Primary care program improves reimbursement. The Federally Qualified Health Center program helps hospitals improve services to the medically indigent.

Under a program created by Congress in 1989, certain primary care treatment centers serving the medically and economically indigent can become Federally Qualified Health Centers (FQHCs). Recently enacted rules and regulations allow participants in the FQHC program to receive 100 percent reasonable cost reimbursement for Medicaid services and 80 percent for Medicare services. An all-inclusive annual cost report is the basis for determining reimbursement rates. The report factors in such expenses as physician and other healthcare and professional salaries and benefits, medical supplies, certain equipment depreciation, and overhead for facility and administrative costs. Both Medicaid and Medicare reimbursement is based on an encounter rate, and states employ various methodologies to determine the reimbursement level. In Illinois, for example, typical reimbursement for a qualified encounter ranges from $70 to $88. To obtain FQHC status, an organization must demonstrate community need, deliver the appropriate range of healthcare services, satisfy management and finance requirements, and function under a community-based governing board. In addition, an FQHC must provide primary healthcare by physicians and (where appropriate) midlevel practitioners; it must also offer its community diagnostic laboratory and x-ray services, preventive healthcare and dental care, case management, pharmacy services, and arrangements for emergency services. Because FQHCs must be freestanding facilities, establishing them can trigger a number of ancillary legal issues, such as those involved in forming a new corporation, complying with not-for-profit corporation regulations, applying for tax-exempt status, and applying for various property and sales tax exemptions. Hospitals that establish FQHCs must also be prepared to relinquish direct control over the delivery of primary care services.