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Federally Qualified Health Center and Rural Health Clinics

Revised: 11-16-2016

  • Overview
  • Establishing Payment Rates
  • Eligible Providers
  • Covered Services
  • Noncovered Services
  • Managed Care Organization (MCO) Contracts
  • FFS Recipients and MCO Enrollees’ Services
  • Pharmacy Copays
  • Maternity and Surgical Services
  • Definitions
  • Legal References
  • Overview

    Federally Qualified Health Centers (FQHC) and Rural Health Clinics (RHC) provide covered services to MHCP recipients in a manner similar to other physician clinics. However, federal mandates and guidelines apply specifically to FQHCs and RHCs.

    Establishing Payment Rates

    Existing Clinics

    The Benefits Improvement and Protection Act (BIPA) of 2000, section 702, deleted federal cost-based reimbursement provisions and created a prospective payment system (PPS) for FQHCs and RHCs. BIPA allows states to offer alternative payment methods (APMs) that must pay at least what the center or clinic would receive under PPS. Minnesota has three different APMs. Complete an annual election form, Alternative Payment Methodology Election for FQHCs and RHCs (DHS-3903) (PDF), to indicate the chosen payment level for the year. It is only necessary to complete the form again when changing the APM selection.

    Methodology and payment information

    Payment Rate Methodology

    Methodology Explanation

    Prospective Payment System (PPS)

    Rate Jan. 1–Dec. 31, 2001:

  • • Developed using 100 percent of the average costs of the FQHC or RHC during fiscal years 1999 and 2000, trended forward
  • • Adjustments made for change in scope of services
  • Alternative Payment Method (APM I)

    Historical cost-based methodology

    Alternative Payment Method (APM II)

    PPS rate plus 2 percent

    Alternative Payment Method (APM III)

    200 percent when medical and mental health are provided to recipient on the same date of service

    For fiscal year 2002 and succeeding fiscal years, the PPS rate is increased by the percentage increase in the Medicare Economic Index (MEI) and any increases or decreases in the scope of services.

    Claims for services provided on or after January 1, 2001, are retroactively adjusted to the applicable PPS rate when a rate adjustment is determined after the effective date.

    PPS and APM rates for FQHCs and RHCs include a rate for dental services, if provided, and a medical rate for all other FQHC or RHC services. The all-inclusive medical payment rate (PPS or APM) is the same whether a physician, nurse midwife, nurse practitioner, or physician assistant performs the service.

    An FQHC or RHC has the option of being paid under one of the APMs. At a minimum, the FQHC or RHC must be paid an amount equal to the FQHC and RHC PPS rate.

    For the specific reporting period, an FQHC or RHC that elects payment under APM I and participates in the Medicare program is required to submit the following:

  • • A cost report prepared for the intermediary
  • • A chart of services provided that shows actual visits
  • The reporting period must coincide with Medicare's reporting requirements.

    After the end of the fiscal year, an FQHC or RHC choosing payment under APM I must provide a copy of the finalized Medicare cost report, Medicare's rate determination letter and the facility’s audited financial statements to the DHS Payment Policy Section.

    If an FQHC does not have Medicare FQHC status, or if Medicare does not desk-audit the RHC facility, and the FQHC or RHC chooses to be paid under APM I, the clinic should provide the following to MHCP:

  • • A cost report using Medicare cost-reporting principles
  • • Additional documentation showing specific Medical Assistance (MA) covered service costs, including pharmacy and dental services
  • • Audited financial statements
  • MHCP will desk-audit the financial information submitted and establish the finalized APM I encounter rate(s) for the cost reporting period. Desk-audit rates may be subject to adjustments for Medicare appeal settlements, amendments and on-site audit adjustments by Medicare or MHCP.

    An FQHC or RHC already receiving an APM I rate in a previous period will continue to be paid the APM I rate until new rates are established using the updated historical cost information from the most recent finalized reporting period. If the PPS rate for the period exceeds the APM I rate, FQHC and RHC services will be at the PPS rate. If the facility's current cost per visit differs significantly from the established APM I interim rate, MHCP will consider adjusting the APM I interim rate. To establish a new APM I interim rate, the FQHC or RHC must present to MHCP the cost estimate and updated statistical information for the non-historical items that affect the cost per visit calculation.

    For both PPS and the APMs, legislative increases provided for fee-for-service items such as obstetric, pediatric, physician and dental services are not applicable to the FQHC or RHC for MA services.

    New Center or Clinic

    Under BIPA, after January 1, 2001, DHS Payment Policy staff will assign the payment rate of an existing center or clinic in the area, or adjacent area with similar caseload, to a new FQHC or RHC. MHCP uses provider service and utilization information to identify those providers who are considered to have a similar caseload to that of the new center or clinic.

    Change in Scope of Services

    If an FQHC or RHC has a change in the scope of services provided, the DHS Payment Policy staff will adjust the PPS rates. The FQHC or RHC must do the following:

  • • Complete the PPS Rate Adjustment for Scope of Service Change form (DHS-4561) (PDF)
  • • Provide historical and budgeted cost information showing the facility’s expenses before and after the change in scope of services
  • • Provide the last two audited financial statements
  • • Provide the projected increase or decrease in the number of encounters due to the change
  • • Scan and email the completed DHS-4561 along with any necessary documents to the DHS Payment Policy Unit at: or
  • If you have questions about this process, call the DHS Payment Policy Unit at 651-431-2537 or 651-431-2539.

    Some services do not require a face-to-face visit with an FQHC or RHC provider (for example, laboratory, x-ray, pharmacy) and may not affect the number of encounters.

    Examples of changes in scope of services include adding or discontinuing one of the following:

  • Pharmacy services (PDF)
  • Radiology services (PDF)
  • Dental services (PDF)
  • Examples of items that are not considered changes in scope of services include:

  • • Increase or decrease in expenses for salaries, benefits and supplies not directly related to a change in the scope of services
  • • Increase or decrease in facility overhead or administration expenses not directly related to a change in the scope of services
  • • Increase or decrease in assets not directly related to a change in the scope of services
  • • Expenditures for items covered by insurance not directly related to a change in the scope of services
  • Calculating Rate Adjustment for Change in Scope of Services
    MHCP uses the same Medicare formula employed on the Form CMS-222 (in the Medicare Provider Reimbursement Manual) as modified for MA covered services, and used to establish PPS rates for January 1, 2001. It is necessary to identify the 1999 and 2000 costs used to calculate the PPS rate. For each year prior to the year of the change, the Medicare Economic Index (MEI) inflates these costs. The inflated costs are then adjusted for budgeted costs. The resulting increase or decrease in encounters, related to the change in scope of services determines the rate impact of the change. Since the costs are distributed among all of the encounters, in some instances the PPS rate decreases. Detailed worksheets are available to enable FQHCs and RHCs to calculate the impact of a change in the scope of services. If a provider does not have a record of the 1999 and 2000 costs used to establish their PPS rate, DHS Payment Policy can provide a copy for them to establish a rate.

    Adjustments to the clinic’s PPS rate for changes in the scope of services will be effective on the first day of the month following the change in scope of services. MHCP will conduct a “look back” after the new services have been in place for a year and will revise the PPS rate according to the actual costs and encounters directly related to the change in scope of services. When determination of the revised PPS rate is completed, MHCP will settle-up to the new rate by making retroactive adjustments for paid claims back to the effective date of the revised rate.

    Rate Change Claim Adjustments

    In the event of a PPS or APM rate change, MHCP will make retroactive adjustments for paid claims back to the effective date of the revised rate. MHCP adjusts FQHC or RHC paid claims through an individual claim adjustment process.

    Eligible Providers

    Providers that meet the definition of an FQHC or RHC must enroll as an FQHC or RHC with MHCP to receive payment at the PPS or APM rate level. Providers who qualify may elect to enroll as another type of fee-for-service clinic provider, instead of electing FQHC or RHC status. See the Enrollment web page for more information about enrolling.

    Individual providers within the enrolled FQHC or RHC may include the following:

  • • Chiropractor
  • • Clinical psychologist
  • • Clinical social worker
  • • Dentist
  • • Nurse practitioner
  • • Nurse midwife
  • • Physician
  • • Advanced dental therapist
  • • Dental therapists
  • • Physician assistant
  • • Qualified mental health professionals
  • Covered Services

    MHCP covers one medical and one dental encounter per day for federally funded MA and MinnesotaCare recipients with major program codes FF, JJ, KK and LL. A medical encounter does not prohibit a dental encounter from being incurred on the same day. 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 after the first encounter, the patient suffers illness or injury requiring additional diagnosis or treatment.

    MHCP covered services descriptions



    Dental services

    Provide in compliance with dental service guidelines

    Drugs and biologicals

    Incidental to an FQHC or RHC professional service only if they cannot be self-administered

    FQHC or RHC professional services inpatient visits

    Services provided to FQHC or RHC patients if covering inpatient hospital visits

    FQHC or RHC surgical services

    Provided to FQHC or RHC patients if surgical services are directly provided by the center or clinic

    RN or LPN part-time or intermittent nursing care

    In an area in which a shortage of home health agencies exists, part-time or intermittent nursing care by a registered nurse or licensed practical nurse to a homebound person under a written plan of treatment, either established and reviewed by a physician every 60 days or established by a nurse practitioner or physician assistant and reviewed at least every 60 days by a supervising physician

    Mental health

    Provided in compliance with mental health guidelines

    Obstetrical or perinatal

    Provided by an FQHC or RHC professional in compliance with medical service guidelines


    Provided by an FQHC or RHC in compliance with pharmacy guidelines

    Services and supplies

    Incidental to FQHC or RHC professional services; covered by the encounter rate if they are:

  • • Of a type commonly furnished in physicians' offices
  • • Of a type commonly rendered either without charge or included in the bill
  • • Furnished as an incidental, although integral, part of a physician's professional services Furnished under the direct, personal supervision of a physician
  • • Provided by a member of the clinic's health care staff who is an employee of the clinic
  • Vaccines

    Incidental to FQHC or RHC professional services.

    In addition, MA coverage of services furnished by an FQHC or RHC includes all other ambulatory services covered under the Minnesota State Plan that are furnished by the FQHC or RHC. Non-dental ambulatory services are part of the medical encounters and are included in developing the medical encounter payment rate for both PPS and Minnesota’s APMs.

    Noncovered Services

    Services covered by the Consolidated Chemical Dependency Treatment Fund (CCDTF) are not covered as FQHC or RHC services.

    Services that MHCP does not cover are not covered as FQHC or RHC services.


    Managed Care Organization (MCO) Contracts

    Payments on MCO Enrollees Encounter (effective January 1, 2015)
    2014 legislation mandated reform of the supplemental payment process for FQHC and RHC services covered under managed care contracts. Legislation states that FQHC and RHC services are no longer included in the managed care capitated rates. FQHC and RHC providers have until December 31, 2016, to identify specific concerns with pre-2015 supplemental payment processing and submit the detailed information to MHCP. MHCP has until June 30, 2017, to settle the pre-2015 supplemental payment periods.

    Effective January 1, 2015, FQHCs and RHCs submit claims for MCO enrollees to the MCO and the MCO submits payable claim lines to MHCP for payment.

    Follow these guidelines:

  • • The FQHC or RHC submits 837P or 837D to the MCO using MCO member identification number
  • • The MCO will adjudicate the claim and determine payable and denied claim lines
  • • The MCO will issue a Remittance Advice (RA) to the provider for the following:
  • • Payable claim lines the MCO pays at $0
  • • Denied claims or claim lines
  • • Copay obligation information
  • • The MCO will submit payable lines to MHCP within seven days of the initial adjudication
  • • MHCP will process the payable lines the MCO submits using the MHCP claims adjudication process
  • • MHCP will pay the full encounter rate for qualifying services, without regard to the person’s copay obligation as determined by the MCO.
  • • MHCP will zero pay claim lines for services that do not generate the FQHC or RHC encounter rate.
  • • MHCP will deny claims or claim lines that do not pass applicable MHCP processing edits.
  • • MHCP will issue an RA to the provider, billing intermediaries and MCOs.
  • • Quarterly copay reconciliation includes the following:
  • • MCO’s must track copay obligations and report them to MHCP quarterly.
  • • MHCP will create gross adjustments quarterly.
  • • MHCP gross adjustments are set up to recoup the MCO reported copay obligation and will appear on the provider’s remittance advice.
  • Void or Replacement Claim
    When submitting void or replacement claims to the MCO, include the MHCP TCN (LOOP 2300/REF, F8 qualifier) if MHCP processed an original carve-out claim for the person and date of service. Include the MCO internal control number (ICN) in the 837 header claim note L2300/NTE02, under the “situational claim information,” section.

    FQHC and RHC MCO Carve-Out
    The following are the carve-out process exclusions:

  • • Medicare claims follow standard billing practice. The MCO handles final resolution and will not forward claims to DHS.
  • • Claims in which a third party insurer (TPL) paid the claim in full
  • • Medical home (health care home) claims procedure codes S0280 and S0281. MCOs will continue to pay these claims directly to the provider
  • • Effective July 1, 2015, the MCO will directly pay MinnesotaCare adults without children, major program BB (200 percent FPG) claims
  • Global Procedure Service Date Reporting for Services Rendered before January 1, 2015
    Certain procedure codes may represent services provided on more than one service date. Each service date with a qualifying face-to-face encounter with an FQHC or RHC professional is eligible for supplemental payment at the FQHC and RHC rate. Without revenue code 0519, global procedure service date reporting from the FQHC or RHC, MHCP will recognize only one service date for payment.

    For MHCP to collect information for supplemental payments processing, we require FQHCs and RHCs to submit revenue code 0519 claims for procedures billed as global package procedures to MCOs. Submit these claims using the 837I claim format. MHCP will deny these 0519 claims with the following two remark codes:

  • • N216 Patient is not enrolled in this portion of our benefit package
  • • N65 Procedure code or procedure rate count cannot be determined, or was not on file, for the date of service/provider
  • In MN–ITS Interactive, MHCP will apply the following claim status codes during claim validation and submission:

  • • 116 Claim submitted to incorrect payer
  • • 21 Missing or invalid information
  • Submitting 0519 claims is not for immediate reimbursement. After MHCP receives information from MCOs about global procedure encounters, we will include the 0519 encounters to settle up with FQHCs and RHCs.

    If the conditions below apply, review the FQHC and RHC Global Encounters for MCO Enrollees - examples and follow the instructions to report the global package procedure encounter service dates to MHCP.

    Conditions for services and instructions for claims and reporting

    Conditions for services rendered before January 1, 2015


    If you submitted a claim to a managed care organization (MCO) for an MA recipient enrolled in an MCO and the following apply:

  • • The MCO paid the claim
  • • The dates of service billed to the MCO are before January 1, 2015
  • • The procedure code(s) are for a global procedure or package (such as obstetric or dental care)
  • • The FQHC or RHC saw the recipient more than one time for that global procedure code
  • Then, refer to the instructions in the next column.

  • • Submit claims to MHCP using the MN–ITS Institutional (837I) claim format
  • • Report each service date on which a face-to-face encounter occurred on a separate line, including the date of service billed to the MCO
  • • Use revenue code 0519 for medical or dental visits
  • • Use the appropriate global package procedure code (HCPCS/CPT/CDT) submitted to the MCO on each 0519 line
  • • Use the FQHC or RHC NPI that corresponds to the FQHC or RHC NPI used to bill the MCO

  • Current billing procedure: To comply with electronic transaction requirements to create uniform electronic health care billing standards, MHCP requires FQHC and RHCs to use the following guidelines when billing:

  • • Bill medical claims using the 837P (Professional) claim format
  • • Bill dental claims using the 837D (Dental) claim format and include tooth number, quadrant or surface as appropriate
  • • Use the corresponding enumerated NPI assigned to the FQHC or RHC location and service to bill all MHCP services
  • • Use the NPI of the rendering provider
  • • For MHCP: Follow all frequency guidelines and request for authorization requirements
  • • For billing MCO’s: Refer to MCO frequency guidelines and request for authorization requirements
  • • Enter time units according to the requirements for the services provided
  • • Report applicable modifiers
  • • For FQHCs using HCPCS code T1017 and T2023, continue to use the applicable code
  • Note: the above claim format instructions do not apply to Medicare crossover claims.

    FQHC and RHC Medicare Crossover Claims
    MHCP will deny FQHC and RHC Medicare-denied (for non-coverage) 837I crossover claims with remark code N34. FQHCs and RHCs must resubmit 837I Medicare-denied crossover claims using the 837P format.

    FFS Recipients and MCO Enrollees’ Services

    The following sections apply to services on or after January 1, 2015.

    Dentures and Partials
    Refer to the following guidelines for denture and partial services on or after January 1, 2015:

  • • For appointments prior to the delivery of the denture or partial, use code D5899 and enter “Encounter in preparation for denture/partial” as the description.
  • • Bill the appropriate code for the denture or partial when the appliance is delivered to the patient.
  • • For all adjustment appointments after delivery of the appliance, use code D5899 and enter “Encounter for denture adjustment,” as the description.
  • Pharmacy Copays

    Billing MHCP Directly
    To correctly identify and report pharmacy copays, submit pharmacy services through point-of-sale (POS). DHS will provide pharmacy copay information to the pharmacist and will track the monthly copay obligation. Because pharmacy services are part of the medical encounter, MHCP does not make a separate pharmacy payment. MHCP will post reason code 89 with a cutback and adjust the claim amount to $0. For MA payments to reflect the applicable pharmacy copays, recognition of copay amounts that apply to FQHC and RHC services will occur during the payment cycle in which the pharmacy service occurred. Collect copays at the time of the visit or bill the recipient according to office policy.

    Billing for MCO Enrollees Services on or after January 1, 2015
    Submit claims to the MCO pharmacy. Pharmacy costs are built into the FQHC and RHC rates, so MCO pharmacy claims will pay at $0. Copay information is provided in real time to the FQHC or RHC through the MCO point-of-sale transaction. The MCO will track copays and process though quarterly reporting to MHCP. MHCP makes payments at the full encounter rate, and creates gross adjustments quarterly to recoup copays from the provider.

    Maternity and Surgical Services: FFS and MCO Enrollees Services on or after January 1, 2015

    Bill the MHCP encounter rate preoperative and postoperative care on the 837P using each pre- and postoperative date of service.

    When providing the surgical procedure only, modify the surgical procedure code based on the procedure code description.


  • • Procedure code 59409 states “vaginal delivery only”; therefore, the “54” modifier is not required
  • • Procedure code 38300 assumes the surgery and pre- or postoperative management; therefore, the “54” modifier is required
  • When providing the preoperative or postoperative care only, submit E & M procedure codes that best describe the level of care. The preoperative and postoperative management modifiers are not required on E & M procedure codes.

    Provider Based RHC and Free-Standing RHC Billing MHCP Hospital Services

    RHC Professional-fee on the 837P claim format:

  • • Pay-to-Provider = RHC NPI
  • • Place of service = 21, 22, 23
  • Hospital Facility fee on the 837I claim format:

  • • Pay-to-Provider = Hospital NPI
  • Hospital Ancillary Services

  • • Hospital Lab = Hospital NPI
  • • Hospital X-Ray = Hospital NPI
  • Hospital Pharmacy = Pharmacy NPI

    Low-Level Services Provided by Mid to High-Level Practitioner

    If a mid to high level practitioner provides a low level, non-encounter generating procedure, such as a dentist providing hygiene services or a physician providing an ultrasound, and the covered service requirements for MA or MinnesotaCare are met, the provider must indicate this as follows in order to receive payment at the PPS or APM rate level:

    Claims Submission Procedure – Dental
    On the 837D, include the word “PROFESSIONAL” in upper case letters in the claim note field when the dentist has provided a lower level service, like hygiene.

    (For batch claims submission, claim note description is located in loop 2300, NTE02)

    837D example: A dentist provides adult prophylaxis, D1110. Claim line 1 contains the CPT D1110.

    Claim notes: PROFESSIONAL

    Claims Submission Procedure –Medical
    On the 837P, include the word “PROFESSIONAL” in upper case letters in the line note field for the service provided by the doctor.

    (For batch claims submission, line note description is located in loop 2400, NTE02)

    837P example: Doctor performs ultrasound, 76801. Claim line 3 contains the CPT 76801. Venipuncture, 36416, and Hemoglobin, 85014 CPTs are also included on this claim on line 1 and 2.

    Line level notes: PROFESSIONAL


    FQHC: A Federally Qualified Health Center (FQHC) is a facility that meets one of the following:

  • • Is receiving a grant under section 329, 330, or 340 of the Public Health Service (PHS) Act, or 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
  • • Is based on the recommendation of the PHS, determined by the Centers for Medicare & Medicaid Services (CMS) to meet the requirements for receiving such a grant
  • • Was treated by CMS, for purposes of Medicare Part B, as a comprehensive federally funded health center (FFHC) as of January 1, 1990
  • • Is an outpatient health program or facility operated by a tribe or tribal organization under the Indian Self-Determination Act or an urban Indian organization receiving funds under Title V of the Indian Health Care Improvement Act
  • Rural Health Clinic: A Rural Health Clinic is a freestanding or provider based facility certified under Code of Federal Regulations, title 42, part 491.

    Dental Encounter: Services provided during a dental visit by a dentist. Certain services provided by a dental therapist or advanced dental therapist also qualify.

    Medical Encounter: Services provided during a medical visit, including but not limited to the following:

  • • Professional services
  • • Obstetrical and perinatal care
  • • Clinic visits
  • • FQHC or RHC professional services provided to FQHC or RHC patients if covering inpatient hospital visits
  • • FQHC or RHC professional services provided to FQHC or RHC patients if surgical services are directly provided by the center or clinic
  • • Mental health visits provided in compliance with mental health guidelines
  • Provider-Based Facility: A clinic that is an integral part of a hospital, skilled nursing facility, or home health agency that is participating in Medicare and is used, governed and supervised with other departments of the facility.

    Legal References

    Minnesota Rules 9505.0250 (physician clinic)
    42 CFR 491 (RHC)
    42 USC 1396d (RHC)
    Minnesota Statutes 256B.0625
    , subd.29 (FQHC)
    42 CFR 491 (FQHC)
    Title XIX, Section 1905(l)
    of the Social Security Act, CR 4210 (PDF) (RHC & FQHC)
    Minnesota Statutes 256B.0625, subd. 30

  • • Laws 2014, Chap 312, Article 24, Section 35)
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