urban and other. The rural and other urban PPS

standardized amounts will be combined into one amount and a separate

large urban standardized amount will continue to distinguish large

urban areas. The hospital wage index will be applied to these

standardized amounts. As such, payment amounts will generally be higher

in urban areas as compared to rural areas. Given the current data

limitations, alternative geographic payment limit adjustments are not

feasible at this time. As mentioned previously, we will closely study

urban and rural cost differences in the FQHC cost data analysis.

MEI Index

Comment: One commenter expressed concern that separate application

of the MEI to urban and rural payment limits will steadily exacerbate

the urban-rural differential.

Response: Although we recognize that the dollar difference between

urban and rural payment limits will increase, the percentage difference

of 16.3 percent will remain constant.

Comment: One commenter requested clarification regarding

publication of the MEI increase.

Response: The annual MEI updates applicable to the FQHC payment

limits will be announced in the RHC and FQHC manual, HCFA Publication

27 of the HCFA Program Instructions Issuances System.

We note that the preamble of the June 12, 1992 rule stated that

FQHC payment limits would be updated by the MEI applicable to primary

care physicians. We would like to clarify that in the absence of a

specific MEI applicable to primary care physicians, the FQHC payment

limits will be updated by the general MEI.

Exceptions Option

Comment: Two commenters expressed opposition to the exceptions

option. They stated that the exceptions option is an unreasonable

imposition creating unnecessary administrative costs. In addition,

requiring FQHCs to wait an entire year to file an exception will create

cash flow problems for those granted an exception. Regional payment

limits were also suggested as an alternative to the exceptions process.

Response: The exceptions process allows former FFHCs the

opportunity to retain the FFHC method of payment with minor adjustments

for the FQHC scope of services for a 3-year period under certain

conditions. No FQHC is required to seek an exception; rather a center

may choose this option if the center can document a disadvantage due to

a decrease in revenues as a result of the application of the FQHC

payment limit. As discussed in the preamble of the interim final rule,

this determination will be made based on a filing of the FFHC cost

report.

Any additional administrative costs resulting from the exceptions

option are allowable costs that can be included in the determination of

the all-inclusive rate. However, we expect exceptions to be limited in

number and do not expect former FFHCs to be adversely affected. We

believe it is essential that all centers, including former FFHCs, file

based on the FQHC methodology so that we can gather cost data for our

analysis.

We considered developing regional limits; however, we decided not

to do so. We believe that the Congress designed the FQHC benefit to

parallel the RHC benefit. Therefore, we want the FQHC payment methods

to be as consistent as possible with the RHC payment methods, which do

not include regional cost limits. As discussed earlier, we will collect

and analyze FQHC cost data to determine if any changes are necessary.

Billing Issues

Comment: Two commenters requested clarification of the billing

mechanism for non-FQHC services. One commenter noted that provisions

for assignment of physician claims directly to the center were

necessary so that the employment relationship between the physician and

center is not disrupted.

Response: In order to bill for non-FQHC services a clinic must have

a separate Part B billing number. The FQHC must obtain the billing

number from the Medicare Part B carrier. Entities that already have

supplier numbers for use in billing Part B carriers need to contact the

carriers' Provider Relations Staff to see if their FQHC status

necessitates the issuance of new Part B billing numbers. FQHC provider

numbers assigned for the purpose of billing the intermediary (Aetna)

cannot be used to bill Part B carriers. HCFA regional offices and

Medicare carriers have been requested to assist FQHCs that require new

Part B billing numbers.

We agree with the commenter on the issue of provisions of

assignment. Section 1842(b)(6) of the Act specifies that Medicare may

pay the center in which the physician provides services if there is a

contractual arrangement between the facility and the provider.

Therefore, there are existing provisions for assignment of physician

claims directly to the center.

Comment: One commenter noted the difference in billing practices

between Medicaid and Medicare, and

[[Page 14656]]

recommended that all FQHC services for both programs be billed on the

HCFA-1500 using Common Procedure Terminology (CPT) Codes.

Response: There is no requirement for Medicare and Medicaid billing

to be the same. Since payment for services covered under the FQHC

benefit is made on a cost-related basis, claims are processed by a

fiscal intermediary. All freestanding FQHC claims are processed by

Aetna. Provider-based FQHC claims are processed by the intermediary

that handles the main provider's claims.

The Medicare Fiscal Intermediaries' systems are set up to process

bills using the HCFA-1450 and the Carriers' systems are set up to

process claims using the HCFA-1500. The HCFA-1450 has different data

elements from the HCFA-1500. To use the HCFA-1500 for cost-related

payment would require a complete revision of the billing systems

maintained by our contractors.

To recap, freestanding FQHCs must use the HCFA-1500 to bill for non

FQHC services since they are not paid on a cost basis. The local Part B

carrier pays for such services subject to the routine Part B coverage

and payment provisions. Provider-based FQHCs bill the intermediary for

all services on the HCFA-1450.

IV. Provisions of the Final Regulations

For the most part, as stated elsewhere in this preamble, this final

rule does not change the provisions of the prior final rule on which we

solicited comments. Those provisions of this final rule that differ

significantly from the earlier rule are:

The definition of specialized nurse practitioner is

removed (Sec. 405.2401 and Sec. 405.2468);

A freestanding FQHC must terminate other provider

agreements at the same time it becomes an FQHC

(Sec. 405.2430(a)(1)(iii));

The services of FQHC staff may be furnished under contract

(Secs. 405.2450, 405.2468(b)(1), and 491.8(a)(3));

In the definition of ``visit,'' (now in Sec. 405.2463) an

allowance is made for two visits per day if the patient has a

``medical'' and an ``other'' health visit on the same day

(Sec. 405.2463);

Nurse-midwife services are added to the list of covered

FQHC services (Sec. 405.2446);

Perinatal care and tuberculosis testing for certain high

risk patients are added to the list of preventive services that are

covered by an FQHC (Sec. 405.2448);

Payment for pneumococcal and influenza vaccines and their

administration at 100 percent of Medicare reasonable cost is added to

Sec. 405.2466 (Note that payment for pneumococcal vaccine is not a new

provision, as it was included in the June 12, 1992 final rule);

We clarify that FQHCs must be located in a medically

undeserved area or serve a medically undeserved population

(Sec. 491.5);

RHCs, but not FQHCs, retain certification even if the area

loses its rural shortage designation (Sec. 491.5);

Clinical psychologists provide FQHC services without the

supervision of a physician (Sec. 491.8);

We clarify that we have adjusted the FQHC payment limits

to correspond with the estimated increase in payments for primary care

services resulting from the continued transition to the full fee

schedule. The current calendar year payment limits reflect this policy

and a further increase is forthcoming in 1995.

V. Collection of Information Requirements

This final rule does not contain any information collection or

recordkeeping requirements that are subject to review by the Office of

Management and Budget under the Paperwork Reduction Act of 1980 (44

U.S.C. 3501 et seq.).

VI. Regulatory Impact Statement

A. Introduction

We generally prepare a regulatory flexibility analysis that is

consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601

through 612) unless the Secretary certifies that a final rule will not

have a significant economic impact on a substantial number of small

entities. For purposes of the RFA, all FFHCs, FQHCs, and RHCs are

considered to be small entities. Individuals and States are not

included in the definition of a small entity.

In addition, section 1102(b) of the Act requires the Secretary to

prepare a regulatory impact analysis if a rule may have a significant

impact on the operations of a substantial number of small rural

hospitals. This analysis must conform to the provisions of section 604

of the RFA. For purposes of section 1102(b) of the Act, we define a

small rural hospital as a hospital that is located outside of a

Metropolitan Statistical Area and has fewer than 50 beds.

B. Provisions of the Final Regulations

This final rule incorporates, with only minor technical and

clarifying changes, the provisions of the final rule with comment

published June 12, 1992 (57 FR 24961) which provided for coverage and

payment of services provided by FQHCs, a category of health facility

established by section 4161 of OBRA '90 and modified by OBRA '93. FQHC

services are defined as the same type of primary health care services

provided by rural health clinics under the Medicare program, plus

preventive primary health services (services not previously covered by

Medicare). An FQHC is an entity that is receiving a grant under section

329, 330, or 340 of the PHS Act; a non-grant receiving entity that is

determined by the Secretary to meet the PHS Act requirements for

receiving such a grant; a facility that has been identified by the

Secretary as a comprehensive federally funded health center as of

January 1, 1990; or is an outpatient health program or facility

operated by a tribe or tribal organization under the Indian Self-

determination Act or by an urban Indian organization receiving funds

under title V of the Indian Health Care Improvement Act as of October

1, 1991. As of March 1994, there were 1,260 participating FQHCs.

C. Positive Effect of Regulations

In the initial regulatory impact statement, we indicated that the

provisions of the final rule with comment will expand Medicare payment

to community and migrant health center grantees and similar entities

that qualify as FQHCs and serve the working poor. We noted that

reporting requirements are less burdensome than previous requirements

under the FFHC payment methodology (FQHCs are required to submit 2 cost

reports annually, FFHCs were required to submit 3). In addition, these

provisions benefit both beneficiaries and FQHCs by expanding Medicare

coverage and payment to include primary and preventive health care

services furnished by physicians and other health practitioners.

D. Comments on Initial Regulatory Impact Statement

We received one comment on the initial regulatory impact statement

published in the Federal Register June 12, 1992. The commenter stated

that the final rule with comment failed to include a certification that

the rule would not have an effect on small entities. We disagree with

the commenter. The final paragraph of the regulatory impact statement

stated that we determined, and the Secretary certified, that the final

rule did not meet the requirements to be determined a major rule, nor

did it meet criteria as having a significant economic impact on a

substantial number of small entities.

[[Page 14657]]

E. Summary

Because this final regulation makes only minor technical and

clarifying changes to the final rule with comment published June 12,

1992, we are not preparing analyses for either the RFA or section

1102(b) of the Act, since we have determined, and the Secretary

certifies, that this final rule will not result in a significant

economic impact on a substantial number of small entities and will not

have a significant impact on the operations of a substantial number of

small rural hospitals.

In accordance with the provisions of Executive Order 12866, this

regulation was not reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

Administrative practice and procedure, Health facilities, Health

professions, Kidney diseases, Medicare, Reporting and recordkeeping

requirements, Rural areas, X-rays.

42 CFR Part 491

Grant programs--health, Health facilities, Medicaid, Medicare,

Reporting and recordkeeping requirements, Rural areas.

42 CFR chapter IV is amended as follows:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart X--Rural Health Clinic and Federally Qualified Health

Center Services

A. Part 405, subpart X, is amended as follows:

1. The authority citation for subpart X continues to read as

follows:

Authority: Secs. 1102, 1833, 1861(aa), 1871 of the Social

Security Act; 42 U.S.C. 1302, 1395l, 1395x(aa), and 1395hh.

Sec. 405.2401 Scope and definitions. [Amended]

2. In Sec. 405.2401, paragraph (b) is amended by removing the

definitions of ``specialized nurse-practitioner'' and ``visit.''

3. Section 405.2430 is amended by revising paragraph (a)(1)(iii) to

read as follows:

Sec. 405.2430 Basic requirements.

(a) Filing procedures. (1) * * *

(iii) The FQHC terminates other provider agreements, unless the

FQHC assures HCFA that it is not using the same space, staff and

resources simultaneously as a physician's office or another type of

provider or supplier. A corporate entity may own other provider types

as long as the provider types are distinct from the FQHC.

* * * * *

4. Section 405.2446 is amended by revising paragraph (b) to read as

follows:

Sec. 405.2446 Scope of services.

* * * * *

(b) FQHC services that are paid for under this subpart are

outpatient services that include the following:

(1) Physician services specified in Sec. 405.2412.

(2) Services and supplies furnished as an incident to a physician's

professional services, as specified in Sec. 405.2413.

(3) Nurse practitioner or physician assistant services specified in

Sec. 405.2414.

(4) Services and supplies furnished as an incident to a nurse

practitioner or physician assistant services, as specified in

Sec. 405.2415.

(5) Clinical psychologist and clinical social worker services

specified in Sec. 405.2450.

(6) Services and supplies furnished as an incident to a clinical

psychologist or clinical social worker services, as specified in

Sec. 405.2452.

(7) Visiting nurse services specified in Sec. 405.2416.

(8) Nurse-midwife services specified in Sec. 405.2401.

(9) Preventive primary services specified in Sec. 405.2448 of this

subpart.

* * * * *

5. In Sec. 405.2448(b), the semicolon at the end of each paragraph

is changed to a period, paragraph (b)(20) is redesignated as (b)(21),

paragraphs (b)(6) and (b)(19) are revised, and a new paragraph (b)(20)

is added to read as follows:

Sec. 405.2448 Preventive primary services.

* * * * *

(b) * * *

(6) Perinatal services.

* * * * *

(19) Risk assessment and initial counseling regarding risks.

(20) Tuberculosis testing for high risk patients.

* * * * *

6. Section 405.2450 is amended by revising paragraph (a)(1) to read

as follows:

Sec. 405.2450 Clinical psychologist and clinical social worker

services.

(a) For clinical psychologist or clinical social worker

professional services to be payable under this subpart, the services

must be--

(1) Furnished by an individual who owns, is employed by, or

furnishes services under contract to the FQHC;

* * * * *

7. A new Sec. 405.2463 is added to read as follows:

Sec. 405.2463 What constitutes a visit.

(a) Visit. (1) A visit is a face-to-face encounter between a clinic

or center patient and a physician, physician assistant, nurse

practitioner, nurse-midwife, or visiting nurse.

(2) For FQHCs, a visit also means a face-to-face encounter between

a patient and a qualified clinical psychologist or clinical social

worker.

(3) Encounters with more than one health professional and multiple

encounters with the same health professional that take place on the

same day and at a single location constitute a single visit, except

when one of the following conditions exist:

(i) After the first encounter, the patient suffers illness or

injury requiring additional diagnosis or treatment.

(ii) For FQHCs, the patient has a medical visit and an other health

visit, as defined in paragraphs (b) and (c) of this section.

(4) Payment. (i) Medicare pays for two visits per day when the

conditions in paragraph (a)(3) of this section are met.

(ii) In all other cases, payment is limited to one visit per day.

(b) Medical visit. For purposes of paragraph (a)(3) of this

section, a medical visit is a face-to-face encounter between an FQHC

patient and a physician, physician assistant, nurse practitioner,

nurse-midwife, or visiting nurse.

(c) Other health visit. For purposes of paragraph (a)(3) of this

section, an other health visit is a face-to-face encounter between an

FQHC patient and a clinical psychologist, clinical social worker, or

other health professional for mental health services.

8. Section 405.2466 is amended by adding a new paragraph (b)(1)(iv)

to read as follows:

Sec. 405.2466 Annual reconciliation.

* * * * *

(b) * * *

(1) * * *

(iv) For rural health clinics and FQHCs, payment for pneumococcal

and influenza vaccine and their administration is 100 percent of

Medicare reasonable cost.

* * * * *

9. Section 405.2468 is amended by revising paragraphs (b)(1) and

(b)(3), and (d)(2) to read as follows:

Sec. 405.2468 Allowable costs.

* * * * *

[[Page 14658]]

(b) * * *

(1) Compensation for the services of a physician, physician

assistant, nurse practitioner, nurse-midwife, visiting nurse, qualified

clinical psychologist, and clinical social worker who owns, is employed

by, or furnishes services under contract to an FQHC. (RHCs are not paid

for services furnished by contracted individuals other than

physicians.)

* * * * *

(3) Costs of services and supplies incident to the services of a

physician, physician assistant, nurse practitioner, nurse-midwife,

qualified clinical psychologist, or clinical social worker.

* * * * *

(d) * * *

(2) Screening guidelines are used to assess the costs of services,

including the following:

(i) Compensation for the professional and supervisory services of

physicians and for the services of physician assistants, nurse

practitioners, and nurse-midwives.

(ii) Services of physicians, physician assistants, nurse

practitioners, nurse-midwives, visiting nurses, qualified clinical

psychologists, and clinical social workers.

(iii) The level of administrative and general expenses.

(iv) Staffing (for example, the ratio of other clinic or center

personnel to physicians, physician assistants, and nurse

practitioners).

(v) The reasonableness of payments for services purchased by the

clinic or center, subject to the limitation that the costs of physician

services purchased by the clinic or center may not exceed amounts

determined under the applicable provisions of subpart E of part 405 or

part 415 of this chapter.

* * * * *

B. Part 491 is amended as follows:

PART 491--CERTIFICATION OF CERTAIN HEALTH FACILITIES

1. The authority citation for part 491 continues to read as

follows:

Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302)

and sec 353 of the Public Health Services Act (42 U.S.C. 263a).

2. In part 491, the term, ``Federally qualified health center'' is

changed to ``FQHC'' wherever the term appears.

3. Section 491.5 is amended by revising paragraphs (a) and (b)(1),

and adding new paragraphs (e) and (f) to read as follows:

Sec. 491.5 Location of clinic or center.

(a) Basic requirements. (1) An RHC is located in a rural area that

is designated as a shortage area.

(2) An FQHC is located in a rural or urban area that is designated

as either a shortage area or an area that has a medically underserved

population.

(3) Both the RHC and the FQHC may be permanent or mobile units.

(i) Permanent unit. The objects, equipment, and supplies necessary

for the provision of the services furnished directly by the clinic or

center are housed in a permanent structure.

(ii) Mobile unit. The objects, equipment, and supplies necessary

for the provision of the services furnished directly by the clinic or

center are housed in a mobile structure, which has fixed, scheduled

location(s).

(iii) Permanent unit in more than one location. If clinic or center

services are furnished at permanent units in more than one location,

each unit is independently considered for approval as a rural health

clinic or for approval as an FQHC.

(b) Exceptions. (1) HCFA does not disqualify an RHC approved under

this subpart if the area in which it is located subsequently fails to

meet the definition of a rural, shortage area.

* * * * *

(e) Medically underserved population. A medically underserved

population includes the following:

(1) A population of an urban or rural area that is designated by

PHS as having a shortage of personal health services.

(2) A population group that is designated by PHS as having a

shortage of personal health services.

(f) Requirements specific to FQHCs. An FQHC approved for

participation in Medicare must meet one of the following criteria:

(1) Furnish services to a medically underserved population.

(2) Be located in a medically underserved area, as demonstrated by

an application approved by PHS.

4. Section 491.8 is amended by revising paragraphs (a)(3), (a)(6)

and (b)(1)(i) to read as follows:

Sec. 491.8 Staffing and staff responsibilities.

(a) Staffing. * * *

(3) The physician assistant, nurse practitioner, nurse-midwife,

clinical social worker, or clinical psychologist member of the staff

may be the owner or an employee of the clinic or center, or may furnish

services under contract to the center.

* * * * *

(6) A physician, nurse practitioner, physician assistant, nurse-

midwife, clinical social worker, or clinical psychologist is available

to furnish patient care services at all times the clinic or center

operates. In addition, for rural health clinics, a nurse practitioner

or a physician assistant is available to furnish patient care services

at least 60 percent of the time the clinic operates.

(b) Physician responsibilities. (1) The physician--

(i) Except for services furnished by a clinical psychologist in an

FQHC, which State law permits to be provided without physician

supervision, provides medical direction for the clinic's or center's

health care activities and consultation for, and medical supervision

of, the health care staff.

* * * * *

(Catalog of Federal Domestic Assistance Program No. 93.773,

Medicare--Hospital Insurance; and Program No. 93.774, Medicare--

Supplementary Medical Insurance Program)

Dated: October 6, 1995.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: March 18, 1996.

Donna E. Shalala,

Secretary.

[FR Doc. 96-7787 Filed 4-2-96; 8:45 am]

BILLING CODE 4120-01-P