Nonprofit Community Health Centers Build For-profit Insurance Plans

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January 6, 2014; USA Today


USA Today reports that a growing number of the nation’s 1,200 federally funded community health centers are building for-profit health insurance plans to serve patients, especially the growing number of Medicaid patients in their communities. It’s a reaction to the changing healthcare marketplace, but it’s also an active attempt to improve their control over their own mission.

Community health centers take the form of charities, with funding coming overwhelmingly from the federal government, supplemented by modest fee-for-service income from some patients and some insurance reimbursement. Most centers have little capacity to engage in traditional charitable fund development, so budgetary pressures affecting their funding sources impact the ability of community health centers to meet their own budgetary and mission needs.

Building for-profit insurance plans helps centers in several ways. It allows centers to benefit from potential profits from offering insurance while making the typical tug-of-war between insurance provider and healthcare provider easier to resolve. It also facilitates the development of a payment model that rewards providers for maintaining and improving health outcomes over time rather than for acute care interventions and procedures done for a patient. How? The for-profit insurance company ties its coverage to the patient’s use of the community health center as its preferred provider, just as other insurance companies develop networks of preferred providers.

As the article notes, not all health insurance companies make a profit every year, as at least one community health center experienced with its own insurance subsidiary. Since many of the subsidiaries are based on Medicaid funding, the subsidiaries will be subject to reimbursement pressures associated with federal and state government programs. The experiments in social entrepreneurship by community health centers are one example of potential innovations in healthcare finance and management that accompany changes in how healthcare is delivered in the United States.—Michael Wyland


  • Sare In Vermont

    This doesn’t make sense to me. Having worked at an FQHC, I know that they receive cost based reimbursement for their Medicaid enrolled patients. This means that the full cost of care is covered. How would supplemental insurance bring greater revenue for these patients?

  • Michael Wyland

    Here’s an excerpt from a National Association of Community Health Centers (NACHC) report that should help both explain and complicate the issue:

    From the Introduction:

    “The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) replaced the traditional cost-based reimbursement system for federally qualified health centers (FQHCs) with a new prospective payment system (PPS).1 The PPS reestablishes the Federal requirement that FQHCs be reimbursed at a minimum rate for services provided to Medicaid patients. This payment baseline is not nationwide but rather is based on the average of each FQHC’s FY1999 and FY2000 reasonable costs per visit rates – therefore, it is a unique payment rate for each FQHC. For existing FQHCs, a baseline per visit rate was established for services provided between January 1, 2001 and September 30, 2001, and then adjusted to take into account any change in the scope of services during that year. For FY2002 and the years thereafter, the per visit rate equals the previous year’s per visit rate, adjusted by the Medicare Economic Index (MEI) for primary care and any change in the FQHC’s scope of services.2 While the PPS establishes a Medicaid per visit payment rate floor, it does not require states to reimburse FQHCs using the PPS methodology. States may choose to implement an alternative payment methodology (APM), including continuation of reasonable cost reimbursement, as long as it does not pay less than what FQHCs would have received under PPS and the affected FQHCs agree to the APM.”