[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



     A REVIEW OF COMMUNITY HEALTH CENTERS: ISSUES AND OPPORTUNITIES

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 25, 2005

                               __________

                           Serial No. 109-31

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


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                    ------------------------------  
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

                    ED WHITFIELD, Kentucky, Chairman

CLIFF STEARNS, Florida               BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING,         Ranking Member
Mississippi                          DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  JAY INSLEE, Washington
MIKE FERGUSON, New Jersey            TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas            HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee          JOHN D. DINGELL, Michigan,
JOE BARTON, Texas,                     (Ex Officio)
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Duke, Elizabeth M., Administrator, Health Resources and 
      Services Administration, U.S. Department of Health and 
      Human Services.............................................    13
    Goetcheus, A. Janelle, Medical Director, Unity Health Care...    54
    Hawkins, Daniel R., Jr., Vice-President, National Association 
      of Community Health Centers................................    44
    Manifold, Roderick V., Executive Director, Central Virginia 
      Health Services, Inc.......................................    61
    Shi, Leiyu...................................................    58
    Sibilsky, Kim, Executive Director, Michigan Primary Care 
      Association................................................    40
    Smith, Dennis, Director, Center for Medicaid and State 
      Operations, Centers for Medicare and Medicaid Services, 
      U.S. Department of Health and Human Services...............    18
Additional material submitted for the record:
    Duke, Elizabeth M., Administrator, Health Resources and 
      Services Administration, U.S. Department of Health and 
      Human Services:
        Letter dated August 17, 2005, to Hon. Tammy Baldwin, 
          enclosing response for the record......................   124
        Letter dated August 17, 2005, to Hon. John D. Dingell, 
          enclosing response for the record......................   121
    Smith, Dennis, Director, Center for Medicaid and State 
      Operations, Centers for Medicare and Medicaid Services, 
      U.S. Department of Health and Human Services, letter dated 
      September 16, 2005, enclosing response for the record......   127

                                 (iii)

  

 
     A REVIEW OF COMMUNITY HEALTH CENTERS: ISSUES AND OPPORTUNITIES

                              ----------                              


                        WEDNESDAY, MAY 25, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:03 p.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman) presiding.
    Members present: Representatives Whitfield, Stearns, Bass, 
Walden, Ferguson, Burgess, Blackburn, Barton (ex officio), 
Stupak, Inslee, Baldwin, and Waxman.
    Also present: Representative Green.
    Staff present: Anthony Cooke, majority counsel; Mark 
Paoletta, chief counsel; Chad Grant, legislative clerk; Jeanne 
Haggerty, majority counsel; Edith Hollman, minority counsel; 
and Voncille Hines, staff assistant.
    Mr. Whitfield. At this time, I would like to call this 
hearing to order.
    As you know, this is the Energy and Commerce Committee's 
Subcommittee on Oversight and Investigations, and today's 
hearing is entitled: ``A Review of Community Health Centers.'' 
And I certainly want to thank all of those who will be 
participating today as witnesses.
    And at this point, I will recognize myself for an opening 
statement.
    We convene this afternoon to review community health 
centers. I look forward to today's hearing with particular 
interest, because I hope to bring, and I think this 
Subcommittee hopes to bring, national attention to the 
opportunities of this program for improving the lives and 
health of many Americans while at the same time bringing focus 
to the important role primary preventive health care can play 
in controlling health care costs.
    To meet the promises we have made through the Medicaid and 
Medicare programs to provide health care we must always seek 
ways to use the taxpayers' money wisely and promoting 
preventing medicine for our most needy citizens is just one 
such opportunity.
    I might also say that the President has recognized the 
promise of community health centers by placing them at the 
center of an initiative to expand the access and services of 
these important safety net institutions. Since 2002, this new 
funding to the community health center program has added the 
capacity to serve an additional 3 million Americans.
    As the committee with principal authority over community 
health centers, we should look forward to learning directly 
from the health centers with us here today and to find out how 
this new money is going to work.
    I might also say that when we decided to have this hearing, 
a lot of people were quite concerned, because they said, ``Oh, 
my gosh. Why do they want to have a hearing about community 
health centers? Is it because their Congressional District does 
not have enough? Is it because they have got to find money to 
save in Medicaid? What is the reason?'' And since I was one of 
those that thought up the idea of having it, and I know that 
Ranking Minority Member Stupak has had a real interest in this, 
and I know we have a witness from Michigan here today who is 
running a successful community health center, but my only 
interest was that, one, I don't think that enough attention of 
the Congress has been focused on these health centers. And two, 
I think that they are providing an invaluable service in 
providing access to, particularly a lot of people who are 
uninsured, and I might add, uninsured people who do have jobs 
but whose employer is not paying their health care for them, 
and yet these people are paying the taxes so that people on 
Medicaid get their health coverage, people on Medicare get 
their health coverage, and they are paying their taxes, but yet 
they can't afford to buy their own health coverage for their 
own families.
    And so we wanted to focus on these community health 
centers. What are the opportunities out there for expansion? 
Are there some new initiatives that we may think of, new models 
that we could look at? You know, there are some unique things 
about these health centers. They do have some limited liability 
prospects under the Tort Claims Act. They get a discount on 
prescription drugs. So there are a lot of great attributes to 
these community health centers. And the real reason that we are 
having this hearing is simply to get a better understanding of 
how it works. Is there a well thought through policy on the 
relationship between the community health centers and Medicaid, 
between the community health centers and Medicare? Are there 
other avenues that we may need to go?
    So I just wanted to mention that as a clarification. I 
certainly do not view this as a hearing of a way to save $10 
billion next year for Medicaid. So I just want to set that in 
the record, set that straight. And I do look forward to the 
testimony, and what we might learn, and, hopefully, can come up 
with some conclusions that will help improve health care for 
everyone in America.
    [The prepared statement of Hon. Ed Whitfield follows:]

  Prepared Statement of Hon. Ed Whitfield, Chairman, Subcommittee on 
                      Oversight and Investigations

    We convene this afternoon to review community health centers. I 
look forward to today's hearing with particular interest because I hope 
to bring national attention to the opportunities of this program for 
improving the lives and health of many Americans while, at the same 
time, bringing focus to the important role primary, preventative health 
care can play in controlling health care costs. To meet the promises we 
have made through the Medicaid and Medicare programs to provide health 
care, we must always seek ways to use the taxpayers' money wisely--and 
promoting preventative medicine for our most needy citizens is just one 
such opportunity.
    Today there are over 900 community health centers providing a 
spectrum of primary health care services through 3600 urban and rural 
sites located in every state and territory. According to the Bureau of 
Primary Healthcare, community health centers in 2003 treated over 12 
million people in medically underserved areas, including 4.8 million 
uninsured. Indeed, 90% of CHC patients live under 200% of the federal 
poverty line. In 2003, these community health centers delivered 
mammograms to over 200,000 women, gave check-ups and other health 
services to 1.6 million children and administered over 2.2 million 
immunizations. The primary healthcare services given by these community 
centers also included pre-natal care, mental health services, blood 
pressure and cholesterol checks and care of chronic diseases such as 
diabetes. I have a community health center in my District and know the 
vital role it plays in providing care to my constituents.
    Community health centers play a critical role in our nation's 
healthcare safety net. The purpose of our oversight hearing today is to 
evaluate the effectiveness of the program in reaching the medically 
underserved and to listen to ideas that could build upon the program's 
areas of success. One such potential area of success, which is of 
particular interest in this time of tightening budgets, is the role of 
community health centers in giving the regular, preventative care that 
both enhances their patients' daily health but also keeps them out of 
hospitals and emergency rooms where the cost of providing care is more 
expensive. Healthy people naturally utilize fewer health care services 
thereby decreasing the burdens on our health care system and the 
Medicaid and Medicare programs. As one example, a study in 1980 found 
that a set of Medicaid patients, who used community health centers, had 
a 30% to 65% lower hospitalization rate and used 12% to 48% less total 
Medicaid funds than a similar group of Medicaid patients who did not 
use such health centers.
    The President has also recognized the promise of community health 
centers by placing them at the center of an initiative to expand the 
access and services of these important safety net institutions. Since 
2002, this new funding to the community health center program has added 
the capacity to serve an additional 3 million Americans. As the 
Committee with principal authority over community health centers, we 
should look forward to learning directly from the health centers with 
us here today how this new money is going to work.
    Finally, I would note here that there is surprisingly little recent 
research on the issue of whether community health centers create 
savings to our public health programs such as Medicaid, through their 
provision of preventative care. As such, I recently asked the 
Government Accountability Office to study this important connection and 
I look forward to its report.
    I welcome today's witnesses and appreciate their appearance here. I 
hope this hearing will leave us all with a more complete understanding 
of the community health center program and ways in which it might 
better serve the medically underserved of this nation while, at the 
same time, helping to control overall healthcare costs.

    Mr. Whitfield. And with that, I yield back the balance of 
my time and recognize the gentleman from Michigan, Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    First, I want to welcome Kim Sibilsky, the Executive 
Director of the Michigan Primary Health Care Association, who 
has dedicated many, many years to making sure that Michigan has 
one of the best community health care systems in the country. I 
look forward to hearing her testimony today.
    Community health centers are one of the few success stories 
in the health care field. They provide quality primary care at 
a fraction of the cost to the uninsured, but also provide care 
to the insured. Not only are community health centers the 
epitome of doing more with less by being incredibly resourceful 
in using the funding they receive, but also community health 
centers lower the costs of health care overall by keeping 
people out of the hospital emergency rooms where the cost of 
care is much greater. As a result, the community health care 
program continues to enjoy strong, bipartisan support.
    Under both the Clinton and Bush Administrations, Congress 
has expanded the budget and the geographic coverage of these 
centers. In the most recent dismal health care disparities 
report of 2004, which I have placed in the exhibit book, the 
Department of Health and Human Services reports ever decreasing 
quality of care and less access for most disadvantaged and poor 
groups except those who receive care in community health 
centers.
    But community health centers face serious challenges. The 
linchpin that keeps these centers financially afloat is the 
Medicaid reimbursement. About one-third of their income comes 
from Medicaid. Along with the base Federal grant and SCHIP, 
Medicaid is what allows these centers to care for the 
uninsured, those who have limited health care insurance, and 
those with no place else to go. Yet Medicaid is under attack. 
The Energy and Commerce Committee has been ordered to cut 
Medicaid by $15 billion to $20 billion over 5 years. This cut 
is equivalent to completely eliminating Federal funding for 
Medicaid coverage between 1.8 and 2.5 low-income parents for 
each of the next 5 years. States simply can not afford these 
cuts. Michigan's high unemployment rate makes Ms. Sibilsky's 
job and that of rural health centers and federally qualified 
health centers more difficult. This is especially true with 
Medicaid cuts expected to be between $15 billion to $20 
billion.
    The fact is that States are already struggling, making 
cuts, and impacting the community health centers. When States 
decide to reduce their Medicaid roles or cut coverage services, 
the community's health centers can't throw out these people or 
stop providing care. The patients still need health care, and 
the centers are legally obligated to provide it. When States 
cut Medicaid, the community health centers are hit with a 
double whammy: community health centers lose Medicaid payments 
for their current patients and community health centers get new 
patients who are being turned away from or can't afford their 
private providers.
    Attached to my statement is an overview of how Michigan 
community health centers are being hit. Michigan, for example, 
stopped paying for dental care for adult Medicaid patients. But 
that service is more utilized than any other by patients in the 
State's community health care centers. They have to keep 
providing it. The poor oral health has serious long-term 
effects on people's health, morbidity, and employability. But 
who will pay for it?
    Who also will pay for the health care of those whose 
employers can no longer afford it? Many employers are 
struggling to compete in the global economy and can no longer 
offer affordable health insurance to their employees. When 
employers cut insurance coverage, the burden falls to Medicaid 
and community health centers. Twenty-seven percent of the 
adults on Medicaid in Michigan have a job. Ms. Sibilsky says it 
better than I could: ``When you restrict enrollment in public 
programs, the cost to providing care does not disappear and the 
savings are not absolute. People will eventually receive the 
care they need. It may not be in the best and most cost-
effective location at a time when progression of illness can be 
headed off and the most expensive care prevented, but in the 
end, anyone can walk into a community hospital and receive some 
level of care.'' Michigan centers are already confronting 
higher co-payments, longer waiting periods for new patients, 
reduction in services, and losses in the hundreds of thousands 
of dollars for ineligible oral health care. Community health 
centers face still more challenges. Who is going to provide the 
money for capital expenditures, something the Federal 
Government doesn't pay for? A number of these centers are 
becoming very adept at private fundraising, but more and more 
often they are competing with other worthy causes, which are 
losing their funding because of shortsighted political 
decisions made here in Washington. The centers need computers, 
equipment, expanded facilities, and staff.
    The President has a commendable goal of creating many new 
health centers, but we can't improve health care if the 
tradeoff is letting the existing centers stay barely alive. In 
addition, the President's budget slashes funding from $300 
million this year to $11 million next year for the Health 
Professions Program, which specifically provides Federal 
funding to bring physicians and other health care providers to 
under-served populations, the exact same populations served by 
community health centers.
    It is distressing, Mr. Chairman, to see a program that is 
so successful, so efficient, so economical, and so praised face 
problems of this size and complexity. I hope this hearing today 
will provide more than a feel-good experience for the members 
and we begin to discuss how arbitrary budget cuts in Washington 
directly affect our ability to provide quality health care and 
coverage to those most in need.
    Mr. Chairman, I yield back the balance of my time.
    Mr. Whitfield. Thank you, Mr. Stupak.
    At this time, I will recognize the gentleman from Oregon, 
Mr. Walden, for his opening statement.
    Mr. Walden. Well, thank you very much, Mr. Chairman. I 
appreciate your holding this hearing. I have been a big 
advocate of the centers. I spent 5 years on a community 
hospital board, chaired and worked on committees in the Oregon 
legislature and enacted the Oregon Health Plan in an effort to 
better serve and better utilize Medicaid funding to try and do 
preventive work as well.
    I hadn't planned to get into the argument over Medicaid 
funding, but just for the record, I believe the target that we 
have to achieve on all areas within our jurisdiction in this 
committee is something to the order of $10 billion and not $15 
billion. And we do have other ways we can generate revenues, 
too, from things like spectrum auction.
    I would also point out that we did support, as I recall on 
the floor and in the budget resolution that has been passed, 
the Medicaid Commission is due to report on how we can achieve 
greater efficiencies in Medicaid. And as an employer, I 
certainly sympathize with the cost of health care. My own 
insurance policies in my company, premiums went up close to 20 
percent this year. So there are a lot of conflicting pressures 
on health care delivery, and it is our opportunity and 
challenge to figure out how best to take care of people who 
need health care in the most efficient and affordable way 
possible. And it is not through the emergency room door. It is 
through clinics like this.
    And I want to brag a bit in terms of what has happened in 
my home State of Oregon, where we have 23 community health 
centers which support over 125 sites in urban, rural, and 
frontier areas.
    Now I want to talk about a frontier area. My District is 
the second biggest in the Nation other than the five single-
member States. And let us cut to the chase and go right on out 
to Wheeler County where there are 1,713 square miles. That is 
about the same as the population in the county. Okay. That is 
the size an area as big as the State of Rhode Island. And 
located there is the Asher Clinic, the sole life-saving source 
for health care. The two surrounding counties of Wheeler 
County, Sherman and Gilliam, none of these three counties has a 
hospital. They have clinics. They have physician assistants. 
One, I guess, now has a doctor but for many years didn't. This 
clinic out in Wheeler County faced some difficulty and initial 
rejection to be able to get qualified as a Federal health 
center and was facing a shortfall of $80,000 a year. That is a 
huge sum in a community like that, a county of 1,700 people or 
thereabouts. So they contacted me and my staff in May 2003, and 
we helped them work through some of the paperwork and all, and 
I really want to commend Elizabeth Duke and her folks for their 
work on this effort as well, because they were, in 2004, able 
to receive a health center grant for $229,500, and you would 
have thought they won the $100 million lottery. And I went out 
to Wheeler County not long after that to help them celebrate a 
bit. And you know, we really are talking about life saving, a 
source of health care. Because you can drive, in parts of my 
District, 100 miles in any direction before you hit the first 
stop light. And if you have a crisis in health care, if clinics 
like this don't exist, you are out of luck unless you wait for 
a helicopter to come pick you up and transport you somewhere, 
which is the alternative, or you race in a car somewhere to try 
and find health care.
    And so I am a firm believer in these federally qualified 
clinics. I believe they can be, and are, a very productive way 
to help people who don't have health insurance get care before 
it is an emergency and improve their own qualities of life.
    So Mr. Chairman, I appreciate your oversight on this. We 
are spending a lot of money in this area. It is our obligation 
to look at what is working and what is not, as we do in this 
subcommittee and as you do very aggressively as our chairman. 
And I think it is good to point out once in a while where 
things are working and use, as an example, these clinics, and 
if there are problems, let us figure out where things work 
better and apply those standards elsewhere. But we have got big 
challenges in this Congress when it comes to the delivery of 
health care services. And if you add up the promises that have 
been made from Social Security, Medicare, and Medicaid, we 
bankrupt the next generation if we don't get it right now.
    And so hopefully, as we look at issues involving, for 
example, the work this subcommittee has done on AWP versus ASP 
on how we pay for drugs versus what it costs to actually get 
them. There are some false economies there and actually some 
perverse incentives to drive up costs of pharmaceuticals to 
Medicaid and robs money, I believe, from actually being able to 
expand and deliver service. It could be as much as $15 billion 
over 10 years. These are issues that we have looked at in this 
committee and need to look at closely as we try to reform 
Medicaid to be able to deliver the most service most 
efficiently to the most number of people.
    And so I welcome this hearing, and I appreciate your and 
our staff's work in this area.
    And I yield back the remaining 3\1/2\ seconds.
    Mr. Whitfield. Thank you, Mr. Walden, for being so generous 
with your time.
    And Mr. Waxman, you are recognized for your opening 
statement.
    Mr. Waxman. Thank you very much, Mr. Chairman.
    Well, it is clear from what I have heard so far that there 
is strong, bipartisan support for the community health centers. 
It is one of the real successes of our Federal health policy.
    But I want to make one point that Mr. Stupak indicated. We 
will be doing a real disservice to the community health centers 
if we make some of the cuts in Medicaid that are being 
proposed. It may not be the $15 billion or $20 billion, 
although we still don't know if somebody might just come up 
with something more than $10 billion, but $10 billion is not a 
small amount of money. It is the Medicaid program that is the 
lifeblood of these centers. If we had not established the 
federally Qualified Health Centers Program in Medicaid in 1989 
guaranteeing community health centers that they would be 
covered providers in the Medicaid program and reimbursed at a 
fair level that recognized their costs, many centers just would 
not be viable. And it is hard to praise those centers when they 
are not around anymore. It is a crucial source of payment, and 
they are not going to be around anymore if we make some of 
these cuts in Medicaid.
    If we cut the Medicaid program and we take away the 
guarantee of coverage for eligible people, we will be damaging 
the community health center program just as directly as if we 
slashed its funding. If we accede to State calls for 
flexibility and take away the payment and coverage guarantees 
we have given to FQHCs, then it is the viability of the 
community health centers that will be directly threatened.
    It is easy to voice support for these centers but miss the 
crucial link to a robust Medicaid program. Certainly the 
administration, in my view, has been hypocritical in touting 
their support for community health centers while they work for 
constant changes in Medicaid, which would damage these 
institutions beyond repair.
    In addition to Medicaid, community health centers see the 
uninsured. Well, we will have many more uninsured if there is 
not a Medicaid eligibility for them to get that coverage. We 
will have more uninsured, less payment, and the community 
health centers, and other providers, will not be able to absorb 
those costs.
    I thank you, Mr. Chairman, for holding this hearing. Let us 
keep all of these things in mind, because there are a lot of 
times we don't want the unforeseen consequences to occur when 
we adopt legislation, but let us take the time in this 
Oversight Committee to foresee what would happen if we make 
short-term cuts in Medicaid to deal with the budget and then 
have very foreseen consequences that could be so harmful to a 
program that has been working well.
    Mr. Whitfield. Mr. Ferguson, do you have an opening 
statement? And while you are preparing, I would like to 
recognize and welcome Mr. Green of Texas, who is a member of 
the Energy and Commerce Committee. He does not happen to be a 
member of this subcommittee, but we know of his intense 
interest in community health centers and welcome him here 
today. It is the policy of the subcommittee that if you are not 
a member of the subcommittee, you can not make an opening 
statement, but you can certainly ask questions and make 
comments during that period. And I know you are excited about 
the number of health centers in Texas, and I was going to be 
really astute and give you the number, but now I can't seem to 
find it, but I think there are something like 35 grantees, or 
so, in Texas.
    But at this time, I recognize Mr. Ferguson for his 5-minute 
opening statement.
    Mr. Ferguson. Thank you, Mr. Chairman.
    I am sorry I was walking in a couple of minutes late.
    I want to thank you for holding this hearing about an 
initiative that has received great support from the President 
and the administration and is currently providing care to 
millions of poor and under-served Americans in our country 
today. In a short time, community health centers have emerged 
as viable sources of health care for the poor of our Nation. In 
fact, 90 percent of people that have used community health 
centers are people under 200 percent of the Federal poverty 
level. Community health centers in 2003 treated over 12 million 
people in medically under-served areas, including 4.8 million 
uninsured patients. That same year, 1.6 million children 
received check-ups or other health services from CHCs and they 
administered over 2.2 million immunizations. Pre-natal care, 
mental health services, blood pressure, mammograms, and 
cholesterol checks and care of chronic diseases, such as 
diabetes, all take place at community health centers every day.
    All of these statistics are impressive, but we can do more. 
I am thankful that we are going to have this opportunity today 
to delve into what we can do to help make community health 
centers serve the community better. For instance, is it 
possible to open up the grant process to faith-based groups to 
help provide these health services to the poor and under-
served? Today, for instance, there are over 500 Catholic-
sponsored health clinics for the poor, serving the exact same 
patient population as community health centers, but they are 
not eligible for Federal funding.
    I thank the chairman for holding this important hearing. I 
look forward to hearing from our expert panel. And I welcome 
their suggestions.
    Thank you, Mr. Chairman. I yield back.
    Mr. Whitfield. Thank you, Mr. Ferguson.
    At this time, I recognize Ms. Baldwin for her opening 
statement.
    Ms. Baldwin. Thank you, Mr. Chairman.
    I want to commend you for holding today's hearing on 
community health centers.
    Like my colleagues, I, too, am a strong supporter of 
community health centers and their mission. I represent a 
District with two federally qualified health centers, and I 
like to visit them frequently. I am constantly impressed with 
the excellent job that they do with extremely limited 
resources. I think each of us knows the large role that 
community health centers play in responding to the health needs 
of our uninsured, our under-insured, and low-income 
constituents and other targeted communities within our 
constituency.
    But the community health centers are also the first to talk 
with me when I visit about the unmet needs that exist in our 
community that they are simply not able to meet, the people 
that they must turn away on a daily, weekly, and monthly basis. 
As just one example, because of the fact that no dentist in the 
largest county in the District that I represent has accepted 
new Medicaid patients in over 2 years, the Madison Community 
Health Center has tried very hard to fill some of that role. 
They have just expanded and moved into a new building with 
dental suites. They can currently serve over 12,000 individuals 
per year who need dental care, but it is estimated that 63,000 
more people in that one county need dental care but don't 
receive it.
    There are two closing points that I want to make. Even 
acknowledging what a huge fan I am of community health centers 
and the incredible job that they do in our community, I just 
want to say that they are clearly a response to the crisis of 
uninsurance in our country, but in my view, not the solution. 
And I remain committed to the belief that this Congress ought 
to declare health care to be a right and not a privilege, that 
we ought to ultimately tackle the challenge of universal health 
care.
    Also, I want to underscore what several other colleagues 
have said in their opening statements about my strong concerns 
on how community health centers will be impacted by the 
impending cuts anticipated in the Medicaid program. Obviously, 
we all agree that community health centers' role and mission 
are vital, and at a time when the situation is so dire, we need 
them to have the capacity to respond to as many in need as 
possible.
    With that, Mr. Chairman, I yield back my remaining time.
    Mr. Whitfield. Thank you, Ms. Baldwin.
    At this time, I will recognize the gentleman from Texas, 
Dr. Burgess, for his opening statement.
    Mr. Burgess. Thank you, Mr. Chairman.
    The District that I represent actually has just crossed the 
finish line with its first community health center. My District 
is truly a cross-section of the country. Within its boundaries, 
you will find a mix of rich, poor, middle income, rural, 
suburban, urban, black, Anglo, and Hispanic citizens. You will 
also see sharp differences in the health needs of different 
communities and how they are impacted by the very health 
disparities.
    For instance, in one part of my District, you will see some 
of the highest infant mortality rates anywhere in the country, 
and indeed, higher than some areas in parts of the world that 
we feel are less developed. In other parts of my District, the 
population is healthier but without ready access to health 
insurance. A new community health center in Denton, Texas is 
beginning to make a difference by giving community residents 
access to a physician at free or reduced cost. This will not 
only improve their short-term health, but will help with the 
creation of a medical home.
    I am also actively seeking out stakeholders in the city of 
Fort Worth to look at standing up a clinic in Southeast Fort 
Worth to meet the needs of this community. This area of Fort 
Worth, having yet to really catch the wave of economic 
development that has benefited other areas of the city, is 
crying out for the type of assistance that a community health 
center can provide.
    As we proceed from this hearing, I hope to be able to tap 
some of the expertise here in the room and assist my 
constituents that look to establish a community health center 
back home.
    Thank you, Mr. Chairman, for calling this hearing, and I 
will yield back.
    Mr. Whitfield. I thank you, Dr. Burgess.
    At this time, I recognize the gentleman from New Hampshire 
for his opening statement.
    Mr. Bass. Thank you, Mr. Chairman.
    This is an interesting hearing. Community health care 
centers are a very important part of almost every Congressional 
District and every State in the country. I have the benefit of 
having at least three or four in my District. I believe there 
are seven altogether in the State of New Hampshire. And what 
they do, as may have been mentioned before, is provide a bridge 
for adequate health care between those who qualify for Medicaid 
and those that buy a health insurance policy. I note that the 
budget for community health care centers has gone up almost 
double in the last 4 or 5 years because we recognize, as does 
the administration, this is an important part of the whole 
health care picture in this country.
    It is a good hearing, a good time for a hearing. I will be 
interested to know whether there are any issues involved with 
whether the competitive bidding process or application process 
for grants ends up resulting in having lots of community health 
care centers in some parts of the country or in some States and 
not in others where they may be needed.
    So Mr. Chairman, I appreciate your calling this hearing, 
and I look forward to hearing from the witnesses.
    Mr. Whitfield. Thank you, Mr. Bass.
    And I am going to ask unanimous consent that we also enter 
into the record about nine documents that specifically relate 
to the health centers. The staffs on both sides of the aisle 
have reviewed this, and I think it will be helpful to complete 
the record with that.
    So without objection, these documents, a total of nine of 
them, will be entered into the record.
    [The information referred to appears at the end of the 
hearing.]
    Mr. Whitfield. We are going to pause for just 1 minute. I 
have been told that the Chairman of the Full Committee is on 
his way, and I know that he did want to make an opening 
statement. So I am going to ask for your patience for a minute. 
We will see if he is going to be here.
    Mr. Green. Mr. Chairman, while we are waiting for the 
opening statement, could I just ask unanimous consent to place 
a statement into the record?
    Mr. Whitfield. Yes. That will be fine.
    Thank you, Mr. Green.
    While we are waiting on the Chairman, I would like, at this 
time, to call the first panel to the witness stand.
    The first panel consists of Dr. Elizabeth Duke, who is the 
Administrator of Health Resources and Services Administration 
with the U.S. Department of Health and Human Services. Dr. 
Duke, we are delighted that you are here with us today, and we 
look forward to your testimony. In addition, Mr. Dennis Smith, 
who is the Director of the Center for Medicaid and State 
Operation, the Centers for Medicare and Medicaid Services at 
the U.S. Department of Health and Human Services.
    So we do welcome you all here today.
    And at this time, the Chairman of the Full Energy and 
Commerce Committee, Mr. Joe Barton of Texas, has just arrived. 
And I know he has a specific interest in community health 
centers. And at this time, we would recognize him for his 
opening statement.
    Chairman Barton. Well, first, Mr. Chairman, happy birthday 
to you.
    If I had known a little bit sooner, we would have had a 
cake, but you are now old enough to vote, and we appreciate 
that.
    Mr. Whitfield. I am 52 today.
    Chairman Barton. Today is your birthday, so happy birthday.
    I need to give Congressman Ferguson, Mr. Embryo himself, 
credit for that. You know, we were all embryos once, and that 
is going to be on your tombstone.
    But to get to the subject of today's hearing, Mr. Chairman, 
community health centers get little national attention. As the 
chairman of the committee with direct jurisdiction over the 
program, I personally want to learn more about how these 
centers work, what role they actually play in delivering health 
care, and what cost savings they might achieve. And I believe, 
Mr. Chairman, this hearing is one of the first hearings any 
committee of the Congress has held on community health centers 
in a long, long time, and I want to commend you for that.
    The program itself is decades old. It was intended then and 
now to serve the poor. It was a small program, but now it is a 
large one. We operate over 3,600 urban and rural size in every 
State and Territory, and community health centers serve more 
than 12 million people.
    I am interested in knowing more about the care offered by 
these centers and the impact that they have on both patients 
and the general health care system in America.
    It has been reported that community health centers lower 
the cost of Medicaid. We are told that even as far back as 1980 
there was a study that found a set of Medicaid patients who use 
community health centers use between 12 to 48 percent less 
total Medicaid funds than a similar group of Medicaid patients 
who did not use community health centers. That is back in 1980. 
Well, now we are in 2005. Is the same thing true today?
    I am also interested in learning whether community health 
centers have been successful or can be successful in moving 
routine patient care out of emergency rooms to clinics where 
the quality is better and the care costs are dramatically 
lower.
    The President has also included community health centers in 
his domestic health care agenda, and the President's initiative 
since 2001 has increased the number of community health centers 
by 334. As the primary authorizing committee, we must remain 
informed about how these additional centers have been allocated 
around the country.
    I really want to thank you, Mr. Chairman, on your birthday, 
for holding this hearing. I look forward to the committee's 
review, and we look forward to moving forward, possibly in 
legislative areas, if this hearing shows that we need to.
    With that, I yield back.
    [The prepared statement of Hon. Joe Barton follows:]

 Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy 
                              and Commerce

    The subject of today's hearing, community health centers, seems to 
get little national attention. But, over a number of years, these 
centers have been slowly building a track record that suggests 
promising developments in the difficult area of health care. Community 
health centers have seemed to be both helping patients live healthier 
lives while, at the same time, controlling overall costs. Like any 
member of Congress hearing something like this--I want to learn more. 
And as Chairman of the Committee with direct jurisdiction over this 
program--I want to find how to support the good work of these centers.
    The community health center program is not new. Indeed it has its 
roots in efforts during the 1960's to promote health services within 
underserved communities. By-passing the bureaucracies of state 
governments, federal money went directly to community based 
organizations delivering basic health services to some of the most 
needy among us.
    Today, this effort continues in over 900 community health centers 
which operate 3600 urban and rural sites in every state and territory 
and serve over 12 million people. In 2003, these community health 
centers delivered mammograms to over 200,000 women, gave check-ups and 
other health services to 1.6 million children and administered over 2.2 
million immunizations. Pre-natal care, mental health services, blood 
pressure and cholesterol checks--all to a patient population 90% of 
whom lived under 200% of poverty. I am interested in learning more 
about the care offered by these centers and looking at ways, such as 
through extended hours, to enhance access to these services.
    While these centers have made important differences in the lives 
and health of their patients, there may also be good news about the 
role these centers play in the health of our vital Medicaid and 
Medicare programs. As one example, a study in 1980 found that a set of 
Medicaid patients, who used community health centers, had a 30% to 65% 
lower hospitalization rate and used 12% to 48% less total Medicaid 
funds than a similar group of Medicaid patients who did not use such 
health centers. In other words: an ounce of prevention may, indeed, be 
worth a pound of cure. Community health centers treat people 
preventatively in a doctor's office instead of finding them in the more 
expensive setting of an emergency room. This lowers costs to programs 
such as Medicaid without sacrificing the quality of the health care 
delivered to beneficiaries.
    The President has made support and expansion of Community Health 
Centers a priority in his domestic health care agenda. For example, 
since 2001, the President's Initiative has increased the number of 
community health center sites by 334 locations. As the primary 
authorizing Committee, we must remain well informed of developments in 
this program and be ready to seize opportunities to leverage and apply 
more broadly the good ideas they have developed.
    I thank the Chairman of the Subcommittee, Ed Whitfield, for holding 
this hearing today. I look forward to the Committee's review of 
community health centers and the chance to look at the issues and 
opportunities involved in this program.

    Mr. Whitfield. And thank you, Mr. Chairman.
    At this time, I recognize the gentlelady from Tennessee, 
Ms. Blackburn, for her opening statement.
    Ms. Blackburn. Thank you, Mr. Chairman.
    And I want to thank you, also, for holding this hearing.
    And I want to thank the witnesses for taking the 
opportunity to come and talk with us about the community health 
center program. I know Mr. Smith is a little familiar with my 
District. He has been on the road with me in that District. And 
you know we have some fine community health centers there. And 
we thank you for your time today.
    And as we look at this issue, I want us to carefully 
examine the effectiveness of the centers, because these centers 
provide direct health care services for some of America's 
population that is most in need of quality, low-cost health 
care. And having that access is important.
    As the cost of health care has been dramatically rising 
over the past decade, this committee must ensure that these 
health centers are performing adequately and in the most cost-
efficient manner before we dedicate new funding for the 
program. I look forward to the responses from these agencies on 
how the health centers are conducting risk management training 
and implementation of efforts for quality performance reviews 
that minimize the risk of malpractice claims and medical 
liability.
    And again, I thank you very much for your time.
    And Mr. Chairman, I thank you for the hearing.
    Mr. Whitfield. And I have already introduced our witnesses 
on the first panel.
    As you are aware, this is an investigative hearing, and it 
is the practice of this subcommittee that when we hold 
hearings, that the witnesses testify under oath. And I would 
ask the two of you, do you have any difficulty testifying under 
oath this afternoon?
    Ms. Duke. No.
    Mr. Smith. No.
    Mr. Whitfield. I would also advise you that you do have the 
right to counsel if you want counsel, and I am assuming that 
neither one of you have legal counsel with you today. So in 
that case, if you would please rise and raise your right hand, 
I will swear you in.
    [Witnesses sworn.]
    Mr. Whitfield. Thank you.
    I will proudly tell you, now you are officially sworn in. 
And Dr. Duke, we will begin with you, and you may give your 5-
minute opening statement.

TESTIMONY OF ELIZABETH M. DUKE, ADMINISTRATOR, HEALTH RESOURCES 
  AND SERVICES ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND 
HUMAN SERVICES; AND DENNIS SMITH, DIRECTOR, CENTER FOR MEDICAID 
AND STATE OPERATIONS, CENTERS FOR MEDICARE & MEDICAID SERVICES, 
          U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Ms. Duke. Thank you very much, sir.
    I would like to submit the longer statement for the record 
and just give an abbreviated statement, if I may.
    I want to thank you very much for having this hearing and 
for allowing us to be with you this afternoon.
    You know that the health centers, in 2004, served an 
estimated 13.2 million people. That was about 3 million more 
than they served in 2001. And they did that service at 3,650 
service delivery sites, which represents an increase of 600 new 
and expanded sites since 2001. In 2005, we plan to fund 153 new 
or expanded health center sites and to serve almost 14 million 
people.
    The President's 2006 budget request includes an additional 
$277 million to complete the President's 5-year health center 
initiative by increasing the number of health center sites by 
275 and significantly expanding 303 existing sites to increase 
the number of people served by 2.4 million above the 2005 level 
for a total of 16.3 million patients.
    The President has also set a new goal to open a health 
center or a rural health clinic in every poor county that can 
support one. The budget includes a $26 million request to open 
new health center sites in 40 of the Nation's poorest counties 
and will support 25 planning grants as well. The goal of this 
initiative is to leverage the success of the current program to 
poor counties that can support a health center and provide 
access to primary and preventive health care services, 
particularly in poor counties that are medically under-served.
    The distinguishing mission of the health center program is 
to empower communities to solve their own local access problems 
and to improve the health status of their under-served and 
vulnerable populations by building community-based primary care 
capacity and by offering case management, home visiting, 
outreach, and other enabling services.
    The program also addresses significant challenges facing 
communities by targeting public housing, homeless, and migrant 
health center development as well. Health centers can provide 
access to high-quality, family oriented, comprehensive primary 
and preventive care regardless of ability to pay.
    Health center grantees, as a result of their receiving a 
HRSA grant, under Section 330 of the Public Health Service Act, 
are eligible for enhanced benefits, including Medicaid and 
Medicare reimbursement, access to the Federal Tort Claims Act 
program for malpractice coverage and access to the program for 
discount drugs for patients under Section 340B of the PHS Act.
    Under Section 330, a health center is required to provide 
primary health services, including those related to family 
medicine, internal medicine, pediatrics, obstetrics, or 
gynecology, that are furnished by physicians and, where 
appropriate, physicians assistants, nurse practitioners, and 
nurse midwives. Additionally, they are required to have basic 
health services, including diagnostic laboratory and 
radiological services and services in preventive health.
    To receive Section 330 grant funds, a clinic must meet a 
number of statutory requirements. The health center must be 
located in a federally designated medically under-served area 
or serve a federally designated medically under-served 
population. It must also be a public or a private non-private 
health center, provide comprehensive primary health services, 
referrals, and other services needed to facilitate access to 
care, such as case management, translation, and transportation. 
It must have a governing board, the majority of whose members 
are patients of the health center, provide services to all in 
the area regardless of their ability to pay, and offer a 
sliding fee schedule that adjusts according to individual 
family income.
    Health centers are in all 50 States of the Union.
    In conclusion, in administering grants for the health 
center program, we take great pride in the high evaluation 
given the program and by the bipartisan support of the 
Congress, and we fully realize that the program works only as a 
partnership with those extraordinary local primary care 
providers providing indispensable, quality clinical service to 
under-served Americans, their neighbors.
    [The prepared statement of Elizabeth M. Duke follows:]

    Prepared Statement of Elizabeth M. Duke, Administrator, Health 
                 Resources and Services Administration

    Mr. Chairman, Members of the Subcommittee, thank you for the 
opportunity to meet with you today on behalf of the Health Resources 
and Services Administration (HRSA) to discuss the Health Centers 
Program.
    I am so pleased to have the opportunity to address you regarding 
the Health Centers program. I was here before the Health Subcommittee 
of the Energy and Commerce Committee on August 1, 2001, to discuss the 
reauthorization of this program. At that time, the funding for the 
program was approximately $1.2 billion. We thank you for both your 
efforts in reauthorizing the program and ensuring funding to expand 
this worthwhile program to accomplish the President's Initiatives, with 
a requested FY2006 funding level of approximately $2 billion, a $304 
million increase.
    Today, I am proud to update you on the success and growth of the 
program to date. By any measure, we have been enormously successful 
implementing the President's Health Center Expansion initiative--an 
effort designed to establish or expand 1,200 health center sites and 
serve an additional 6.1 million patients annually by the end of 2006. 
This continues to be a priority because we know that 100 percent of 
these funds go to provide direct health care services for our neighbors 
who are most in need.
    In 2004, the health center system served an estimated 13.2 million 
people--about 3 million more than in 2001--at more than 3,650 service 
delivery sites which represents an increase of more than 600 new and 
expanded sites since 2001. In 2005, we plan to fund 153 new or expanded 
health center sites and serve almost 14 million patients.
    The President's FY 2006 budget request includes an additional $277 
million to complete the President's five-year Health Centers Initiative 
by increasing the number of health center sites by 275 and 
significantly expanding 303 existing sites to increase the number of 
people served by 2.4 million, above 2005 levels, for a total of more 
than 16.3 million patients.
    The President has set a new goal to open a health center or rural 
health clinic in every poor county that can support one. The Budget 
includes $26 million to open new health center sites in 40 of the 
Nation's poorest counties and will support 25 planning grants as well. 
The goal of the initiative is to leverage the success of the current 
program to poor counties that can support a Health Center and provide 
access to primary and preventive health care services particularly in 
poor communities that are medically underserved.

Health Centers Program
    The distinguishing mission of the Health Centers Program is to 
empower communities to solve their own local access problems and to 
improve the health status of their underserved and vulnerable 
populations by building community-based primary care capacity and by 
offering case management, home visiting, outreach, and other enabling 
services. The program also addresses significant challenges facing 
communities by targeting public housing, homeless, and migrant health 
center development as well. Health Centers provide access to high 
quality, family oriented, comprehensive primary and preventive health 
care, regardless of ability to pay.
    Health Center grantees, as a result of their receiving from HRSA a 
grant under section 330 of the Public Health Service (PHS) Act, are 
eligible for enhanced benefits including Medicaid/Medicare 
reimbursement, access to the Federal Tort Claims Act (FTCA) program for 
malpractice coverage and access to the program for discount drugs for 
patients under section 340B of the PHS Act.
    Under the section 330, a Health Center is required to provide 
primary health services, including those related to family medicine, 
internal medicine, pediatrics, obstetrics, or gynecology, that are 
furnished by physicians and where appropriate, physician assistants, 
nurse practitioners, and nurse midwives. Additional required basic 
health services include diagnostic laboratory and radiologic services 
and a series of preventive health services, including prenatal and 
perinatal services; appropriate cancer screening; well-child services; 
immunizations against vaccine-preventable diseases; screenings for 
elevated blood lead levels; communicable diseases and cholesterol; 
pediatric eye, ear, and dental screenings; voluntary family planning 
services; and preventive dental services.

Health Centers Requirements
    To receive section 330 grant funds, a clinic must meet a number of 
statutory requirements. The Health Center must: be located in a 
Federally designated medically underserved area (MUA) or serve a 
Federally designated medically underserved population (MUP); be a 
public or private nonprofit health center; provide comprehensive 
primary health services, referrals, and other services needed to 
facilitate access to care, such as case management, translation, and 
transportation; have a governing board, the majority of whose members 
are patients of the Health Center; provide services to all in the 
service area regardless of ability to pay; and offer a sliding fee 
schedule that adjusts according to individual family income.
    The requirement that a majority of board members be Health Center 
patients makes these clinics unique among safety net providers and is 
designed to ensure that the centers remain responsive to community 
needs. Under section 330, a Health Center applicant needs to 
demonstrate the establishment of a governing board that has a 51 
percent consumer majority, meets monthly, selects the Health Center's 
services and hours, approves the Health Center's annual budget, selects 
the Health Center's director, and establishes the Health Center's 
general policies.
    Health Centers are located in all 50 States, the District of 
Columbia, and the territories. Currently the Health Center urban-to-
rural ratio is even.

Health Centers Awards Process
    HRSA accepts, on a competitive basis, applications from eligible 
organizations seeking a grant for operational support for new and 
continuing Health Centers. Eligible organizations are public or 
nonprofit entities including tribal, faith-based and community-based 
organizations.
    The largest category of grant awards includes new access points 
encompassing both new clinic starts and satellites of existing clinics. 
Other categories include the expansion of medical capacity at existing 
locations and new service expansion activities such as enhanced oral 
health and mental health/substance abuse services.
    All eligible and responsive grant applications are referred to an 
Objective Review Committee (ORC), comprised of experts in the delivery 
of community health care services, for their independent review and 
recommendations. When funding decisions are made, each applicant 
receives a notification letter listing strengths and weaknesses of each 
section of their application as noted by the ORC. This review approach 
provides valuable technical assistance for improving future 
applications for both awardees and those we were not able to approve 
during a particular cycle due to funding limitations. The process is 
very competitive and during many cycles, we are able to fund only 20% 
of the applications submitted. This result reflects a very dynamic 
program which is encouraging the development of community-based primary 
health care clinics at a rate greater than we can provide monetary 
support.

Technical Assistance
    HRSA works directly with communities to develop needed resources 
through the primary care associations in each State. These primary care 
associations, funded by HRSA, provide ongoing technical assistance 
involving guidance and options for organizations interested in applying 
for Health Center grants and to existing Health Center grantees 
interested in expanding their comprehensive primary care services.
    In addition, HRSA assists applicants through grant-writing 
workshops and other technical assistance activities, which are provided 
through a contract with the National Association of Community Health 
Centers. Such activities assist applicants to: demonstrate a high level 
of need in the community; present a sound proposal to meet this need; 
show that the organization is ready to rapidly implement the proposal; 
display responsiveness to the health care environment in the service 
area; and demonstrate collaborative and coordinated delivery systems 
for the provision of health care to the underserved in their 
communities.
    Federally-funded health centers are similar to other health care 
businesses. Like most businesses, at any point in time, approximately 
4% of health centers are experiencing significant challenges to their 
viability. HRSA, with assistance from interdisciplinary teams that may 
include contractors, grantees and staff, provides intensive technical 
assistance to grantees to address problems. At all times, continuity of 
service for the affected population is the first priority under 
consideration in addressing such challenges.

Health Centers Services
    Health Centers offer ambulatory services that reflect the diverse 
needs of the populations they serve. Because of the combination of low 
incomes, linguistic barriers, and often poor health status, Health 
Center patients require access to enabling services as well as 
comprehensive primary care services.
    Health Centers are unique among primary care providers for the 
array of enabling services they offer, including case management, 
translation, transportation, outreach, eligibility assistance, and 
health education. Health Centers commit significant resources to 
managing chronic conditions including diabetes, asthma, and 
cardiovascular disease.
    In 2003, Health Centers provided more than 49 million encounters, 
220,000 mammograms, over 1.4 million pap tests, and 2.27 million 
encounters for immunizations, as well as nearly 400,000 HIV tests and 
counseling, perinatal and delivery care for 332,000 women, and 
translation services to more than 3.5 million patients.
    Health Centers are staffed by a combination of clinical, enabling, 
and administrative personnel. They are typically managed by a chief 
executive officer and a clinical director. Depending on the size of the 
patient population, the clinical staff consists of a mixture of primary 
care physicians, nurse practitioners, physician assistants, substance 
abuse and mental health specialists, dentists, hygienists, and other 
health professionals.

Health Centers Financing
    Health Centers receive funding from a variety of sources. A 
majority of Health Centers revenue comes from Federal resources 
including Medicaid, Medicare, the 330 grant, SCHIP and other Federal 
programs. On average nationwide, HRSA grants comprise 22 percent of 
Health Center revenue, but as little as 15 percent depending on the 
individual community and grant application. At 36 percent, Medicaid is 
the largest source of revenue for Health Centers, followed by Federal 
grants. Health Centers serve about 10 percent of all Medicaid enrollees 
nationally, but in actual Medicaid dollars, this amounts to less than 1 
percent of all Medicaid payments to all providers.
    For Health Centers( revenues, in addition to Medicaid and the 
section 330 Federal grant funding, Medicare accounts for 6 percent, 
self-pay for 6 percent, other third-party payers 9 percent, other 
State/local government or foundations account for 13 percent and the 
remaining 6 percent from other sources.

Health Centers Background
    The Consolidated Health Centers program has developed over 40 years 
ago, beginning with the creation of the migrant health center program 
and followed by the neighborhood health center demonstration projects 
initiated in 1965 and first funded by Congress as part of the War on 
Poverty. By the early 1970s, about 100 neighborhood health centers had 
been established under the Economic Opportunity Act. These centers were 
designed to provide accessible, dignified personal health services to 
low-income families. Community and consumer participation in the 
organization and a patient-majority governing board were features of 
the Health Center model. With the phase-out of the Office of Economic 
Opportunity in the early 1970s, the centers supported under this 
authority were transferred to the Public Health Service. The mandate of 
the centers was broadened so that comprehensive primary and preventive 
services were provided to all who came through the doors. The Community 
Health Center program, as authorized under section 330 of the Public 
Health Service Act, was established in 1975. A reauthorization that 
consolidated the separate authorities of the Community, Migrant, 
Homeless and Public Housing Health Centers under section 330 took place 
in 1996. Most recently, the Health Care Safety Net Amendments of 2002 
reauthorized the Consolidated Health Centers Program through 2006. The 
2002 Health Center reauthorization requires that grants be awarded for 
FY 2002 and beyond in such a way that maintains the proportion of the 
total appropriation awarded to migrant, homeless and public housing 
applicants in FY 2001. In general, about 81 percent of funding is 
awarded to community health centers, with the remaining 19 percent 
divided across migrant, public housing, and homeless health centers.

Conclusion
    Health Centers offer high quality, prevention-oriented, case-
managed, family-focused primary care services that result in 
appropriate and cost-effective use of ambulatory, specialty and in-
patient services. Primary care is delivered for all life cycles, and 
includes a full range of health services. In administering grants for 
the Health Centers program, we take great pride in the high evaluation 
given the program, and the bipartisan support of Congress, and fully 
realize that the program works only as a partnership with those 
extraordinary local primary care providers providing indispensable 
quality clinical services to underserved Americans with few health care 
alternatives.

    Mr. Whitfield. Thank you, Dr. Duke.
    And Mr. Smith, you are recognized for your opening 
statement.

                    TESTIMONY OF DENNIS SMITH

    Mr. Smith. Thank you, Mr. Chairman. And thank you, members 
of the subcommittee, for inviting me today to talk with you all 
on the role of community health centers as an important part of 
America's health care system, and in particular, the 
relationship of the Medicaid and Medicare programs to the CHCs.
    I do have a full written statement for the record, and I 
will try my best not to plow the same ground as the 
administrator on our points.
    But the majority of Medicare and Medicaid dollars that go 
into the community health centers are through the federally 
qualified health centers, or FQHCs. Over the years, Medicaid 
spending has increased substantially. In 1991, Medicaid 
spending through FQHCs totaled $45 million. Ten years later, 
Medicaid expenditures in FQHCs had increased to $737 million. 
Over the last 4 years, spending on FQHCs has nearly doubled to 
an estimated $1.3 billion. This increased spending is due, in 
large part, to the President's initiatives to expand community 
health centers. Medicaid, indeed, is the largest single source 
of revenues for FQHCs, accounting for 64 percent of patient-
related revenues.
    Medicare, Medicaid, and SCHIP Benefits Improvement 
Protection Act of 2000, or BIPA, established a prospective 
payment system for FQHCs. This system, which has been in place 
since January 2001, replaced the previous cost-based 
reimbursement system for health centers under Medicaid. The 
prospective payment system establishes a per-visit payment rate 
for each FQHC in advance. And since fiscal year 2002, payments 
made under this system have been adjusted annually for 
inflation using the Medicare Economic Index.
    States have the option of using an alternative payment 
mechanism, provided that the payment rate is not lower than 
what would have been paid under the new PPS. States have made a 
variety of choices in how they want to set their reimbursement 
rates--which system to use, the PPS or alternative 
methodologies. I think it is very important to emphasize that 
the FQHCs themselves must agree to the alternative 
methodologies.
    In addition, States are required to make supplemental 
payments to FQHCs that provide care to Medicaid beneficiaries 
when they are enrolled in a managed care plan to cover the 
difference between the rates paid by managed care plans and the 
FQHC's prospective payment rate. So again, Congress has been 
very clear that FQHC's are an important part of the delivery 
system. We want to make certain that those payments make the 
FQHCs whole for the cost that they provide to beneficiaries.
    Very briefly, in addition to Medicaid expenditures, 
Medicare spends $265 million on services provided through 
FQHCs. The Medicare reimbursement rate is based on an all-
inclusive per-visit payment amount based on reasonable costs as 
determined through filing of a Medicare cost report. These are 
subject to one of two upper payment limits, not the other upper 
payment limits that we often discuss, but its own upper payment 
limit, depending on whether the FQHC is located in an urban or 
a rural area. For calendar year 2005, the upper payment limit 
is $109.88 for urban centers, $94.48 for rural centers.
    In conclusion, community health centers are an important 
part of the Medicare and Medicaid network of providers. 
Substantial growth in expenditures reflects the increase in 
access to care at CHCs through President Bush's initiatives as 
well as through the partnerships that have been formed over the 
years between HRSA, CMS, the centers, the States, and the 
managed care organizations.
    I look forward to addressing the questions that you might 
have, and thank you, again, for the opportunity to appear 
before you today.
    [The prepared statement of Dennis Smith follows:]

 Prepared Statement of Dennis Smith, Director, Center for Medicaid and 
      State Operations, Centers for Medicare and Medicaid Services

    Chairman Whitfield, Congressman Stupak, thank you for inviting me 
to testify on the role of the Medicaid program in serving millions of 
Americans who seek care through community health centers (CHCs). CHCs 
are an important part of America's health care safety net, providing 
comprehensive primary and preventive health care services to all who 
seek care. They serve in rural areas or in inner-city neighborhoods, 
places where too many people do not have the access to the quality 
health care they require. CHCs exist in areas where economic, 
geographic, or cultural barriers limit access to primary health care 
for a substantial portion of the population; and, they tailor services 
to the needs of the community. Services include primary and preventive 
health care, prenatal services, dental care, and essential ancillary 
services such as laboratory tests, X-ray, environmental health, and 
pharmacy services. In addition, they provide services such as outreach 
and health education, transportation, and translation services.

   CHCS, STATE MEDICAID PROGRAMS, AND MEDICARE SERVE AMERICANS WITH 
                            LIMITED INCOMES

    The majority of Medicare and Medicaid dollars that go into CHCs are 
through the Federally Qualified Health Centers (FQHCs). Congress 
established the FQHC program in 1989 to respond to concerns that health 
centers were using grant funds intended to support care for the 
uninsured to supplement Medicare and Medicaid payments. FQHCs under 
Medicare and Medicaid include three types of centers:

 Community health centers that receive grants under section 330 of the 
        Public Health Service Act;
 FQHC ``look-alikes''--centers that meet all of requirements for a 
        community health center under section 330 of the Public Health 
        Service Act, but do not receive such a grant, and that are not 
        owned, controlled or operated by another entity; and
 Outpatient health programs or tribal facilities operated by a tribe 
        or tribal facility under the Indian Self-Determination Act or 
        by an urban Indian organization receiving funds under Title V 
        of the Indian Health Care Improvement Act for the provision of 
        primary health services.
    Over the years, Medicaid spending through FQHCs has increased 
substantially. As recently as 1991, Federal Medicaid spending on 
services provided to Medicaid beneficiaries by FQHCs totaled $45 
million. Federal Medicaid expenditures in FQHCs have increased since 
then to $778 million in FY 2004. This increased spending is due in 
large part to an increase of about 500 new health center sites under 
the President's health center initiative. (These figures do not include 
expenditures through managed care contracts or the state share of 
Medicaid funding). Total Federal and State Medicaid spending total $1.3 
billion in FY 2004.
    According to HRSA, Medicaid is the largest single source of revenue 
for the FQHCs. Medicaid accounts for 36 percent of total revenue of the 
FQHCs.
    CMS designates FQHC look-alikes based on the recommendation of 
HRSA. When CMS receives a recommendation from HRSA, CMS notifies the 
State Medicaid agency of a pending application for FQHC designation and 
provides the state with an opportunity to comment on the application. 
Once all issues are addressed, CMS notifies HRSA and the State Medicaid 
agency that the application has been approved and HRSA notifies the 
center of the approval. In CY 2004, CMS approved 26 applications. 
Currently, six applications are under review.

              MEDICAID COVERS FQHCS AS A MANDATORY BENEFIT

    As mentioned earlier, FQHCs provide a package of primary and 
preventive care services to Medicaid beneficiaries. These services 
include physician, nurse practitioner, physician assistant, clinical 
psychologist and clinical social worker, plus any other ambulatory 
service that is covered in the state plan. FQHCs are paid under the 
Medicaid program for services on a per visit basis, rather than billing 
separately for each service provided when a patient visits a health 
center.
    The Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (BIPA) established a prospective payment system 
for FQHCs. This system, which has been in place since January 2001, 
replaced the previous cost-based reimbursement system for health 
centers under Medicaid. The prospective payment system establishes a 
per visit payment rate for each FQHC in advance. The 2001 payment rate 
was based on the average of each FQHC's reasonable costs per visit in 
FY 1999 and FY 2000. Since FY 2002, payments made under this system 
have been adjusted annually for inflation using the Medicare Economic 
Index. Payments also are adjusted based on increases or decreases in 
change in scope of services provided.
    States have the option of using an alternative payment mechanism, 
provided the payment rate is not lower than what would be paid under 
the new PPS. For example, states may opt to establish an alternative 
PPS or retain the original cost-based reimbursement system. CMS must 
review and approve the payment system; and, the FQHC must agree to the 
alternative methodology. Most states are using the PPS option 
established under BIPA, while 15 states opted to use cost-based 
reimbursement and eight states elected to implement an alternative PPS 
to pay at least a portion of their FQHC costs.
    In addition, states are required to make supplemental payments to 
FQHCs that provide care to Medicaid beneficiaries enrolled in a managed 
care plan to cover the difference between the rates paid by managed 
care plans and the FQHC's prospective payment rate. FQHCs receive the 
same payment rate from managed care plans that the plans pay to other 
providers for similar services. This supplemental payment provision was 
added as an incentive to FQHCs to participate in managed care plans. 
FQHCs are guaranteed a PPS rate as a minimum to participate in a 
managed care plan.

              MEDICARE PAYMENTS BASED ON REASONABLE COSTS

    FQHC services also are available to Medicare beneficiaries under 
Part B. The Medicare FQHC benefit provides coverage for a full range of 
primary care services (and services incident thereto) including 
physician, physician assistant, nurse practitioner, and certain other 
non-physician practitioner services such as clinical social worker and 
clinical psychologist services. The benefit also covers a range of 
preventive services as well as pneumococal and influenza vaccines. In 
CY 2003, almost 900,000 Medicare beneficiaries received care at a 
section 330-funded FQHC.
    Medicare pays FQHCs an all-inclusive per visit payment amount, 
based on reasonable costs as determined through the filing of its 
Medicare cost report. The FQHC's all-inclusive per visit payment amount 
is subject to one of two upper payment limits (UPL), depending upon 
whether the FQHC is located in an urban or rural area. In CY 2005, the 
UPL is $109.88 for urban centers and $94.48 for rural centers. In FY 
2004, Medicare spent about $265 million on services provided by FQHCs. 
To ensure payment rates are appropriate, CMS and HRSA are jointly 
evaluating the current UPLs for Medicare FQHC services.
    In addition, the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) establishes a wrap-around payment in 
Medicare, similar to the supplemental payment in Medicaid. CMS will pay 
FQHCs the difference between what a Medicare Advantage health care plan 
pays the FQHC, and the reasonable cost payments the FQHC otherwise 
would receive under Medicare fee-for-service. Medicare Advantage plans 
must pay FQHCs the same levels and amounts they pay other providers for 
similar services. This provision becomes effective for services 
provided on or after January 1, 2006 and contract years beginning on or 
after January 1, 2006.

  ENSURING FQHCS PARTICIPATE IN THE MEDICARE PRESCRIPTION DRUG PROGRAM

    HRSA and CMS have been working closely together on efforts to 
implement the new prescription drug benefit under Medicare Part D, and 
will be working to make sure health centers are a key part of that 
effort, particularly with respect to outreach and education of low-
income Medicare beneficiaries who are eligible for the low-income 
subsidy program and will be eligible for a comprehensive drug benefit 
with minimal copayments. Also, health centers with pharmacies will be 
able to participate in prescription drug coverage plans and Medicare 
Health Plans with prescription drug coverage. In addition, the final 
rule implementing the MMA provides that prescription drug coverage 
plans and Medicare Health Plans may count FQHC pharmacies in meeting 
the MMA pharmacy access standards, and this will give these plans 
incentives to include FQHC pharmacies in their plan networks.

                               CONCLUSION

    CHCs are an important part of the Medicare and Medicaid networks of 
providers. The substantial growth in expenditures reflects the increase 
in access to care at CHCs through the President's initiative as well as 
partnerships that have been formed over the years between HRSA, CMS, 
the Centers, the states, and managed care organizations.
    Thank you again for this opportunity and I look forward to 
answering any questions you might have.

    Mr. Whitfield. Well, thank you all very much for your 
testimony. We appreciate your taking the time to be with us, as 
I indicated.
    And Dr. Duke, I will begin the question period here.
    And you mentioned in your testimony that one of your goals 
is to be sure that 40 of the Nation's poorest counties each has 
a community health center located within their boundaries. How 
many of those 40 counties have a community health center today?
    Ms. Duke. The initiative, as the President described it, is 
to target high-poverty counties that have no health center or 
rural health clinic in them today.
    Mr. Whitfield. This 40 figure that you mentioned, so you 
are talking about areas that do not have a center already?
    Ms. Duke. Yes, sir; that is correct.
    Mr. Whitfield. I thought that you were talking about that 
it was an overall goal to be sure that the 40 poorest counties 
had a center and that some of them already did have a center, 
but that is not what you are talking about.
    Ms. Duke. No, sir. The idea is that there are many, many 
counties that do not have a rural health clinic or an FQHC.
    Mr. Whitfield. Right.
    Ms. Duke. And the goal would be to allow competition to 
increase the number of poor counties that have a center.
    Mr. Whitfield. Well, what role do States play in winning 
these 330 grants? And I ask that question, because is there any 
concern that some States just may be more adept at this than 
others? I noticed, for example, that Alaska has, like, 21 
grantees, and they have a population of about 670,000. A State 
like Kentucky, and I just happen to be from Kentucky, has 4.5 
million and we have 12. So do States play an important role in 
being successful in the awarding of these grants?
    Ms. Duke. The process by which these get awarded, perhaps 
if I could talk about the process and then talk about the State 
role in that, would that be helpful?
    Mr. Whitfield. Yes. Right.
    Ms. Duke. The process under which grants are awarded is a 
competitive process. And the requirements are that to be 
awarded a health center, it must be in a medically under-served 
area----
    Mr. Whitfield. Right.
    Ms. Duke. [continuing] and that it must be a non-for-profit 
or a public entity. And it is competitive. And it has been a 
very competitive process. We receive far more applications than 
we have capacity to fund. And the States do get engaged in this 
activity, because we have initiated a strategic planning 
process. And the primary care associations in each State work 
to identify needs for health centers and provide technical 
assistance to communities in building the foundation to be 
actually able to compete. And some have been very, very engaged 
in that process and others have been, perhaps, less engaged.
    But interesting, you can actually see the results of the 
way that activity has gone in the sense that intensive 
strategic planning has produced increased numbers of awards to 
States over the last 4 to 5 years.
    Mr. Whitfield. And what are some of the States that are 
most adept at that?
    Ms. Duke. Well, I think the one that I took particular 
attention to in the recent competition was Texas, which had a 
high uninsured rate where the Primary Care Association and the 
legislature put together a strategic plan, and in the last 
competition, they achieved 10 health center awards in that last 
competition.
    Mr. Whitfield. And how many were granted nationwide?
    Ms. Duke. In that round, I think it was 88.
    Mr. Whitfield. So Texas received 10 of those?
    Ms. Duke. Eighty-eight plus seventeen. I am sorry. It is 88 
plus 17.
    Mr. Whitfield. Okay. Now the Objective Review Committee, 
who is a member of the Objective Review Committee, and how is 
it decided who is a member of that committee?
    Ms. Duke. Objective Review Committees are selected from 
people who have expertise in community health delivery. And it 
is our goal to have the members of the Objective Review 
Committees cycle on and off so we don't have the same people on 
all of the time. We have made a very aggressive campaign to 
have more and more people involved in that process. We think it 
is educational for them, and it certainly provides fairness for 
the community. And we receive about 100 applications a month 
for people to enter the ranks of serving on these objective 
review panels.
    So it is a widely diverse group.
    Mr. Whitfield. And is there a set number of members on that 
Objective Review Committee?
    Ms. Duke. It is not a set number, but the goal is to have a 
sufficient number that there can be dialog that they can carry 
on the weight of the number of applications, because we get 
hundreds of applications, and we break them down into a certain 
number per panel. So they work very hard, and they do a great 
deal of work, because each of these applications is about 80 
pages long.
    Mr. Whitfield. So do you appoint them, or who appoints 
them?
    Ms. Duke. I do not touch them. They are basically taken 
care of in the routine process of our centralized grants 
management process. We have a centralized grants management 
process that sets up the Objective Review Committees. That is 
to say it is separate from the program office that runs the 
health center program. And it is separate from my office. It is 
set up by people who do professionally grant administration. 
And they are set up objectively, and then they have a scoring 
process that is designed to get around the problem, which is 
inherent in human nature, and, as we used to say in the school 
world, some people are easy graders and some people are hard 
graders, and so they set up a process to distinguish out the 
outliners so that a fair score----
    Mr. Whitfield. But they don't make the final decision?
    Ms. Duke. No, sir; they don't make the final decision, but 
their weighting is very significant.
    Mr. Whitfield. Okay.
    Ms. Duke. The final decision has to rest on addressing 
other issues, like their financial viability.
    Mr. Whitfield. I read an article for this hearing, and it 
may have been somebody's testimony, I can't remember right now, 
but it said that last year, 106 million visits were made to 
hospital emergency rooms and that 58 percent of those really 
were not necessary, it was not proper to be at a hospital, and 
maybe going to a community health center would have been 
better. Are you familiar with that statistic? And has your 
agency conducted any studies on the relationship of savings by 
these community health centers for hospital emergency rooms, 
for example? Any sort of study like that that you conducted?
    Ms. Duke. Sir, I could give you two. I am not familiar with 
that particular statistic, but we could provide copies for you, 
I am familiar with the results of one study that indicated that 
by having patients have a medical home at a health center, that 
that drives down the inappropriate hospitalizations by about 11 
percent and drives down inappropriate use of emergency rooms by 
19 percent. And we could provide that for you. The other thing 
is that we have seen some communities that have come together 
to compete for health center programs who have then networked 
themselves together with the community health centers and 
hospitals and private physicians and so forth to address this 
question of the inappropriate use of very expensive emergency 
room care. And we have seen in one instance where we provided a 
grant for 3 years to support that kind of networking, and at 
the end of the 3 years, the community sustained that approach 
with the view that they were saving enough in the hospitals' 
emergency rooms to support the networking costs associated with 
it.
    So it is a good investment.
    Mr. Whitfield. Have you had any experience with a small 
hospital, say a small rural hospital, that is a critical access 
hospital, as an example, that was having such financial 
difficulty that they decided they wanted to convert to become a 
community health center with emphasis on primary care and 
preventative care? Are you aware of an example of that 
happening anywhere in the country?
    Ms. Duke. I don't have a specific instance in mind, but 
that is one of the things that we have seen is where hospitals 
previously had run outpatient clinics and ultimately decided to 
give up that line and a community board took over the 
outpatient work and ultimately competed for and won a grant as 
a federally supported FQHC.
    Mr. Whitfield. Well, my time is expired, and I recognize 
the gentleman from Michigan.
    Ms. Duke. Thank you, sir.
    Mr. Stupak. Thank you, Mr. Chairman, and welcome to our 
witnesses.
    Ms. Duke. Thank you.
    Mr. Stupak. Mr. Smith, if I may ask you a question on 
Medicaid here. The large Medicaid cuts are particularly hurting 
our rural areas, as folks in rural areas are more likely to 
receive Medicaid and to be uninsured, and 30 percent of the 
children in rural areas have Medicaid or SCHIP coverage 
compared to 19 percent in urban areas. Nearly 25 percent of 
residents in rural counties are uninsured.
    In my statement, I mentioned Michigan and how our 
unemployment is at 7.5 percent and our demand on Medicaid is 
unprecedented. We are covering a lot of people who are 
employed. We have a job and can't afford insurance. So our 
question is, we are having all of these people on here. We have 
cuts coming to Medicaid. Where does Michigan go? Actually one 
out of every four people now in Michigan are on Medicaid. So 
who do we dump in Michigan if we don't have the funds to take 
care of it? If you take a look at our Medicaid in Michigan, it 
has gone up 30 percent but yet we have held our costs to less 
than 5 percent. So I think Michigan has really done a good job, 
but we are just at the point now where we have to start making 
tough choices. So who do we dump? The senior in the nursing 
homes? The children with disabilities? Or cut providers?
    Mr. Smith. We are very pleased with the partnership we have 
had with Michigan over the past several years. We have helped 
Michigan expand health insurance coverage through the HIFA 
waiver. We helped Michigan come up with one of the most 
innovative cost containment proposals in the country by 
starting the drug purchasing arrangements. Michigan was the 
originator, but it has expanded to other States as well.
    Mr. Stupak. Sure, but under that program, we are getting 
penalized for being efficient.
    Mr. Smith. I think that what we are finding in Michigan, 
and other States as well, States are reconsidering new ways to 
deliver services in more cost effective and innovative ways, 
including in long-term care settings. A third of Medicaid's 
spending is on long-term care. We are seeing States move more 
into home and community-based services, expanding services for 
people to stay in their own homes rather than go into 
institutional care. We think this is part of the solution.
    Mr. Stupak. Well, let me ask the question this way. 
Medicaid was set up so that when unemployment goes up, Medicaid 
would be there to take care of those people who lost their 
insurance or can't afford it anymore. But yet what we are 
seeing in Michigan, more and more people are going on Medicaid, 
and our reimbursement, or help from the Federal Government, has 
decreased, the exact opposite of the way it was supposed to be 
when the program was passed by Congress. So how can we justify 
increased caseloads in Michigan but yet less money? Something 
has got to give. Who don't we cover any more?
    Mr. Smith. In large part, when people become uninsured, 
they are not eligible for Medicaid in the first place. For 
example, if you are an unemployed single male, you are not 
going to become eligible for Medicaid.
    Mr. Stupak. But a lot of these are not unemployed single 
males.
    Let me ask you this question. The Energy and Commerce 
Committee has been directed to find $15 to $20 billion in cuts 
over the next 5 years. If you take a look at it, the 
President's proposed Medicaid cuts, it is probably $8 billion, 
but yet in the budget resolution, we are directed to come up 
with $15 to $16 to $20 billion in cuts, and we have this 
commission. Can you provide some specific ways Congress could 
cut funding to Medicaid that were not included in the 
President's budget proposal that CBO scored at $8 billion? And 
this commission that is set up, wouldn't it be better if we had 
them look outside the budget process on ways we can save money 
as opposed to looking within the Federal budget process?
    Mr. Smith. I think that the President's budget provides a 
lot of guidance for how we think you can lower the rate of 
growth in the Medicaid program. Medicaid over the next 10 years 
is going to spend $5 trillion. And you mentioned Michigan's 
rate of growth of being around 5 percent. In fact, Michigan has 
been holding their rate of growth to below the national average 
for each of the 5 years. So we know that States can adopt ways 
to lower their rate of growth of spending and still deliver 
quality services and, in the case of Michigan, expand coverage 
as well. What we have----
    Mr. Stupak. But rate of growth, to make sure we are on the 
same page here, are you talking about spending, sir?
    Mr. Smith. Yes, Mr. Stupak.
    Mr. Stupak. Well, I am talking about rate of growth to 
increase the people we have on here. I agree, the spending is 
down, but the number of people on it are going up.
    Mr. Smith. And as I said, and you stated as well, 
Michigan's rate of growth is around 5 percent.
    Mr. Stupak. Correct.
    Mr. Smith. That is lower than the national rate of growth.
    Mr. Stupak. And they have cut every possible way to keep 
that less than 5 percent. They even came up with a new drug 
program, and yet we are being penalized by the Federal 
Government for doing that. We are going to lose money 
underneath the program reimbursement. So how do we do it? I 
mean, I am not wrong in my theory on why we have Medicaid, so 
when unemployment goes up, Medicaid is supposed to go up and be 
there to take care of the unemployed. When unemployment goes 
down, Medicaid should go down, right? That is the theory behind 
the program.
    Mr. Smith. And that is the essential partnership that still 
exists in the Medicaid program as well.
    Mr. Stupak. The partnership exists, but the reimbursement 
isn't there.
    Mr. Smith. The Federal dollars follow State dollars, and 
the States make the decisions beyond the Federal requirements 
of eligibility and services. The States are the ones making the 
decisions on who to cover, what services----
    Mr. Stupak. But unlike the Federal Government, the States 
have to balance their budget. The Federal Government does not. 
And Michigan, as it balances its budget, is balancing a budget, 
especially when we come to Medicaid when $1 out of every $4 is 
on Medicaid, is either on seniors, on nursing homes, disabled 
people, or the unemployed.
    Let me just leave you with this thought. Hopefully this 
commission will look at ways to modernize Medicaid outside the 
budget process. I would hope you would encourage them to do 
that. I would just look within this Federal budget, because I 
think there are other ways of doing it, and Michigan would be 
one good example, if you would take a look at it.
    Let me ask Dr. Duke this question.
    You said in your opening, and I found it pretty 
fascinating, that about 2001 we had 10 million people on the 
system, and your goal is to get, by the end of fiscal year 
2005, 16.3 million. You know, we are putting more people on, 
but the reimbursement isn't there, and you are bringing on new 
centers and the centers now, as we will hear in the next panel, 
don't have enough money to compete. So for putting on 60 
percent more people than we did 5 years ago, we have more 
health centers than we had 5 years ago, but we are not keeping 
up with the reimbursement rates from the Federal Government the 
same, so again, something has got to give. Either we have got 
to cut back on providers, we have got to cut back on the 
existing ones. We are going to have to find money elsewhere, 
correct?
    Ms. Duke. The health centers are supported by a variety of 
funding sources. The grants under the Public Health Service Act 
constitute about 22 percent of their funding. Medicaid is about 
a third of their funding. But they also have funding that comes 
in from the State and from private philanthropy, and in fact, 
about 75 percent of their funding does not come through the 
program that we conduct. They are locally funded as well. So I 
don't want to just tie the public health centers to one source 
of funding.
    Mr. Stupak. Sure. Well, let me ask it this way. From just 
the Federal Government, if you had 10 million people being 
served, and I don't know how many centers there were back in 
2001, but you had it in your testimony----
    Ms. Duke. 3,200.
    Mr. Stupak. 3,200. And in 2006, you are going to have how 
many?
    Ms. Duke. 4,400.
    Mr. Stupak. Okay. Are the 3,200 going to get the same 
amount of money in real dollars, not taking into account 
inflation, what they got in 2001? Will they get that same 
amount in 2006?
    Ms. Duke. Well, there will be a different body of health 
centers.
    Mr. Stupak. Sure. We are expanding them.
    Ms. Duke. There will be a different body of health centers, 
and they will have different sources of funding. They will have 
Medicaid. They will have our grant. They will have Medicare. 
They will have private philanthropy----
    Mr. Stupak. Well, that is the same thing they had in 2001. 
The point being, how can we continue to expand a program if we 
are not taking care of existing health centers now?
    Ms. Duke. The health centers now have received, over the 
last several years, grant money, and they have received base 
adjustments, $31 million in 2005. In addition, they receive 
sources of funding outside of the Federal Government.
    Mr. Stupak. I agree with all of that. The Rural Flexibility 
Grant Program, it is a great program. Let us zero it out this 
year. How do we justify that? How about the Rural Health Reach 
Grant Program? That is $28 million. It took a 70 percent cut 
this year. So I mean, how do we make that stuff up?
    Ms. Duke. The Rural Health Program is funded under a 
different category, and the----
    Mr. Stupak. Or not funded. But go ahead.
    Ms. Duke. The reasoning behind that has been that the rural 
areas are significantly benefited, about $25 billion, under the 
Medicare Modernization Act, and the categorical programs that 
were under our program were considered to be now not needed 
since the funding would come through MMA.
    Mr. Stupak. Do you really think any of the health care 
centers are going to say we no longer need the Rural 
Flexibility Grant Program or the rural outreach grants, that 
they are no longer needed underneath your program? They still 
need those programs, don't they?
    Ms. Duke. The rural health centers and the variety of 
recipients of those grants are in the process of just getting 
used to the new act that is just coming into implementation.
    Mr. Stupak. Getting used to no money? I mean, if you zeroed 
out the program, they are just getting used to it.
    Ms. Duke. The new act will come in in 2006, and that is the 
2006 budget you are quoting.
    Mr. Stupak. Right. Okay.
    Mr. Walden [presiding]. The Chair now recognizes the 
chairman of the full committee, Mr. Barton, for questions.
    Chairman Barton. Thank you.
    And I don't think I will take 10 minutes.
    First, Dr. Duke, I want to thank you for your assistance in 
helping make the decision to fund the health clinic in Tarrant 
County at John Peter Smith. We appreciate that.
    I guess my basic question is just kind of a general one. 
How many counties and cities do we have that could use a rural 
health clinic or a public health clinic that don't have them 
right now? What percent of the truly eligible needy population 
is not being served that could be served? Are we serving half 
of the population, two-thirds of the population, a fourth of 
the population?
    Ms. Duke. Sir, I don't have an exact number to give you 
there. We have a number of counties that have significant 
populations at below 200 percent of poverty. The question is 
some of them have a rural health clinic. Some of them have an 
FQHC, so I don't exactly have the exact number to give you at 
this moment.
    Chairman Barton. Well, but give me some number. I mean, how 
close are we to saying that we are generally meeting the need 
that the program was designed to meet? I am not holding you to 
any specificity, just generically. Are we----
    Ms. Duke. I will just use the data I have myself. If I go 
by the number of applications we receive versus the number of 
applications are we are actually able to fund, that might be a 
piece of data. We can fund about 20 percent of the grant 
applications we receive, which means that four-fifths of those 
that we receive, we can't fund.
    Chairman Barton. And so all of those are qualified? They 
are legitimate applications that meet the minimum requirements?
    Ms. Duke. Yes, all of the grants that I am referring to 
there were deemed to be eligible to compete and had 
applications that could be reviewed by an objective review 
committee.
    Chairman Barton. Okay. So just kind of generally, we are 
only meeting 20 percent, or one out of five, and it could be 1 
out of 4 or 1 out of 3, but we can't say that we are meeting 7 
out of 10. We are not at 70 percent or 80 percent. We are under 
50 percent, not over 50 percent.
    Ms. Duke. We have a base of 3,200 that we started with in 
2001, and so given that as a base, which lays a foundation, 
then on top of that, the competition is that we are funding 
about one-fifth of our applications.
    Chairman Barton. Okay. This application process, I mean, I 
am familiar with it now, because I went through it in my home 
county in my home District, do you consider that to be a fair 
application process?
    Ms. Duke. Yes, it is a fair application process. It has 
many, many challenges. One of the challenges is ascertaining 
need. Need exists in a variety of ways as you go across this 
really very diverse, vast country. And need looks different in 
Alaska than it looks in Florida. It looks different in Montana 
than in Texas. And one of the things we did fairly early on was 
to change the process to allow communities to tell us what need 
looked like in their community and then tell us how they were 
going to meet that need. And that need boils down to what are 
the barriers to care in the area and what are the disparities 
and health results that come from those barriers? So we have 
just put on a Federal Register notice, and we have received 
some answers back that we are in the process of having the 
experts review. To get feedback from the communities as to the 
adequacy of those criteria and also the percentage of weight 
that should be put on need in both the first round of scoring, 
which is just strictly on need, and then in the second round, 
the percentage of need as related to how that need is going to 
be met.
    So we are constantly trying to assess that process, make 
sure that it is fair, and make sure that it is getting a return 
of good health care for the investment the taxpayers are 
making.
    Chairman Barton. My last question, Mr. Chairman, and I will 
refer to this to Mr. Smith.
    We are looking at Medicaid reconciliation and Medicaid 
reform. We are going to do that in our Health Subcommittee 
later this summer. Are these federally qualified health centers 
an avenue that could be utilized more to get better quality 
care for low income at a competitive price if we were to make a 
few changes in the current Medicaid laws?
    Mr. Smith. Mr. Chairman, I think that FQHCs in particular 
are vitally important because of access in under-served areas, 
and they are very important for that. In terms of reform or 
generating a lower rate of growth----
    Chairman Barton. No, I am talking about expanding them, not 
contracting them, by taking the pressure off emergency rooms in 
our central hospitals, could we get better quality at less cost 
if we expanded the use of these federally qualified health 
centers? That is probably a better way to phrase the question.
    Mr. Smith. I think they are key players in under-served 
areas. In terms of great impact on the overall program, as I 
said, Medicaid reimbursement for FQHCs is about $1.3 billion 
out of total Medicaid spending of well over $300 billion. They 
are very important for local areas in giving access, but 
nationally, FQHCs are a relatively small part of the program.
    Chairman Barton. I am going to yield back. I yield to Mr. 
Walden.
    Mr. Walden. Thank you, Mr. Chairman.
    I was just going to point out that as we have this 
discussion about the size of the budget for the federally 
qualified centers versus overall Medicaid, it is important to 
go back to a comment made earlier and the work that is being 
done to look at the savings that are achieved for Medicaid 
because we have these centers in place. And it was pointed out 
to me that a 1980 study looked at a set of Medicaid patients 
who used community health centers back then and had a 30 to 65 
percent lower hospitalization rate and used 12 percent to 48 
percent less total Medicaid funds than a similar group of 
Medicaid patients who did not use such centers.
    So if these data hold true today, 25 years later or 20 
years later, whatever it is, they are enormous savings. I mean, 
it is just sort of logical that if you are not feeling well and 
you can go to a health center in your community and get checked 
out and sort of do the preventive end of things, you would 
probably be more likely to do that, at least in this period of 
time, than waiting if there is no clinic. That means I have got 
to go to the hospital, and you wait and suddenly you just go to 
the ER. And the most expensive portal of health care is open to 
you. And so it just seems to me, logically, that if we could 
encourage families and encourage these health care clinics----
    Chairman Barton. Especially if only 20 percent of the 
eligible population has one of these.
    Mr. Walden. Yes. And that is why I think the President is 
on track.
    Chairman Barton. Expand this program and----
    Mr. Whitfield. I might add, Mr. Chairman, that I have heard 
some people make a comment, half seriously and half not 
seriously, that we might be better of as a Nation, from a 
health care perspective, if say half of the money spent on 
Medicaid now was used to create additional community health 
care centers, that that would be a greater savings, provide 
better health care, in other words think outside the box a new 
model.
    Chairman Barton. Isn't it great to have these hearings so 
we can talk to each other while you all watch?
    Mr. Walden. Well, can I just finish up on----
    Chairman Barton. Sure. I am going to yield the balance of 
my time to Congressman Walden, the vice-chairman of the 
subcommittee.
    Mr. Walden. Thank you. I appreciate that, Mr. Chairman.
    There is one question. I noticed today, in the Congress 
Daily, Mr. Smith, you are quoted talking about----
    Chairman Barton. This just means after he asks his 
questions he can leave. He doesn't have to wait for another 
hour. That is how sneaky he is.
    Mr. Walden. Well, because I had to yield, when I was in the 
chair, to you, because you are like senior and all and have the 
big gavel.
    So in the 43 seconds I have left on your time, I guess the 
question is as we look for savings, one of the things that has 
been identified recently is some pharmaceuticals that are given 
to certain people, and specifically when it comes to things 
like Viagra, for potential sex offenders through Medicaid. You 
have spoken out on that. I mean, are there other things like 
that that we need to be looking at when we look at how to 
direct the money to the best place?
    Mr. Smith. I think there are lots of areas in Medicaid to 
look at. FQHCs show that when you have access, it is going to 
lower costs for the total part of the system. We have talked, 
and Chairman Barton held a hearing last December on how 
Medicaid is overpaying for prescription drugs, finding ways for 
Medicaid to be a better payer, and the extent to which Medicaid 
can get to the under-utilization and the over-utilization by 
improving service delivery. I think that is where the promise 
really lies. And we have seniors who are on drugs that are 
contraindicated for them individually. You go to a PACE program 
and when I go in, I inevitably ask, ``What is the average 
number of drugs a senior is on when they come into the 
clinic?'' Once they have started, 6 months later, they are on 
half of the number of drugs they were on when they started. So 
I think there is a lot of over-utilization in the program and 
by improving the way we deliver services we will also improve 
health care and lower the rate of growth.
    Mr. Walden. Well, the figure on these impotence drugs are 
like $2 billion for Medicare and Medicaid combined. So we are 
talking about billions around here. It adds up.
    Mr. Smith. Yes, sir.
    Mr. Whitfield. The gentleman's time has expired.
    I might also just add that I had, myself, asked the General 
Accounting Office to do a little more comprehensive study of 
some of the savings to Medicaid and Medicare as a result of 
having these community health centers, which touched on some 
issues that Chairman Barton raised, and I am looking forward to 
their getting back with us on that study.
    At this time, I will recognize the gentlelady from 
Wisconsin, Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman.
    My question is for Dr. Duke. I would like to get your 
opinions on the sparsely populated area preference, which has 
been in effect since 1995. And it is a provision that I would 
say adversely affects my State, and as I understand, most 
States in the Midwest, East, and South of our country.
    Now let me just go through my understanding of this 
preference before I ask your opinion.
    My understanding is that a sparsely populated area is a 
preference, which is unlike a priority designation, and that a 
priority designation can add a few points to an applicant's 
score, but a preference requires that an application that meets 
minimal qualifications must be funded ahead of other 
applicants, perhaps with significantly higher overall scores. 
Thus, many sparsely populated area applicants that meet the 
needs test cutoff and score well enough to be fundable are 
allowed to really jump to the front of the funding line, 
regardless of their overall comparative merit and score.
    I represent part of the State of Wisconsin and much of 
Wisconsin is quite rural. But none of the counties in Wisconsin 
meet the very narrow criteria to be a sparsely populated area, 
which, to my understanding, is a county with a population of 
seven persons or fewer per square mile.
    I think you previously testified that a few years back, in 
2002, over $13 million was provided to 24 sparsely populated 
applicants in eight States, yet 125 non-sparsely populated 
applicants with higher scores than the lowest scoring sparsely 
populated applicant were passed over for funding.
    So I guess I would ask whether you would be supportive of 
Congress making the sparsely populated applicants a priority 
rather than a preference. And I would also be interested in 
knowing what changes in the scoring process you would support 
in order to make sure that rural applicants get their fair 
share of these grants.
    Ms. Duke. The legislation, as you describe it, sets up 
certain categories of applicants, among them sparsely 
populated, which, as you describe, is a requirement that has a 
population number of seven----
    Ms. Baldwin. Seven people or fewer per square mile.
    Ms. Duke. [continuing] people or fewer per square mile, and 
certain States fit that requirement.
    One of the barriers to care that is part of the 
consideration is the issue of geography and distance. And that 
was the comment I made a bit back that America is an incredibly 
diverse country. And so the barriers to care in one State may 
look significantly different from the barriers to care in 
another State or in a section of a State. So that was the 
thinking of the Congress in putting that sparsely populated 
provision in. There are also provisions for special treatment 
of migrant health centers, public housing, and homeless health 
centers as well. And the justification is, as I have indicated, 
the administration does not have a position on changing those 
designations at this point, but I will raise the issue.
    Ms. Baldwin. Okay. And then for Mr. Smith, I am certainly 
very supportive of the increases in funding for community 
health centers. And in my State, centers have been able to use 
additional funding to expand. In conversations with some of the 
directors, it is my impression that CMS and HRSA have put a 
large emphasis, and perhaps even a requirement, on build-out. 
For example, if a clinic is expanding, they must also build 
dental suites as part of that expansion. But what happens, it 
seems that less emphasis is given to funding the actual health 
care that would be provided in these build-outs. So I guess my 
question is what kind of requirements are placed on centers 
that are expanding? And is it appropriate to place such 
emphasis on build-outs without a corresponding emphasis on the 
services delivered?
    Mr. Smith. I thank you for the question, but I think 
actually the administrator would be better able to respond on 
build-out.
    Ms. Duke. I will have to get back to you for the record on 
that. I need to check out what that issue is.
    Ms. Baldwin. Okay.
    Ms. Duke. I apologize. I need to follow up on that.
    Ms. Baldwin. We would be happy to work with you to get some 
more information.
    Ms. Duke. Okay.
    Ms. Baldwin. I do not have any further questions, and I 
would yield back the remainder of my time.
    Mr. Whitfield. Thank you, Ms. Baldwin.
    At this time, we would recognize Mr. Walden.
    Mr. Walden. Yes. Mr. Chairman, I had a couple minutes of 
the other chair's time, and I know we have got votes coming up, 
so I will yield to other members.
    Mr. Whitfield. Okay. Mr. Burgess, you are recognized.
    Mr. Burgess. Thank you, Mr. Chairman.
    I will, too, try to condense this because of votes.
    Dr. Duke, thank you for your commitment, the 
administration's commitment to the community health centers 
program, and thanks for your interest to work with Congress to 
continue the expansion currently underway. The need for the 
comprehensive services that these centers provide is on the 
rise, based on the number of applications that your office 
receives annually. And I see this need back home, where I am 
very eager to have another health center established in Tarrant 
County. Chairman Barton correctly pointed out that one was 
placed in North Fort Worth just recently, but we very badly 
need one in the southeast part of town.
    Can you tell me how many applications you received last 
year that were acceptable for funding? If there were no limits 
on funding, how many would you have funded?
    Ms. Duke. I think I am just going to have to report on one 
round. I believe we received 330 some in the round, and we were 
able to fund 76, I think, in that round, and it came back to 
about 25 percent. But that is from memory. And what I would 
rather do, frankly, is to share with you a table that would 
have the accurate data rather than trying to do it from memory.
    Mr. Burgess. Very well. If additional funding is coming 
your way, what plans do you have for ensuring that the maximum 
number of proposals are going to be accepted to receive 
funding?
    Ms. Duke. We have put together a strategic planning process 
in each State that is led by the primary care association in 
each State to identify where needs are and to give technical 
assistance to communities to build those areas. What we are 
doing right now is those plans are developed and the 
applications that are coming in are extraordinarily good. 
Basically, we follow the legislation, as I just mentioned to 
Ms. Baldwin, and we follow the requirements for the set-asides 
for the various categories. And then we take the available 
money and we fund centers in order of their scores until we 
have no more money. And so we have lots of applications that 
are high-quality applications that we would continue to fund 
and we believe that the strategic planning process will 
continue to bring in good applications from deserving 
communities.
    Mr. Burgess. Very well. Thank you.
    Mr. Smith, if I understand this correctly, Medicaid 
reimbursement at a federally qualified health center or a look-
alike facility, is at the usual and customary rate as opposed 
to the Medicare maximum allowable, is that correct?
    Mr. Smith. There are a couple of different ways. The 
payment methodologies can use a prospective payment system or a 
cost-reimbursement system that is then indexed, or an 
alternative that the FQHCs and the States can agree upon. So 
there are really about three different ways you could 
potentially pay. And then on top of that, if you are serving an 
individual in Medicaid who is enrolled in managed care, the 
managed care plan may be the payer, but the State would also 
pay a supplemental rate at an FQHC site in order to make the 
FQHC whole.
    Mr. Burgess. Well, certainly I support the administration's 
goal of providing more federally qualified health centers. 
Given the chairman's discussion and Mr. Walden's discussion, I 
just can't help but think there ought to be some way to pay 
providers just a little bit better and have that network of 
providers for that population without standing up a clinic with 
walls. That is, there must be a network available in the 
community already that would be willing to see those patients 
and able to see those patients within existing facilities 
without having to stand up the walls of a clinic and pay a 
clinic administrator and all of the overhead associated with a 
clinic. Is any work being done in that area to sort of 
establish a federally qualified health center without walls?
    Mr. Smith. I will ask the administrator to help me out. I 
think part of----
    Mr. Burgess. Well, clearly, Chairman Barton, if I could 
just add to that, said this is a more cost-effective way of 
delivering care. If we are able to keep the patient in the 
doctor's office, whether it be a federally qualified health 
center or a private office, it is cheaper than going to the 
emergency room where you have the highest overhead on the 
planet. So you know, maybe I am just more making an observation 
rather than asking a question. It would seem to me that if you 
can capture physician networks within a community that needs a 
federally qualified health center but doesn't have one, and if 
you just pay a little bit better, you are going to be able to 
place those patients within private offices and, as Mr. Walden 
pointed out, possibly save a ton of money in the process. I 
just think back to my own days in private practice. No one ever 
expects to make money on a Medicaid patient, and in fact, I 
think we have been told that by the previous iteration of CMS 
that was HCFA, we just expect you to go broke a little more 
slowly. And I think that was sort of the business model where 
this was set up.
    But please feel free to respond to that, and again, it may 
be more of an observation on my part than a question. It just 
seems like when we are looking for a better way to do things, 
this would be a better way.
    Mr. Smith. A couple things. I think you are pointing out 
that the solution is outside Medicaid in terms of getting more 
Americans insured. And certainly, the President has offered a 
number of proposals that expand insurance in the first place. 
Within the Medicaid program, treating people and giving them 
access to care in a clinic or an FQHC or in the doctor's office 
instead of in the emergency room is a goal certainly we all 
share. And I think that part of that is it is going to come in 
a variety of different approaches. And as we have expanded 
coverage, there have also been folks that want to know if 
Medicaid is paying its share. I think Medicaid is paying its 
share for the Medicaid recipients in the reimbursement system 
that we presently have. As I stated, Medicaid accounts for 64 
percent of total patient-related reimbursement to FQHCs.
    So I think Medicaid is paying its share, and I think 
Congress has made sure that Medicaid is paying its share in the 
PPS system, the supplemental payments above the managed care 
rates, et cetera. But the real goal everybody has is to expand 
insurance so people are seeking care in the most appropriate 
setting instead of in emergency rooms.
    Mr. Burgess. Well, is there a subset of the population that 
really just needs help buying insurance rather than the full 
faith and credit of the Medicaid system behind them?
    Mr. Smith. Again, I think what the President is proposing 
is to be able to expand coverage through a variety of different 
ways, whether it is through the employers, giving tax credits 
to small businesses, forming purchasing pools, or tax credits 
to help people meet the cost of care. They could take a variety 
of approaches, and the President, in his budget, has increased 
the Federal commitment to health care spending.
    Mr. Burgess. Mr. Chairman, I have taken more time--I am 
sorry. Did you have something you wanted to add, Dr. Duke?
    Ms. Duke. I just could add that we do have some models 
where centers have entered into partnerships with private 
providers. In Salt Lake City, 600 private providers work with 
the county, the hospitals, the doctors, and the health centers 
to do what you are talking about in the sense that the services 
are expanded by private contributions from doctors who take 
uninsured patients and provide those services as part of their 
commitment to the community.
    Mr. Burgess. Thank you, Mr. Chairman. I have used more time 
than I intended. I will yield back.
    Mr. Whitfield. The gentleman from Washington, Mr. Inslee.
    Mr. Inslee. Thank you.
    I wonder if either or both of you could talk about the 
clinics' experience with the Medicare prescription drug bill. 
What percentage of folks are signed up for that? What are not? 
What experience have you had with the bill that was adopted a 
while back?
    Mr. Smith. In terms of enrollment, there are a number of 
people who will automatically be enrolled, people who are 
presently eligible for Medicaid will be automatically enrolled 
into a plan. I don't believe the MMA had a specific provision 
about the role of the FQHCs, but certainly at CMS and HRSA, we 
are encouraging PDPs and the plans to include FQHCs in their 
network. FQHCs in particular play a very vital role in access 
for individuals, and we are certainly encouraging that. For 
enrollment of the rest of the Medicare population, we are on 
the threshold of the Social Security Administration and CMS 
doing great outreach efforts to encourage individuals to apply 
for the low-income subsidy so that Medicare will pay the vast 
majority of the cost of enrolling in the part D prescription 
drugs. We are encouraging the plans to make the FQHCs a part of 
their network. So we don't have statistics yet on actual 
enrollment, because we are at the beginning of that for the 
entire population.
    Mr. Inslee. So can you give me any flavor at all? Are 
people rushing to sign up on their first visits to the health 
center, or is this a hard sell? Or can you give me any flavor 
of what is happening out there?
    Ms. Duke. I have just, within the last week, sent out a 
letter to health centers to initiate this process, so we are 
really at the very beginning, and I have no data on that at 
this point. But as we get data, I will be glad to share it with 
you.
    Mr. Inslee. Have you had any feedback from the health 
centers about the relative response to their constituents at 
all to this effort?
    Ms. Duke. No, I just sent the letter out within the last 
week.
    Mr. Smith. If I may add, I believe that with Social 
Security's capabilities, we are going to have very 
sophisticated analysis at the local level, by county, to be 
able to identify the take-up rates. As we have said, we are at 
the very beginning of that, but over time, those will be 
targeted. We have teams around the country who will continue to 
look at that data to make certain that the take-up rates are as 
positive as possible.
    So if we see that enrollment is lagging behind, we have 
teams that will then provide outreach to sign up the 
beneficiaries.
    Mr. Inslee. So you haven't gotten calls from the health 
centers that they are overwhelmed and you have got to put on 
new help to get people clamoring to get on that? It doesn't 
sound like it anyway.
    Mr. Smith. We have a whole variety of different agencies 
involved in the outreach including Social Security and SHIPs. 
We have the area agencies on aging. The FQHCs are part of a 
very large effort to do the outreach.
    Mr. Inslee. Well, I suspect you won't be overwhelmed with 
the needs of people to process this, so that probably won't be 
a problem.
    Thank you.
    Mr. Smith. Thank you.
    Mr. Whitfield. Ms. Blackburn, you are recognized for 10 
minutes.
    Ms. Blackburn. Thank you, Mr. Chairman.
    And I am going to try to consolidate this as much as I can, 
so that we get through everyone before we go to vote.
    And Mr. Smith, you said something earlier that I think hits 
the nail on the head with the centers that I have seen, and 
that is that when you have the type of access that these 
centers provide then you do have a lower cost. I think the 
other thing that I have noticed in the centers is the 
environment. And you create an environment where there is an 
acceptance that it is okay to ask questions and to get some 
education on how to deal with health care situations. And I 
think that is a positive as we look for ways to better educate.
    Mr. Smith, one more thing before I go to Dr. Duke.
    The revenue stream, we have talked around that a couple of 
times, and you mentioned 36 percent of the funding comes from 
Medicaid payments, Medicare and Medicaid. If you will just in 
writing for me later, break that stream down as to how most 
centers arrive at their full funding.
    And then I want to move on to my risk management liability 
questions that I have.
    And Dr. Duke, the HHSIG's report from February 2005 talks 
about HSRA no longer performing onsite primary care 
effectiveness reviews and that HSRA is developing a new 
performance assessment protocol for all its grantees, including 
the health centers. And what I would like to know is if this 
has been developed and if it has not, when it is to be 
developed and fully implemented.
    Ms. Duke. We are in the process now of doing the first full 
year of performance reviews for our grantees. The approach we 
have taken is to do one review per grantee and to cover all of 
the grants that they might have from us so that perhaps they 
have a health center grant, they might have an HIV/AIDS grant, 
so that we would not go back twice to the same grantee. We 
would do them all at once.
    Ms. Blackburn. So your new model will be one onsite review.
    Ms. Duke. Yes.
    Ms. Blackburn. Then the balance, are you planning to handle 
that as a web-based review or information submission or what is 
your template?
    Ms. Duke. The approach we have taken is that the reviews 
actually use both.
    Ms. Blackburn. Okay.
    Ms. Duke. That is to say there is a preparatory stage, 
which is document reviews, web-based, and so forth, and then 
there is an onsite, and then there is a feedback process, and 
it has been received very well by grantees as positive.
    Ms. Blackburn. Okay. Great. I will be interested in 
following that. I think that is an important part of this 
concept as we look at the care delivery, the cost-
effectiveness, and increasing the scope of the program.
    In that vein, you have got 33 percent of the centers that 
have received accreditation from the Joint Commission of Health 
Care Organizations. Okay. And when do you think you are going 
to have all current centers or your grant recipients receiving 
accreditation?
    Ms. Duke. We are working very closely in trying to move 
that forward. We have a goal of having 100 percent coverage, 
but we won't reach it this year.
    Ms. Blackburn. Are all of the centers actively pursuing 
accreditation or----
    Ms. Duke. I don't believe I could say all of them are 
seeking accreditation at this point. There are issues of cost 
involved.
    Ms. Blackburn. Okay.
    Ms. Duke. And so I think at this point, people are 
balancing many competing demands, but that is our goal is that 
we will reach that. But we won't reach it this year.
    Ms. Blackburn. Okay. Let us quickly talk about risk 
management controls, because the Inspector General's report 
notes that the risk management training is lacking. And I will 
ask you to respond to this in writing, because we are in the 
vote. I would like to know how the centers are conducting their 
risk management training workshops and if you all have a 
comprehensive agenda for covering that risk management.
    And then my final question to you will be, and you can 
respond in writing to this, too, just for the interest of time, 
looking at the health center tort claims fund from which the 
malpractice claims are paid. And I would like to know the 
current status of that fund and what is the average amount of a 
malpractice claim on one of the centers?
    And with that, Mr. Chairman, I will yield back.
    Mr. Whitfield. Thank you.
    Mr. Stupak. Mr. Chairman, before we yield, you were asking 
questions on the OIG report. Do you have that, and could you 
put it in the record so we could have that?
    Ms. Blackburn. Yes, I do have that, and I will be happy to 
put it in the record.
    Mr. Stupak. Okay. Thank you.
    Mr. Whitfield. Without objection, so ordered.
    Mr. Green, you are recognized.
    Mr. Green. Thank you, Mr. Chairman, and I will try and be 
brief, because I know we have a vote in a little over 2 
minutes.
    One, I want to thank you and the ranking member for 
allowing me to be on the subcommittee. I serve on the Health 
Subcommittee, and obviously community health centers are 
important, and I want to thank HRSA for the ten for Texas and 
we received five in the Houston area. We have identified, 
through Dr. Sanchez, who used to be our Health Commissioner. I 
don't know what we call him now since the State legislature 
merged all of the agencies, identified community-based clinics 
as a way that we can deal with it with the resources that we 
don't have. But it brings it down to the local level oftentimes 
that, for example, the one that was just awarded in Pasadena 
had fund-raisers and we had both business and, in fact, one of 
our for-profit hospitals convinced that over half their 
emergency room contacts could be eliminated by having a 
community health clinic. And our numbers, we think 57 percent 
of the emergency room visits in Houston and Harris Counties are 
people who could have been served by a community-based clinic. 
And so I agree that we could look at lowering some of our other 
costs if we do that.
    One of the concerns I have is we have been looking at, in 
the success we had, two of those five were in the District I 
represent. And what I was trying to see, is it easier for FQHCs 
to have amendments or look-alikes than it is to have another 
free-standing one, because it seems like maybe they would have 
better response from HRSA for expansion? So if we only have 
five, for example, in the city of Houston and we are looking at 
the next round to see what we can do, is it better to have just 
expansions of clinics, additional sites that are in the needy 
areas, or it seems like it is much harder to get a whole new 
free-standing clinic with a new board?
    Ms. Duke. The look-alikes often make very good candidates 
for actual grant status in the sense that they already meet 
many of the same requirements. And so I don't think that the 
question is mutually exclusive. I think moving to look-alike 
status has the advantage of providing care and getting some 
benefits from the Federal Government and then being able to 
compete very well. Look-alikes have competed very well for 
those grants.
    Mr. Green. Okay. The other issue for the one of the 
clinics, I know the funding doesn't begin until later this 
year, and I know in 2005, Congress provided $775 billion for 
community health centers, and I know that several programs, the 
Bureau of Primary Health Care, have it delayed during the 
current fiscal year. And can you explain how the fiscal year 
2005 funding for community health centers has been allocated or 
is being allocated? It looks like the 330 grants are being 
moved into the next budget year.
    Ms. Duke. We have the costs of continuing the grantees we 
already have, which is a number of about almost 3,700. And so 
they continue to get grants to continue their operations. And 
so the issue is the availability of funds to start new centers. 
One of the issues, for me, or at least my sense, is that there 
is a terrible cost for people that have to keep coming in to 
compete over and over again. And so one of the things we have 
tried to do was to identify the groups who had already competed 
successfully and to identify them for funding in the next round 
rather than go through another very costly grant process so 
that we, in essence, have one leg up on the next cycle.
    Mr. Green. And Mr. Chairman, my last statement is if we use 
the cap program to put together these collaboratives for the 
community, and I know the President is supporting community-
based clinics, but we also need the cap program to be able to 
put together these collaboratives, particularly in areas that 
we have to bring the community groups and the folks together 
on.
    But Mr. Smith, my last question for CMS is two of the FQHCs 
in my District have expressed frustration with the process of 
obtaining Medicaid provider numbers for Federal reimbursement. 
There was a merger between two of our clinics, and it took 7 
months to get a provider number. Is there some way that if you 
have two clinics, for example, that may have separate numbers 
that it could be fast-tracked on instead of the delay 
sometimes?
    Mr. Smith. Mr. Green, that is Medicare. Medicare is 
enrolling the providers directly. I would be happy to get back 
to you on that.
    Mr. Green. Okay.
    Mr. Smith. I just don't know off hand.
    Mr. Green. I know our own experiences with our one in 
Pasadena, we needed the number very quickly, and thank goodness 
there is a Texan who I know is family who runs CMS, and we were 
able to get that number quickly, but not everybody can call 
their Member of Congress and get it done.
    Mr. Smith. If you could give me their names, I will make 
sure we check them.
    Mr. Green. Okay. We can get that information to you.
    Mr. Smith. Okay.
    Mr. Green. In fact, when we run vote, my staff will be able 
to share it.
    Mr. Smith. We will be happy to follow up.
    Mr. Green. And again, thank you, Mr. Chairman, for letting 
me in. It is a great----
    Mr. Whitfield. Thank you, Mr. Green.
    We do have a series of four votes on the floor. We had a 
lot of other questions for you, Dr. Duke, and Mr. Smith, but we 
are not going to ask you to stay, because we have another panel 
coming in. But we are going to submit some additional questions 
in writing, particularly for you, Mr. Smith, and one being, for 
example, should States be allowed to spend Medicaid dollars to 
establish community health centers themselves, meeting the 
guidelines? Just something to think about. And we will have 
some additional questions for you.
    And then Dr. Duke, one thing that I would like to ask you 
all to provide us is 2003/2004 list of new grantees by 
Congressional District. If you would do that, we would 
appreciate it. And Mr. Stupak, do you have anything?
    Mr. Stupak. Not at this time.
    Mr. Whitfield. Okay. Okay. And like I said, we will submit 
additional questions in writing.
    And thank you all so much, and we look forward to continue 
working with you as we strive to improve health care.
    And with that, the first panel is dismissed.
    For those of you on the second panel, as I said, we have 
four votes. We are going to go cast those votes now. I imagine 
we could be back here by about 4:35. And we will swear you in 
at that point, and we will begin your panel.
    So thank you very much.
    With that, we are in recess.
    [Brief recess.]
    Mr. Whitfield. Okay. On our second panel, we have Mr. 
Roderick Manifold, who is the Executive Director at the Central 
Virginia Health Services, Incorporated; Mrs. Kim Sibilsky, who 
is the Executive Director of the Michigan Primary Care 
Association; Mr. Daniel Hawkins, who is the Vice-President of 
the National Association of Community Health Centers; Dr. 
Janelle Goetcheus, who is the Medical Director of Unity Health 
Care; and Dr. Leiyu Shi, who is an Associate Professor at Johns 
Hopkins School of Public Health. We welcome all of you.
    And where is Mr. Manifold? Okay. Well, Mr. Stupak has just 
come back from voting as well, and so as soon as we get Mr. 
Manifold, we will go on and have you sworn in and you can begin 
your testimony.
    And we do genuinely thank you for being with us today, and 
we look forward to hearing what you have to say.
    I will tell you, if it is going to be 10 minutes, we will 
go on and swear these in, and we will go on and start with your 
testimony.
    So I will call the meeting back to order. And you all are 
aware that this is an investigative hearing, and it is the 
practice of the Oversight Investigations Subcommittee that we 
give testimony under oath. Do any of you have any difficulty 
giving testimony under oath? And you also know that when you 
give it under oath, if you want legal counsel, you have that 
right. And assuming you do not have legal counsel, so if you 
will stand, I will swear you in.
    [Witnesses sworn.]
    Mr. Whitfield. Thank you. Okay. You are now under oath, and 
Mrs. Sibilsky, we will start with you. And be sure and turn 
your microphone on and get it up close. And you may begin your 
5-minute opening statement.

TESTIMONY OF KIM SIBILSKY, EXECUTIVE DIRECTOR, MICHIGAN PRIMARY 
   CARE ASSOCIATION; DANIEL R. HAWKINS, JR., VICE-PRESIDENT, 
 NATIONAL ASSOCIATION OF COMMUNITY HEALTH CENTERS; A. JANELLE 
GOETCHEUS, MEDICAL DIRECTOR, UNITY HEALTH CARE; LEIYU SHI; AND 
  RODERICK V. MANIFOLD, EXECUTIVE DIRECTOR, CENTRAL VIRGINIA 
                     HEALTH SERVICES, INC.

    Ms. Sibilsky. Good afternoon. My name is Kim Sibilsky, and 
I am the Executive Director of the Michigan Primary Care 
Association.
    On behalf of Michigan's federally qualified health centers, 
I thank you for this opportunity to testify.
    Representing community-based primary care centers, MPCA 
provides a myriad of services, including health professional 
recruitment, clinical support, technical assistance services, 
education and training, as well as assisting organizations 
becoming community migrant health centers or other primary care 
delivery models. In short, we are a membership association of 
FQHCs dedicated to educating for the medically under-served.
    Mr. Chairman and members of the subcommittee, I believe the 
most important job of a health center is to serve as a medical 
home for medically under-served communities. In Michigan, 
health centers serve as the medical home and are delivering 
comprehensive primary care to more than 425,000 persons in more 
than 140 communities and neighborhoods. Our 29 FQHC 
organizations form an essential component of the State's safety 
net for health care services. To that end, we are committed to 
bringing high-quality, comprehensive health care to people and 
communities in Michigan that desperately need them.
    This job is getting tougher every day, however. Growing 
health care costs coupled with increased uninsured and 
underinsured people in Michigan and nationwide directly 
contributes to the growing number of Medicaid-eligible people. 
In Michigan, nearly 25 percent of the State's low-income 
residents lack basic health insurance. And about 12 percent of 
the overall State population is uninsured.
    Seen another way, unless these people are fortunate enough 
to live in a community with an FQHC or a free or a charity 
clinic, they have few options, other than their local 
hospital's emergency room, to receive care. And let me tell 
you, there are consequences to this reality.
    In 2001, Michigan looked at preventable hospitalizations, 
those for which timely and effective ambulatory care can help 
reduce the risks for common problems, such as asthma, diabetes, 
or dehydration. High rates of preventable hospitalizations in a 
community signal potential barriers to care, including lack of 
sufficient primary care resources.
    The review estimated that Michigan had over 240,000 
preventable hospitalizations, which resulted in almost 1.3 
million unnecessary inpatient days of care. But this does not 
have to be the reality today. FQHCs strategically placed in 
under-served communities increase access to early intervention 
and improve the economic and physical health of Michigan's 
communities.
    Through the President's initiative, Michigan has expanded 
access to care to over 56,000 residents in 28 communities. As 
Michigan's uninsured population continues to grow, the State 
also is experiencing record levels of enrollment in Medicaid as 
the result of our slow economic recovery. Currently, Michigan's 
Medicaid program covers one out of seven citizens. With such 
high Medicaid enrollment numbers and low State revenues, the 
pressure is on to identify cost savings.
    Mr. Chairman, FQHCs stand ready to be a part of the answer. 
In Michigan alone, 29 FQHC organizations currently care for 10 
percent of all Medicaid enrollees for less than 1 percent of 
the physician services budget. In other words, health centers 
are saving the Medicaid program money.
    This achievement is made possible largely because of 
Congress' wise decision to support adequate Medicaid 
reimbursement to health centers by creating the prospective 
payment system for FQHCs. I am proud to say that the 
implementation of the prospective payment system is a huge 
success, and we applaud Congress for their support.
    However, as Congress considers to Medicaid, it is critical 
that it recognize the unique relationship between health 
centers and Medicaid. In particular, lawmakers must appreciate 
the changes in Medicaid that could be construed as minor could 
actually have devastating impacts on health centers. For 
example, the elimination of dental services for Medicaid adults 
in Michigan in 2003 is still causing tremendous stress to the 
system and to health centers. And to be sure, Michigan's 
Medicaid adult benefit waiver program continues to threaten 
FQHCs' abilities to protect Federal dollars for the uninsured 
in the State. Lawmakers must be careful not to inadvertently 
impact the mission of health centers during discussions on 
Medicaid reform.
    And I, along with the Michigan health centers, look forward 
to working with Congress in this effort.
    Thank you for this opportunity to talk with you. If there 
are any questions, I would be pleased to answer.
    [The prepared statement of Kim E. Sibilsky follows:]

   Prepared Statement of Kim Sibilsky, Executive Director, Michigan 
    Primary Care Association on Behalf of the Michigan Primary Care 
                              Association

    Good Afternoon. My name is Kim Sibilsky and I am here representing 
Michigan's Federally Qualified Health Centers (FQHC), which include 
community, migrant, homeless health centers. I am the Executive 
Director of the Michigan Primary Care Association (MPCA). The MPCA is a 
nonprofit organization developed to promote, support and develop 
comprehensive, accessible and affordable, quality primary health care 
services to everyone living in Michigan. Representing organizational 
providers and affiliates of community-based primary care centers in the 
state, we provide a myriad of services, including health professional 
recruitment, clinical support and technical assistance services, 
education and training as well as helping organizations become a 
Community/Migrant Health Center or other primary care delivery model.
    Thank you for this opportunity to speak with you today.
    Federally Qualified Health Centers (FQHC) provide medical homes to 
residents of medically underserved communities. Michigan's health 
centers deliver comprehensive primary care in more than 140 Michigan 
communities and neighborhoods to more than 425,000 persons. Michigan's 
29 FQHC organizations form an essential component of the state's safety 
net for health care services. We are committed to providing high 
quality, comprehensive health care services to federally designated 
medically underserved areas and populations.
    As FQHC organizations, we provide a comprehensive set of primary 
care services and enabling services to all people, regardless of their 
ability to pay. Our clinics not only provide care to families, they 
also provide care to high risk and special populations including people 
with changing insurance coverage and those with chronic conditions and 
disabilities. Research has repeatedly shown that these groups cost the 
system a disproportionate share of available resources and we are 
committed to providing them with the best service in a cost-effective 
manner.
    To address the cost of health care, we must ensure that necessary 
services are available, are delivered by the most appropriate provider, 
and are accessible in the most cost-effective setting, at the right 
time. By regulation, only communities lacking such access qualify for a 
Federally Qualified Health Center. These regulations focus on two 
different, but equally important issues: 1) a severe shortage of 
primary care providers for the entire community; and/or 2) a severe 
shortage due to primary care physicians refusing to provide essential 
care to populations in need.
    Research shows that you can reduce the cost of health care by 
increasing access to preventive and primary care services. It follows 
that a reduction in health care costs will result in a reduction in the 
number of uninsured persons. Yet the cost of health care continues to 
grow and the growing number of uninsured and underinsured people in 
Michigan and across the country is directly contributing to the growing 
number of Medicaid eligible people. This results in a burgeoning 
Medicaid budget. Figures calculated from the Current Population Survey 
and Claritas, a data clearinghouse, indicate that more than 250,000 or 
24.7% of Michigan's low-income residents lack basic health insurance. 
Looking at all income levels, 1.1 million or 12% of Michigan's 
residents and 45 million or 15.6% nationally are uninsured.
    Unless an uninsured person is fortunate enough to live in a 
community with an FQHC or a free/charity clinic, they have few options 
other than their local hospital's emergency room. Reports indicate that 
58% percent of the 106,000,000 annual visits to hospital emergency 
rooms across the country are described as inappropriate. In a new study 
published in Health Services Research; entitled, ``ailability of Safety 
Net Providers and Access to Care of Uninsured Persons'' Hadley J. and 
Cunningham P., October 2004) finds that FQHCs are more cost effective 
because they improve access to primary care for the uninsured and 
underinsured and reduce emergency room visits and hospital stays.
    Michigan completed a study in 2001 which looked at preventable 
hospitalizations, those for which timely and effective ambulatory care 
can help reduce the risks for common problems such as asthma, diabetes 
or dehydration. High rates of preventable hospitalizations in a 
community signal potential barriers to care including lack of 
sufficient primary care resources. The review estimated that we had 
over 240,000 preventable hospitalizations which resulted in almost 1.3 
million unnecessary inpatient days of care.
    Michigan's Medicaid program covers 1 out of 7 citizens. We continue 
to experience record levels of enrollment as a result of our slow 
economic recovery. With such high Medicaid enrollment numbers and low 
state revenues, the pressure is on to identify cost savings. FQHCs 
stand ready to be a part of the answer. Several studies have 
demonstrated that health centers save the Medicaid program more than 
30% in annual spending per beneficiary due to reduced specialty care 
referral and fewer hospital admissions and FQHCs save by helping to 
prevent unnecessary usage of the emergency room. Studies have indicated 
that Medicaid beneficiaries who sought care at health centers were 22% 
less likely to be hospitalized for potentially avoidable conditions 
than beneficiaries who obtained care elsewhere. Michigan's 29 FQHC 
organizations currently care for 10% of all Medicaid enrollees for less 
than 1% of the physician services budget.
    Federally Qualified Health Centers (FQHC) applaud the work of 
Congress to protect the federal funds provided to help care for the 
uninsured and underinsured. From the beginning, Congress recognized 
that without mandating a payment system that provided sufficient 
resources to the FQHCs to care for Medicaid clients, federal dollars 
may be shifted away from the uninsured. Previously, this meant cost-
based reimbursement. On January 1, 2001, the Prospective Payment System 
outlined in the Medicare and Medicaid Beneficiaries Improvement and 
Protection Act of 2000 was implemented across the country. This was a 
historic moment in our program's history. For Michigan FQHCs, not only 
did this allow them to plan for the future with a predictable budget, 
it created incentives to innovate and implement cost-saving programs 
such as the 340(b) drug pricing program. FQHCs welcomed and continue to 
support efforts to maximize the use of limited tax dollars at both the 
state and federal levels. The Prospective Payment System is key to 
these efforts.
    Under the Prospective Payment System, each FQHC is assigned a 
prospective payment amount calculated from their reported 1999-2000 
costs. While states have implemented the system in slightly different 
ways, they all are required to adjust the rates annually by at least 
the Medicare Economic Index (MEI). These adjustments have averaged 
around 2.7% over the last four years, way below the medical inflation 
rate. Even with these modest adjustments, Michigan FQHCs view the 
implementation of the Prospective Payment System as a huge success and 
support efforts by our State Medicaid Agency to act as a guardian on 
behalf of the public good. We have to work within a budget and we 
understand that both the State and federal government have to do the 
same.
    The Prospective Payment System reimburses the FQHCs and FQHC 
``look-alikes'' on an encounter basis. FQHC encounters combine the cost 
of the face-to-face visit with a provider and the cost of ancillary 
services such as immunizations, on-site lab and x-rays, translation, 
and nutritional counseling provided during the visit into one payment. 
People not directly involved in the FQHC program often mistakenly 
believe that we are paid higher rates for office visits than private 
physician offices. In reality, private physician offices usually do not 
provide the scope of services we do and when they do provide some of 
these ancillary services, they often do not incorporate these services 
into their practice without a means to receive payment.
    Michigan would like to draw your attention to how crucial the 
Prospective Payment System is to FQHCs. We recognize that through the 
waiver process, states regularly request the ability to waive their 
obligation to provide FQHCs with payment according to the Prospective 
Payment System. This waiver activity has the potential to jeopardize 
the entire system. For example, when the State Children's Health 
Insurance Program was created, recognition of our payment system was 
not included. At the time of development, we anticipated that the 
enrollees would be relatively inexpensive to care for given that they 
were children. To our surprise, Michigan created a SCHIP waiver program 
for childless adults with incomes below 35% of the federal poverty 
level. This program is referred to as the Adult Benefits Waiver. As you 
can imagine, this is a very different population than the one we, and 
we believe Congress, envisioned. Adults enrolled in this program often 
have multiple conditions including chronic illness, substance abuse, 
and mental health issues. Many of them are very transient, moving from 
shelter to shelter or reside on the street. Without recognition of our 
Prospective Payment System, programs such as Michigan's Adult Benefit 
Waiver threaten the FQHCs' ability to protect the federal dollars for 
the uninsured persons in our communities. Because of the demographics 
of the target population, most private providers do not wish to enroll 
in these provider networks. As a result, more than half to two-thirds 
of the Adult Benefit Waiver program enrollees are patients of FQHCs. 
Recognition of our payment system would protect the financial viability 
of our nation's health centers and the federal funds provided for the 
uninsured.
    I would like to ask for your assistance as you and your colleagues 
begin to evaluate the Medicaid program to remember the Federally 
Qualified Health Centers. Changes that could be construed as minor 
could have devastating impacts on our system. For example, the State of 
Michigan elected to eliminate dental services for Medicaid adults on 
October 1, 2003. This saved relatively little general fund dollars 
($9.2 million) and would impact few providers given the relatively 
small number of private dentists enrolled in the program. What they did 
not understand is that the Federally Qualified Health Centers accounted 
for the majority of dental care currently being provided to the 
Medicaid adults. The elimination of Medicaid adult dental is still 
causing tremendous stress to our system since the need did not 
disappear, just the payment.
    Everyone is struggling with how to pay for our Medicaid system. We 
must remember the interplay between publicly-funded coverage and the 
uninsured. When you restrict enrollment in public programs, the cost of 
providing care does not disappear and the savings are not absolute. 
People will eventually receive the care they need. It may not be in the 
best and most cost-effective location, at a time when the progression 
of illness can be headed off and the most expensive care prevented, but 
in the end, anyone can walk into a community hospital and receive some 
level of care. Our goal as providers is to squeeze any waste out of the 
system that we can. We believe a sizeable amount of waste exists simply 
from the vast amount of paperwork required of health care providers, 
the lack of connections between different components of the health care 
delivery system, and the mobility of our population. I would like to 
talk to you today about two opportunities that Michigan's FQHCs have 
embraced to help us address some of these challenges--the chronic 
disease collaboratives and technology.
    Federally Qualified Health Centers are uniquely positioned to 
embrace change. Our administrators are particularly adept at stretching 
dollars, our clinicians are mission-oriented and employed by the 
centers, our Boards of Directors are made of a majority of users of the 
clinics and therefore personally committed to their continuation, and 
the federal government is an important partner with resources that go 
beyond the financial. With the support of the Bureau of Primary Health 
Care, the FQHCs have undertaken a major shift in how chronically ill 
patients are cared for and given the responsibility for their own 
health. Many positive changes have occurred as a result of the Chronic 
Disease Collaboratives. Some of these are listed below:

 Michigan Health Centers in the Chronic Disease Collaboratives have 
        experienced drastic reductions in the severity of diabetes 
        among their patients. The Hemoglobin A1c, a lab measurement 
        used to gauge the severity of diabetes, has increased by 26% 
        from the when the centers began to implement the model in 1999 
        to April 2005.
 Presently there are over 5,463 Michigan patients being tracked 
        related to cardiovascular disease. The Chronic Disease 
        Collaborative aims to reduce blood pressure which leads to 
        reduction in complications associated with cardiovascular 
        disease. To date, despite an influx in the number of new 
        patients enrolled, the program has demonstrated a 5% overall 
        increase in the number of patients with a blood pressure less 
        than 140/90.
 In addition to tracking diabetes and cardiovascular disease, the 
        Michigan health centers are spreading the care model to other 
        chronic diseases including cancer, depression, asthma and a 
        perinatal pilot project.
    As a State Primary Care Association, we are working to educate our 
state policymakers about this program and in fact have a proposal 
pending with the State of Michigan that will draw many different 
provider types into providing care using the chronic care model 
including Critical Access Hospitals, community hospitals, independent 
and provider-based Rural Health Clinics, private physician offices, 
Medicaid Health Maintenance Organizations, and community-based coverage 
programs. This model has tremendous potential that is just beginning to 
be broadly appreciated such as improvements in patients' depressive 
symptoms, percentage increases of patients receiving appropriate 
treatment for chronic conditions and the ability to track measurable 
improvement in meeting nationally accepted guidelines. We are committed 
to providing assistance and sharing our lessons learned in order to see 
the impressive results in improvement of health status and reduction of 
health disparities in Michigan that we have experienced in health 
centers nationally.
    Finally, in light of the national interest in moving health care to 
the electronic age, I'd like to speak with you concerning Michigan 
health centers' innovation in information technology supported by the 
Bureau of Primary Health Care of HRSA, VirtualCHC. VirtualCHC is an 
Application Service Provider (ASP) designed by MPCA which delivers 
application functionality and computer services to many users via the 
Internet or a private network. VirtualCHC houses software appropriate 
to health centers, including a number of choices of practice 
management, general ledger, Microsoft Office Suite and many others, 
making them available to health centers via the Internet.
    As I mentioned earlier, electronic health records represent an 
opportunity. They are key to our efforts to improve the quality of care 
through better and more regular monitoring of patient/provider 
adherence to clinical guidelines and to eliminate duplication of 
services/testing/treatment. Implementing electronic health records is a 
large front-end expense for centers purchasing the software, equipment, 
training and lost productivity. VirtualCHC provides a way to help 
minimize that initial investment by giving them a viable alternative to 
developing and implementing complex systems themselves. Finally, 
because VirtualCHC is Internet based, there are no geographic 
limitations in health centers selecting or being supported by 
VirtualCHC. As a result, VirtualCHC has serviced health center clients 
in Michigan, Missouri, Massachusetts, Alaska and the Virgin Islands. 
With Community Health Centers, the future really IS now.
    Thank you for this opportunity to talk with you. If there are any 
questions, I would be pleased to answer them at this time.

    Mr. Whitfield. Thank you.
    Mr. Hawkins, you are recognized for 5 minutes.

               TESTIMONY OF DANIEL R. HAWKINS, JR.

    Mr. Hawkins. Thank you, Mr. Chairman.
    Good afternoon to you and members of the subcommittee. My 
name is Dan Hawkins, and on behalf of America's health centers 
and their 15 million patients, thank you for the opportunity to 
speak with you this afternoon about the Federal health centers 
program and to share their success stories.
    Mr. Chairman, I have personally seen the power of health 
centers to transform the health and well being of under-served 
people and communities as a VISTA volunteer back in the 1960's. 
I helped a community in a small, rural south Texas town to 
startup a health center and then served as its initial 
Director. That center is still in operation today, no thanks to 
me. It serves more than 40,000 people a year.
    Conceived in 1965 as a bold experiment to bring health care 
services to our Nation's neediest communities, the health 
center program has a 40-year record of success, providing an 
enduring model of primary care delivery for the country.
    Health centers have used community empowerment, what we 
like to call patient democracies, to produce improved health 
outcomes and quality of life. Dr. Duke has already pointed out 
the stellar record of achievement of the health centers. NAC, 
and all health centers, are deeply grateful to Congress for its 
support of the health centers program and for expanding its 
reach. The $566 million increase in appropriations provided 
since fiscal year 2002 has enabled more than 700 communities to 
secure a new or expanded health center, adding 4 million new 
patients over the last 4 years.
    Program funds are rewarded nationally on a competitive 
basis, thus ensuring high-quality projects. Thankfully, 
Congress has also provided additional funding for existing 
centers, all of which face growing uninsured patient rolls and 
rising costs. We appreciate the President's historic request, a 
$304 million increase for next year. It can't come soon enough, 
as the numbers show. As you have heard earlier today, last 
year, over 430 applications were submitted for a new health 
center site, and only 91 of them received funding.
    We are delighted the President has announced a second 
health center initiative to place a new health center in every 
poor county that currently lacks one. We recently released a 
study showing 929 such counties, including 69 in Kentucky and 
11 in Michigan, several in your District, Mr. Chairman, and 
several in Mr. Stupak's District.
    We look forward to working with the President and Congress 
to help this program reach every community in need. As my 
colleague, Kim Sibilsky has already noted, NAC and State 
primary care associations have long recognized that the success 
of the program and the current expansion initiatives will 
depend on the ability of health centers to meet all 
requirements and performance standards and expectations. With 
this in mind, we have significantly enhanced our training and 
technical assistance activities for health centers focused on 
financial management, clinical practice, and board governance, 
among others. We continue to assist hundreds of communities to 
successfully apply for new health center funding.
    As you know, the health centers program is scheduled for 
reauthorization next year. Over the years, Congress has 
consistently reaffirmed and strengthened the core elements of 
the health centers program, including community governance, 
location in under-served communities, open-door policy 
regardless of health status, insurance coverage, or ability to 
pay, and focus on community-wide health. We believe these core 
statutory requirements provide the crucial framework for the 
success of the program. It simply would not be where it is 
today without them, and we commend the committee for 
consistently safeguarding these requirements over the years.
    I want to turn, for a moment, to the Medicaid program. 
Medicaid health centers have long enjoyed a special 
relationship as twin pillars of a broad strategy to improve 
health care for the poor, minority, and under-served Americans. 
Today, that unique relationship continues with health centers 
caring for nearly 6 million Medicaid recipients, more than one 
of every ten Medicaid beneficiaries for less than 1 percent of 
all Medicaid dollars, while Medicaid serves as their single 
largest revenue source. Recognizing the importance of this 
relationship, Congress, in 1989, made health center services a 
guaranteed Medicaid benefit and required that its payments 
cover the cost of care for Medicaid patients so that their 
Federal grant funds could be dedicated to care of the 
uninsured. Since that time, health centers have doubled the 
number of uninsured people served to 6 million because Medicaid 
paid its fair share. And in 2000, this committee led Congress 
to reaffirm the importance of adequate Medicaid payments to 
health centers by creating a prospective payment system for 
them.
    Today, health centers continue to deliver significant 
savings to all payers, and especially to Medicaid. They control 
health care costs by providing primary care and preventive 
services, reducing the need for more costly hospital care down 
the road. Dozens of studies have found that health centers save 
the Medicaid program 30 percent or more in total spending 
compared to other providers.
    As Congress considers Medicaid reforms, we stand ready to 
work with the committee to ensure that any such reforms 
preserves Medicaid's crucial coverage for those who need it 
most and recognizes the key role of health centers in both 
caring for Medicaid recipients and the uninsured.
    Thank you, once again, for this opportunity, and I would be 
happy to answer any questions.
    [The prepared statement of Daniel R. Hawkins, Jr. follows:]

Prepared Statement of Daniel R. Hawkins, Jr., Vice President, Federal, 
  State, and Public Affairs, National Association of Community Health 
                                Centers

    Mr. Chairman and Members of the Subcommittee, my name is Dan 
Hawkins and I am Vice President for Federal, State, and Public Affairs 
for the National Association of Community Health Centers. On behalf of 
America's Health Centers and the 15 million patients they serve, I want 
to express my gratitude for the opportunity to speak to you today about 
the federal Health Centers program. NACHC and health centers appreciate 
the unwavering support that this Subcommittee and the entire Committee 
has given to carry out their mission and we look forward to continuing 
to work with you to further strengthen the program to serve medically 
underserved communities. As the Committee that oversees not just the 
authorization of the Health Centers program, but also the entire 
Medicaid program, we appreciate the opportunity to appear before you 
today.
    Mr. Chairman, I have personally seen the power of health centers to 
lift the health and the lives of individuals and families in our most 
underserved communities. As a VISTA volunteer assigned to south Texas 
in the 1960s, the residents of our town asked me to work on improving 
access to health care and clean water in our community. We decided to 
apply for funds through a relatively new, innovative program--the 
Migrant Health program. I stayed on and served as executive director of 
the health center from 1971 to 1977. The health center is still in 
operation today, and has expanded to serve over 40,000 patients 
annually. The community empowerment and patient-directed care model 
thrives today in every health center in America and I am honored to be 
here to share with you their success story.

Background and History of the Health Centers Program
    Conceived in 1965 as a bold, new experiment in the delivery of 
health care services to our nation's most vulnerable populations, the 
Health Centers program has a 40-year record of success that serves as 
an endearing model of primary care delivery for the country. The Health 
Centers program began in rural Mississippi, and in inner-city Boston in 
the mid-1960s, to serve rural, migrant, and urban individuals who had 
little access to health care and no voice in the delivery of health 
services. In the 1980s and 1990s, the Health Care for the Homeless and 
Public Housing health centers were created. In 1996, the Community, 
Migrant, Public Housing and Health Care for the Homeless programs were 
consolidated into a single statutory authority within the Public Health 
Service Act (PHSA).
    Congress established the program as a unique public-private 
partnership, and has continued to provide direct funding to community 
organizations for the development and operation of health systems that 
address pressing local health needs and meet national performance 
standards. This federal commitment has had a lasting and profound 
affect on health centers and the communities and patients they serve in 
every corner of the country. Now, as in 1965, health centers are 
designed to empower communities to create locally-tailored solutions 
that improve access to care and the health of the patients they serve.
    This blueprint has stood the test of time, and has allowed health 
centers to serve hundreds of millions of people since the inception of 
the program. Health centers proudly accept this responsibility in 
return for the investment made by the American taxpayers in the form of 
PHSA grants. However, this overwhelmingly poor, uninsured, and 
medically underserved patient mix creates unique challenges for health 
centers that are not necessarily confronted by other health care 
providers.

Current Statistics
    Indeed, America's Health Centers serve an estimated 15 million 
people in every state and territory. Health centers provide care to 10 
million people of color, 6 million uninsured individuals, 700,000 
seasonal and migrant farmworkers, and 600,000 homeless individuals. 
Over 1,000 health centers are located in 3,600 rural, frontier, and 
urban communities across the country. The communities served by health 
centers are in dire need of improved access to care, and in many cases 
the centers serve as the sole provider of health services in the area, 
including medical, dental, mental health, and substance abuse services.
    Patients can walk through the doors of their local health center 
and receive one-stop health care delivery that offers a broad range of 
preventive and primary care services, including prenatal and well-child 
care, immunizations, disease screenings, treatment for chronic diseases 
such as diabetes, asthma, and hypertension, HIV testing, counseling and 
treatment, and access to mental health and substance abuse treatment. 
Health centers also offer critically important enabling services that 
ensure that health center patients can truly access care, such as 
family and community outreach, case management, translation and 
interpretation, and transportation services.

Delivery of High-Quality, Cost-Effective Care
    Because of the unique model of patient empowerment, what we like to 
call ``patient democracies'', health centers have produced improved 
health outcomes and quality of life. Health centers provide preventive 
services to vulnerable populations that may not otherwise have access 
to certain services such as immunizations, health education, 
mammograms, and Pap smears, as well as colorectal, glaucoma, and other 
screenings. Health centers have also made significant headway in 
preventing anemia and lead poisoning.
    Additionally, health centers have distinguished themselves in the 
management of chronic illness, meeting or exceeding nationally accepted 
practice standards for treatment of these conditions. In fact, the 
Institute of Medicine and the General Accounting Office have recognized 
health centers as models for screening, diagnosing, and managing 
chronic conditions such as cardiovascular disease, diabetes, asthma, 
depression, cancer, and HIV/AIDS.
    HHS' Health Resources and Services Administration (HRSA) has also 
helped improve the provision of quality care at health centers through 
the Health Disparities Collaboratives initiative. At the end of 2004, 
more than two-thirds of all health centers had initiated this effort, 
and an additional 150 health centers have started a Collaborative this 
year. I like to think of the Collaboratives as clinical demonstrations 
for health centers, designed to improve the skills of clinical staff, 
and strengthen caregiving through the development of extensive patient 
registries that improve clinicians' ability to monitor the health of 
individual patients, and effectively educate patients on the self-
management of their conditions. More than 75,000 people with chronic 
diseases have been enrolled in elective registries for cancer, 
diabetes, asthma, and cardiovascular disease. Health centers 
participating in the Collaboratives almost unanimously report that 
health outcomes for their patients have dramatically improved.
    As a result of health centers' focus on the provision of preventive 
and primary care services and management of chronic diseases, low-
income, uninsured health center users are more likely to have a usual 
source of care than the uninsured nationally. 99% of surveyed health 
center patients report that they were satisfied with the care they 
receive at health centers. Communities served by health centers have 
infant mortality rates between 10 and 40% lower than communities not 
served by health centers, and the latest studies have shown a continued 
decrease in infant mortality at health centers while the nationwide 
rate has increased. Health centers are also linked to improvements in 
accessing early prenatal care and reductions in low birth weight.
    This one-stop, patient-centered approach works. The Health Centers 
program has been recognized by the Office of Management and Budget as 
one of the most effective and efficiently run programs in the 
Department of Health and Human Services (HHS). Numerous studies have 
also pointed to the success of health centers in reducing health 
disparities and improving the health status of vulnerable populations 
who receive care at their sites. Indeed, a major report by the George 
Washington University found that high levels of health center 
penetration among low-income populations generally results in the 
narrowing or elimination of health disparities in communities of color.

Historic Expansion of Access Through the Health Centers program
    While health centers have had four decades of success, there has 
been no brighter moment in the life of the program than now. NACHC and 
health centers are deeply grateful to Congress for its support of the 
Health Centers program. In Fiscal Year (FY) 2005, Congress appropriated 
$1.7 billion in overall funding for the Health Centers program, a $566 
million increase in funding over FY 2002.
    These increases have enabled hundreds of additional communities to 
participate in the Health Centers program and to deliver community-
based care to more than 4 million people in the past 4 years. We are 
also very grateful that Congress has provided additional funding for 
base grant adjustments for existing health centers, which have seen 
unexpected increases in the number of uninsured patients coming through 
their doors at the very same time they continue to battle the 
continuously rising cost of delivering health care in their 
communities. These base grant adjustments have allowed health centers 
across the country to stabilize their operations and continue to 
provide care to their existing patients, while also looking for ways to 
expand access to necessary care.
    We also appreciate the President's strong support for the program 
and his historic request for a $304 million increase in FY 2006, which 
would bring overall health center funding to $2 billion. This year we 
expect health centers to serve nearly 16 million people in every state 
across the country. This would be a tremendous boost for those lacking 
care in their communities and we wholeheartedly support the 
Administration's request, which would meet the 5-year goal of the 
President to serve an additional 6.1 million patients at 1,200 new 
health centers.
    Despite the expansion of the program, the demand for health centers 
is at record highs--in 2004, we estimate that there were over 430 
applications for new access points, only 91 of which received funding--
a 21 percent success rate, making health centers' funding on the same 
level with other competitively awarded grant programs under HHS. Indeed 
the application process is rigorous, and it should be. Health center 
program funds are awarded on a nationally competitive basis, ensuring 
that the highest possible quality projects receive approval. 
Organizations can apply for new access point funding (which is for new 
starts and new sites), or for expanded medical capacity funding to 
serve additional patients at existing sites, or to make new services 
such as dental or mental health services available to patients.
    Given the increasing need for health centers, we are extremely 
grateful that the President has committed to continue the growth of 
program by announcing a continuation of his Health Center Initiative 
into the future. This new announcement will focus on placing new health 
centers in poor counties that currently lack a health center site, a 
very ambitious goal. To begin this effort, the President has requested 
$26 million in FY 2006 to fund 40 new access points in high need 
counties.
    Given the President's new initiative, we have also examined the 
need in poor counties. NACHC and the George Washington University 
estimate that there are approximately 929 poor counties in need of a 
health center, from Kentucky to Michigan. Through this continued 
expansion, we believe that millions of additional patients would have 
access to care at a health centers. We commend the President for his 
continued support of the Health Centers program and we look forward to 
working with Congress to ensure it reaches every community in need.

Authorization of the Health Centers program
    As we look forward in the life of this 40-year experiment in 
community health empowerment, I note that the Health Centers program 
was last reauthorized in 2002, as a part of the Health Care Safety Net 
Amendments Act. The program is scheduled for reauthorization next year. 
Health centers are grateful to the Committee for its leadership role in 
strengthening and improving the Section 330 statute in 2002, further 
modernizing it to serve millions of new patients. Most importantly, in 
reauthorizing the program the Committee and Congress reaffirmed its 
four core elements, as it has consistently over the entire life of the 
program. These core elements, which have greatly contributed to its 
continued success, require that health centers: 1) be governed by 
community boards a majority of whose members are current health center 
patients, to assure responsiveness to local needs; 2) be open to 
everyone in the communities they serve, regardless of health status, 
insurance coverage, or ability to pay; 3) be located in high-need 
medically-underserved areas; and 4) provide comprehensive preventive 
and primary health care services.
    In reauthorizing these bedrock requirements, Congress sent a clear 
message that it sees patient involvement in health care service 
delivery as key to health centers' success in providing access and 
knocking down barriers to health care. Active patient management of 
health centers assures responsiveness to local needs. This begins with 
community empowerment, through the patient-majority governing board 
that manages health center operations and makes decisions on services 
provided, and leads to the fulfillment of the other core elements of 
the program.
    Through the direction and input of these community boards, health 
centers can identify their communities' most pressing health concerns 
and work with their patients, providers, and other key stakeholders to 
address these issues. This has been particularly valuable as health 
centers address and work to eliminate health disparities in their 
patient population. Board members with unique and direct community 
connections determine the best approach for removing barriers to health 
care, helping health centers to meet their patients where they are, not 
where they want them to be. The critical, distinguishing feature of the 
health center model of community empowerment is that the community has 
been directly involved in virtually every aspect of the centers' 
operations, and, in turn, each health center has become an integral 
part of its community, identifying the most pressing community needs 
and either developing or advocating for the most effective business or 
public policy solutions.
    I also want to expand on the other core features of the Section 330 
program, each of which has played a key role in the continued success 
of the Health Centers program. First, health centers are unique among 
health providers and systems in its statutory requirement that they be 
open to all in the community regardless of ability to pay. Like the 
community board requirement, this element is what links health centers 
the local neighborhoods they serve. There is no cherry picking at 
health centers; everyone--the uninsured, underinsured, those on 
Medicaid and Medicare, and those who have private coverage can receive 
quality health care at health centers. Consequently, health centers 
have a very diverse payor mix, in which the federal grant constitutes 
approximately 25% of center revenues. Medicaid and SCHIP make up 40% of 
revenue, private insurance constitutes 15%, and Medicare approximately 
6%. Health centers are interested in addressing health needs on a truly 
community-wide basis, and the requirement that they be open to all in 
the areas they serve allows them to do just that.
    Second, health centers are required under the statute to be located 
in high-need, medically-underserved areas. In reauthorizing the 
provision in 2002, Congress sought to ensure that much-needed, precious 
resources are allocated to the communities most in need of the services 
of a health center. Location of health centers in MUAs prevents the 
duplication of services, and establishes health centers in newly 
identified communities or expands the work of existing centers where 
there are well-documented gaps in care.
    Third, health centers are distinctive in the broad range of 
required and optional primary and preventive health and related 
services they provide under Section 330. This also includes a range of 
enabling services that ensure optimal access to care. In 2002, Congress 
not only reauthorized this requirement, but added to the list by 
including appropriate cancer screenings and specialty referrals as 
required services and behavioral health, mental health, substance 
abuse, and recuperative care treatment as optional services that health 
centers may provide.
    We believe that these core statutory requirements provide the 
crucial framework for success of the Health Centers program. The 
program simply would not be where it is today without these critical 
elements, and we commend Congress for safeguarding these requirements 
in every reauthorization of the Section 330 since its inception.

Need for Construction Assistance
    While health centers greatly appreciate the ongoing effort of the 
federal government to expand the reach of the program, we must 
acknowledge the growing need for support for facility construction, 
renovation, and modernization. Currently, we estimate that over two-
thirds of health centers need to upgrade, expand, or replace their 
facilities. Approximately 30% of health center buildings are more than 
30 years old and 65% operate in facilities that are more than 10 years 
old. The average cost of a facility project is estimated to be $1.8 
million, but projects can range in size from a small $400,000 project 
to a major $20 million effort. NACHC estimates that the current unmet 
need among health centers for capital projects is approximately $1.2 
billion.
    We strongly believe that the delivery of quality care to patients 
at health centers hinges greatly upon the quality of the facilities 
where care is provided. Prior to 1996, health centers could use a small 
portion of their grant funding for construction, renovation, and 
modernization of their facilities; elimination of this authority during 
the 1996 reauthorization and the failure to restore it during the 2002 
process has severely undermined health centers' ability to successfully 
address their most pressing capital needs. As just one example, wiring 
a health center for high-speed IT systems or secure wireless networks, 
which will be crucial as we move to electronic health records, is not 
an allowable grant cost today.
    Given this limited access to capital resources, health centers were 
very pleased that the Bureau of Primary Care Loan Guarantee Program was 
revised as part of the 2002 reauthorization to allow health centers to 
use loans not only for the development of managed care networks, but 
also for the purchase of equipment and to refinance existing loans 
previously made for facility construction. However, these funds still 
cannot be used for capital projects, and the guarantee covers only 80% 
of the value of the loan. Consequently, health centers participation 
has been limited, as many centers find it difficult to cover 20% of 
initial loan value, because of very slim financial margins as non-
profit organizations serving low-income, underserved populations.
    Despite this, health centers have worked hard to leverage resources 
to participate in other federal programs that offer capital assistance. 
Health centers in rural areas have been very successful in obtaining 
funding for facility improvement from the Department of Agriculture's 
Rural Housing Administration programs, which provide loan guarantees up 
to 90% of loan value. Health centers have had more limited success in 
accessing facility assistance through the Department of Housing and 
Urban Development (HUD) programs. If health centers were able to access 
HUD's loan guarantee and mortgage insurance, they would have an 
important tool with which to address facility concerns. We look forward 
to working with Congress to ensure that health centers are given the 
tools to expand, modernize and, when needed, to build new facilities in 
order to serve additional patients.
    Above all, we stand ready to assist the Committee as you move 
forward next year to reauthorize the Section 330 Health Centers program 
and its core elements.

The Importance of Health Centers and Medicaid
    I want to turn for a moment to the importance of Medicaid to the 
Health Centers program. Since their creation back in 1965, Medicaid and 
health centers have enjoyed a special relationship, as twin pillars of 
a broad strategy whose goal was to dramatically improve health care for 
poor, minority, and underserved Americans. Today, that unique 
relationship continues: just as health centers rely on Medicaid 
revenues, Medicaid beneficiaries rely on health centers for their care. 
Health centers are major providers of primary and preventive care 
services in Medicaid today, caring for nearly six million Medicaid 
recipients. In fact, Medicaid is currently the single largest 
beneficiary of health center services, as well as health centers' 
single largest source of financing. Keenly recognizing the importance 
of health center services to Medicaid beneficiaries, Congress in the 
Omnibus Budget Reconciliation Act of 1989 made the services of a 
Federally Qualified Health Centers (FQHCs) a guaranteed Medicaid 
benefit offered to beneficiaries in every State Medicaid program. Most 
important, Congress recognized and acknowledged that Medicaid 
reimbursement to FQHCs must be sufficient to assure that health centers 
were paid their full reasonable costs for serving Medicaid patients (so 
that they would not have to use their Public Health Service Act grant 
funds to subsidize low Medicaid payments). In the accompanying 
Committee report, lawmakers wrote:
          ``The Subcommittee on Health and the Environment heard 
        testimony that, on average, Medicaid payments to Federally-
        qualified health centers cover less than 70 percent of the 
        costs incurred by the centers in serving Medicaid patients. The 
        role of the programs funded under sections 329, 330, and 340 of 
        the PHS Act is to deliver comprehensive primary care services 
        to underserved populations or areas without regard to ability 
        to pay. To the extent that the Medicaid program is not covering 
        the cost of treating its own beneficiaries, it is compromising 
        the ability of the centers to meet the primary care needs of 
        those without any public or private coverage whatsoever.'' 
        (U.S. Congress, 1989, p. 415).
    In the 16 years since enactment of the FQHC Medicaid requirement, 
health centers have increased their capacity for uninsured care by 3 
million people--double the number of uninsured patients served in 1990, 
a rate of growth that is more than twice that for the nation's 
uninsured population. Alternatively stated, the Congress has received a 
higher rate of return on its annual appropriations investment in health 
centers because Medicaid cost-based reimbursement was in place.
    In 2000, under the leadership of former Republican Congressman (now 
Senator) Richard Burr and his Democratic colleague Congressman Edolphus 
Towns, and with the support of the overwhelming majority of the Energy 
and Commerce Committee, Congress reaffirmed the continued importance of 
adequate Medicaid reimbursement to health centers by creating a 
prospective payment system for FQHCs that (1) assures continued access 
to care for Medicaid patients, (2) protects Federal grant funds to 
provide care for the uninsured, and (3) gives state Medicaid agencies 
greater flexibility in designing their Medicaid programs and 
predictability in the cost of payments to health centers.
    Today, health centers continue to deliver significant savings to 
all payers, and especially to Medicaid. They control health care costs 
by providing primary and preventive services, reducing the need for 
more costly hospital care down the road. In South Carolina, for 
example, the state health department analyzed their annual costs for 
patients who have diabetes as a primary or secondary diagnosis. They 
found that patients of CareSouth, a health center system that had 
participated in the Diabetes Collaborative, had annual health costs of 
$343.00 per patient, while patients of other providers had a cost of 
$1,600 and specialists had a cost of $1,900. The health center had 
produced those results by reducing the average blood sugar level of 
their diabetic patients from 11 to 8--a 3 point drop (a 1 point 
decrease translates into a 17% decrease in mortality, an 18% decrease 
in heart attacks, and a 15% decrease in strokes) (Health Resources and 
Services Administration, 2003).
    In addition, according to another study, communities served by 
health centers had 5.8 fewer preventable hospitalizations per 1,000 
people over three years than other medically underserved communities 
not served by a health center (Epstein, 2001). Another study found that 
Medicaid beneficiaries who seek care at health centers were 22 percent 
less likely to be hospitalized for potentially avoidable conditions 
than beneficiaries who obtained care elsewhere (Falik, 2001) Several 
other studies have found that health centers save the Medicaid program 
more than 30 percent in annual spending per beneficiary by successfully 
managing their patients' care in ways that reduce the need for, and use 
of, specialty care referrals and hospital admissions (Braddock, 1994: 
Duggar, 1994a; Duggar, 1994b; Falik, 2001; Starfield, 1994; Stuart, 
1995; Stuart, 1993).

Growing Challenges
    Beyond paying its fair share for health center services provided to 
beneficiaries, Medicaid plays an important role by providing its 
beneficiaries access to comprehensive services beyond those available 
at health centers. However, as the health care needs of low-income 
individuals continue to grow, so do the challenges to health centers in 
sustaining their ability to provide quality care to Medicaid 
beneficiaries and other patients.
    Undoubtedly, one of the greatest of these challenges is the 
increasing number of states in the past few years that have sought to 
limit the scope and the breadth of services provided to enrollees in 
their state Medicaid programs as well as implementing so-called ``cost-
containment'' measures. Cutbacks in Medicaid eligibility levels or 
benefits, caps in enrollment, or forgone expansion plans naturally are 
presenting significant difficulties for health centers. What's more, 
these actions are occurring at the same time as employers are either 
shifting more of the rising cost of health insurance onto their workers 
or to dropping the coverage altogether. As other health care providers 
have begun cutting back on the uncompensated or charity care they 
provide, the result is that health centers are serving an ever-
increasing number of uninsured individuals who previously were covered 
under Medicaid or through their employers.
    Compounding this challenge is the increasing level of discretion 
being provided to the states in the operation of their Medicaid 
programs through HHS' issuance of Section 1115 waivers--under which 
State Medicaid agencies are permitted to reduce benefits, increase cost 
sharing requirements, and adjust reimbursement rates. Health centers 
have already experienced the impact of this increased state flexibility 
in some fifteen states during the 1990s. In most cases, the ability of 
health centers to care for both their Medicaid and their uninsured 
patients during this period was negatively impacted when their Medicaid 
payments were reduced below the cost of providing care. In many of 
those states, other providers decided not to participate or limited 
their care to only a few Medicaid patients, leaving health centers as 
one of the few remaining sources of primary and preventive care to this 
population.
    While these and other changes in the health care system have put a 
tremendous strain on the overall Health Centers program, health centers 
remained committed to providing access to care for everyone that walks 
through their doors, regardless of their health status, insurance 
coverage, or ability to pay for services. Put simply, health centers 
will continue to provide care for those whom other providers cannot or 
will not serve.

Health Centers and Medicaid Reform
    As Congress moves forward on considering ways in which to reform 
Medicaid, it is critical that it keep in mind the important role health 
centers play in their communities and the unique relationship between 
these centers and the Medicaid program. Indeed, as the Kaiser Family 
Foundation points out, ``[t]he fundamental interrelationship between 
Medicaid and health centers . . . suggests, by extension, that dynamics 
in one domain are bound to have important impacts in the other.'' It is 
therefore imperative that lawmakers working on Medicaid reform consider 
the impact of any changes in that program on the ability of health 
centers to fulfill their public policy mission.
    All health care providers must seek to cross-subsidize when 
payments from a third party source are insufficient. However, unlike 
most physician practices that have paid for indigent care services by 
cross-subsidies from their commercial payers, health centers do not 
have a substantial commercially insured patient base from which to 
draw. Evidence abounds that the traditional response by physicians and 
other providers to reduced Medicaid or Medicare payments has been to 
restrict or reduce the number of publicly-insured patients they serve, 
often accompanied by a reduction in the amount of indigent care they 
provide as well.
    Because of the shortage of commercial payments, health centers have 
three options if Medicaid, their largest third party payer, does not 
cover the cost of providing care to its beneficiaries. They can (1) 
reduce health care services or reduce the number of health care access 
points, (2) close their doors entirely--likely resulting in communities 
having little or no access to primary health care services--or (3) 
cover Medicaid shortfalls with their PHSA grants intended to defray the 
cost of caring for the uninsured.
    Ensuring the adequacy of payments under Medicaid, regrettably, is 
not a new issue for health centers. It in fact has been an ongoing 
concern since the 1990s, during which the relationship between health 
centers and Medicaid experienced significant challenges as a result of 
the increased use of Section 1115 waivers in many states. In most cases 
throughout this period, the ability of health centers to care for 
Medicaid and uninsured patients was severely damaged when Medicaid 
payments were cut to only a fraction of the cost of providing care. 
Moreover, in many of those states, other providers refused to 
participate or limited their care to only a few Medicaid patients, 
leaving health centers as one of the few remaining sources of primary 
and preventive care to this population.
    One of the states in which health centers were most impacted during 
this period was Tennessee. In 1998, the certified public accounting 
firm of Goldstein, Golub, Kessler and Company (GGK) examined the impact 
of low-Medicaid payments on health centers in the state under the 
TennCare program. In GGK's study they found that, while the number of 
TennCare visits to health centers increased, the gap between revenues 
and costs per TennCare visit widened, resulting in significant revenue 
losses for health centers.
    By 1996, Tennessee's health centers were losing almost $28 per 
TennCare patient visit. This created an unfunded gap in reimbursement 
that forced health centers to cover these losses out of their PHS Act 
grants. The result was a reduction in the number of uninsured persons 
receiving care at Tennessee's health centers, and the virtual 
elimination of all ``supplemental'' services, including health and 
nutrition education, parenting classes and community outreach--all of 
which have been proven highly effective in improving the overall health 
of patients.
    Increasingly, health centers today continue face many of the same 
challenges with 1115 waivers as they did in the 1990s. Originally 
created to allow states to try innovative health care approaches, many 
recently approved waivers have instead been used to limit benefits, 
increase cost sharing, and reduce enrollment. In some cases, Medicaid 
provider payments have been cut dramatically, causing other providers 
to severely limit or end their participation in Medicaid, and leaving 
health centers--whose mandate is to serve everyone regardless of 
ability to pay--as one of the few remaining sources of primary and 
preventive care to this population. If states are permitted to cut 
Medicaid payments to health centers under these waivers, their ability 
to care for both Medicaid-covered and uninsured patients would be 
severely damaged. For these reasons, health centers believe strongly 
that Medicaid waivers should be approved only if they ``promote the 
objectives of'' Medicaid, and do not erode the program's ability to 
provide comprehensive services to beneficiaries.
    As Congress begins to consider reforms to Medicaid, it will be 
important for lawmakers to appreciate the integral role of health 
centers and other core safety net providers in Medicaid, and ensure 
that these providers are adequately paid for the reasonable costs of 
health care they provide to enrollees. We look forward to continuing to 
work with Congress in these efforts.

The Importance of Ensuring Future Health Centers Success
    Health centers have successfully stood the test of time over the 
past four decades, not only because they are rooted in the communities 
they serve, but because of their attention to continuous quality 
improvement and technical assistance. Since 2002, health centers have 
expanded to serve an additional 4 million people, adding approximately 
3,000 clinicians and several thousand other staffers at centers across 
the country. With hundreds of new health centers, staff and patients, 
it is imperative that health centers, whether brand new or established, 
receive the technical assistance and training required to successfully 
expand to provide high quality care.
    NACHC and State and Regional Primary Care Associations (S/R PCAs) 
remain fully committed to and engaged in technical assistance 
activities with health centers. We have long recognized that the 
success of the program--and current and future expansion initiatives--
depends on the ability of health centers to carry out the requirements 
of the statute and program expectations.
    While HRSA has restructured the availability of technical 
assistance through its project officers, and decreased funding 
available for on-site assistance for many new centers, HRSA has been 
able to help health centers plan and implement effective expansion 
strategies through a cooperative agreement with NACHC and grants to S/R 
PCAs,. NACHC and the PCAs also conduct trainings for health center 
staff regarding financial management, clinical practice guidelines, 
regulatory and legal requirements and consumer board trainings. NACHC 
also assists communities seeking to apply for new health center funding 
to meet the federal requirements of the grant.
    I am very pleased to report that, over the past few years, NACHC 
has dramatically increased the frequency and types of education, 
training and technical assistance it provides. Indeed, since the 
beginning of the expansion initiative, NACHC has conducted 44 health 
center grant proposal trainings, some in cooperation with the Bureau of 
Primary Health Care, PCAs and other organizations, and involving over 
3000 individuals interested in starting a health center. In addition to 
onsite trainings conducted at our two annual conferences, NACHC has 
also conducted trainings in 12 states. We average 300 technical 
assistance calls a month. We have also held six onsite orientations for 
new health centers, and six new start teleconference sessions, 
providing training for approximately 1100 individuals who are on the 
staffs and boards of the newly-funded health centers in their 
communities.
    Additionally, NACHC has conducted 35 new health center medical 
director orientation sessions, providing intensive training to over 
1100 medical directors representing 1000 health centers, since 2001. 
Over this same period of time, our clinical team has also conducted 
quality management trainings for approximately 720 health centers and 
their clinicians. NACHC also provides trainings and technical 
assistance on other key aspects of health center operations, including 
board governance, financial management, corporate compliance, and 
strategic business planning. We stand ready to continue our activities 
in all of these areas to ensure that health centers can build on their 
record of success over the past 40 years and in this current expansion 
effort.

Conclusion
    Health centers appreciate the unwavering support of Congress for 
the program over the past four decades. In the past 40 years, health 
centers have produced a return on the federal investment in the 
program, by providing access to care and a health care home to millions 
of patients in medically-underserved communities across the country. 
Because Congress has continued to reaffirm the core elements of the 
program; that health centers are open to all, run and controlled by the 
community, located in high need medically-underserved areas, and 
provide comprehensive primary and preventive services, the program has 
successfully faced challenges posed by our ever-changing health care 
system. On behalf of health centers across the country, their staffs, 
and the patients they serve, we stand ready to work with you to ensure 
that health centers continue to provide a health care home for everyone 
who needs their care. Thank you once again and I would be happy to 
entertain questions from the committee.

    Mr. Whitfield. Thank you, Mr. Hawkins.
    And Dr. Goetcheus, you are recognized for your opening 
statement. And be sure and turn your microphone on.

                TESTIMONY OF A. JANELLE GOETCHEUS

    Ms. Goetcheus. Thank you for holding these hearings. Thank 
you for the opportunity to share today.
    I am Janelle Goetcheus. I am the Medical Director of Unity 
Health Care, which is a federally qualified health center here 
in Washington. Unity operates a large number of community 
health centers throughout DC, last year seeing over 55,000 
individual patients, representing 240,000 patient visits.
    Unity began in 1985 as a health care for the homeless 
project. And a lot we did here in DC was to place health 
services directly in the shelters. One of those shelters is 
just a few blocks away from here at 2nd and D. I think some of 
the committee members have been there to visit, and we would 
welcome any others who would want to. A thousand people in one 
building. We have a health service that runs 6 days a week. It 
is constantly busy. We have another outreach van with a medical 
team that goes along Pennsylvania Avenue and some of the parks 
in the adjacent area looking for homeless folks who need access 
into health care.
    But through the years, we have spread into community health 
centers throughout the District. And what we have known is it 
was more than just a doctor's office visit that we needed to 
provide. We needed to provide a comprehensive set of services, 
wrap-around services, and so we include mental health and 
dental and pharmacy. And one of the most important ones is 
social work. I often say, as a physician, I could never 
practice without social workers with me. For example, this 
week, I was with a person who came in who had cancer and was 
also mentally ill. And I needed to work with a social worker 
myself to try to get Medicaid for that person in order that I 
could get chemotherapy for them.
    I guess, if anything I would like to share today, and I 
have heard it here today, is in terms of the quality of the 
health care that happens in these community health services. I 
really do think it is equal to any care that you would get in 
any other place of choice. One of the things that has helped 
has been these collaboratives, and you have heard some mention 
of that today.
    We participate in a diabetic collaborative. What that means 
is if a patient comes in to see me who has diabetes, they don't 
just see me as a primary care provider, they also see the nurse 
care manager who sits with the patient, teaches them about 
their illnesses, and helps them set goals for themselves. And 
we have, and the Bureau of Primary Health Care, has the 
outcomes related to these initiatives and really can show that 
we have decreased hospitalizations, decreased emergency room, 
and decreased all of the complications that diabetes can bring, 
the early amputations, the early dialysis.
    Another great source of help has been the National Health 
Corps, and I think you would hear this from all of us at the 
table. We have, for instance, in some of the poorest areas here 
in DC, we have six health services out there. All of them have 
National Health Corps physicians. Two of those have been out 
today making home visits in some of the housing projects, 
accessing elderly people who otherwise never would have health 
care.
    We also multiply. We take the Federal dollars and we 
multiply them in various ways. For example, United Health Care 
this year gave us a $1 million grant, and it will be a multi-
year grant to establish improved care at some of our community 
health centers in these areas. NIH has also been a great 
partner. They provide care not only on our specialists but also 
access patients into their own campus. Volunteers also help us. 
We look forward to hopefully further legislation that would 
allow the Federal tort to cover volunteer physicians, 
especially specialists that we often have a great deal of 
difficulty finding.
    We face lots of challenges. You have heard today in terms 
of the base funding issues, we have benefited by the expanded 
grants that have come. What we have done from one of our grants 
is we have gone into the jail, because here in DC, there are 
over 50 people a day who are coming out of DC jail into the 
community and another 2,400 that are coming from Federal 
prisons around the Nation and coming back into the District, 
and we are trying to connect those folks into ongoing primary 
health care.
    But I think most of all what we do is bring hope to people, 
not only good primary care, but we bring hope. One of those I 
think most often of is my friend Robert who I met not very far 
from here one night, a very cold night, and they were standing 
around a barrel. And they had built a fire with just some 
papers to try to keep warm, a group of men. He had a blood 
pressure of 190 over 135, which is dangerously high, and he is 
a 54-year-old gentleman. He had worked day labor most of his 
life and had gotten to that age and couldn't do the heavy 
lifting anymore, and so he was homeless. But now, instead of 
around that fire barrel, he was able to move into his own 
apartment. So I think these community health centers bring good 
primary care, but they bring hope and they bring hope to many, 
many Roberts around this Nation.
    Thank you.
    [The prepared statement of A. Janelle Goetcheus follows:]

Prepared Statement of A. Janelle Goetcheus, Chief Medical Officer Unity 
                           Health Care, Inc.

    Good afternoon, my name is Dr. Janelle Goetcheus, Chief Medical 
Officer of Unity Health Care, Inc. (Unity), Washington, D.C., a 
Federally Qualified Health Center (FQHC) that operates a large network 
of health centers which provided health care services to 55,500 patient 
in 2004, generating over 240,000 patient encounters.
    It is a privilege to testify before this Sub-Committee and I thank 
you Mr. Chairman for the opportunity to do so.
    I have over 20 years of experience serving the medically 
underserved in Washington, D.C., and I wish to speak to you today about 
the unique value of a community health center in addressing the health 
care needs of the medically underserved. Let me first tell you about 
Unity, and the people we serve. Unity began as a private non-profit 
with funds from the Robert Wood Johnson/Pew Charitable Trust providing 
health care services to homeless persons. In 1987 we were one of the 
first federally funded programs under the Stewart B. McKinney Homeless 
Assistance Act. Over time we expanded our services to include provision 
of health services in neighborhood/community settings. Today we are the 
recipient of federal grants under the Community Health Center 
Consolidated Act, with grants to serve fixed populations in community 
health centers, homeless persons and we also receive a school based 
health grant.
    Unity provides primary health care services, mental health 
services, case management, pharmacy, dental, WIC and HIV/Hep-C services 
throughout the eight (8) wards of the District of Columbia. We do this 
in fixed sites, homeless shelters, and outreach mobile vans. We have a 
total of 31 access points throughout our Citywide network.
    Of the approximately 55,500 persons served by Unity in 2004 over:

 75% of them were at 200% or lower of the Federal Poverty Level, most 
        of them were actually 100% or below,
 74% were uninsured
 16% were recipients of Medicaid
 10% Medicare and other
 of our total population served 21% were homeless (on the streets or 
        in shelters)
    Of the homeless persons we see approximately:

 36% are substance abusers
 19% have mental health issues; much higher percentage for women
 16% are dually diagnosed
 20% are veterans, and
 12% are person living with HIV/Aids.
    The ethnic make up of Unity's population is as follows:

 77% are African American
 18% are Latino
 4% other
 21% are best served by a language other than English.
    I share these statistics only to point out that health centers are 
adept at cultural competence, able to recognize the unique needs of 
their patients, address them in their own language and culture, and 
thus remove barriers to care that are often present when serving a 
mixed racial, ethnic and low income population.
    It is important to recognize that health centers provide 
comprehensive primary health care. This federal requirement to provide 
comprehensive services enables patients to have the majority of their 
health care needs addressed in a one stop setting. The comprehensive 
nature of the care provided goes far beyond a doctors visit. My role as 
a provider in the health process is important, but I could not practice 
medicine without the support of a myriad of other providers/services 
that go into this healing process. Patients we serve have a host of 
problems, beyond chronic illness. Social workers are an essential part 
of the provision of health care in a community health center. They 
assist the provider with arranging for entitlements, and in some cases 
housing, since over 20% of our patients are homeless, or living in 
shelters, and many of them suffer from chronic illnesses. As a primary 
care provider, I often rely on the psychiatrist or mental health worker 
on staff to link that patient to them so that they can begin to address 
underlying problems that often go much deeper than the initial 
presenting symptom. Our patients experience trauma, domestic violence, 
a family facing eviction, a person with a cocaine addition, a grieving 
mother; all of these issues can be addressed in a comprehensive manner 
within a community health center setting.
    As the Bureau of Primary Health Care (BPHC) increasingly encourages 
health center grantees to participate in the Disease Collaboratives, 
the role of comprehensive health care, and coordinated care management 
is further emphasized. The Disease Collaboratives are a model of care 
that places the patient at the center of the care, and he/she is 
supported in their goal of self-management by a Care Management Team 
often consisting of a nurse care manager, a social worker, the 
provider, and other support personnel as needed, such as mental health 
therapist, pharmacist and speciality providers, i.e. ophthalmologist, 
podiatrist, in the case of diabetes.
    The Chronic Disease Collaboratives nationally have shown that even 
an indigent and hard to manage population can still generate good 
health outcomes and improve health status if the care is provided in a 
coordinated manner. The community health center is the ideal location 
for the implementation of these Disease Collaboratives because most of 
the services are on site and the support offered by the overall care 
team goes far beyond the type of care that an individual physician 
could provide alone. The clinical data collected through these Disease 
Collaboratives substantiates the effectiveness of this model of care.
    Patients who participate in this model of care have expressed their 
satisfaction with it, and many for the first time are taking ownership 
of their health status and realize that their own self involvement, and 
reliance on support from the care management provided between physician 
appointments plays a crucial role in their health status.
    Unity Has in addition, to the care management structure outlined 
above, launched its own initiative called ``open access'' or ``same day 
appointment''. This process again calls for a radical re-design of the 
traditional doctors office visit. A pilot program, with guidance from 
the Institute for Health Care Improvement (IHI), Unity staff and 
providers are accommodating patients within 24 hours of their request 
for care. Traditionally patients requesting care would call up and 
unless it was an emergency, would be given an appointment on the next 
available opening which could be weeks or months away. The theory 
behind ``same day access'' is to ``do today's work today'', to address 
the needs of the patient immediately, and to reduce waste and lost time 
both for the patient and the staff of the health center. This 
initiative is now operative in three (3) of Unity's major sites with 
plans to expand it to the whole network over time.
    I point this initiative out as another example of the creativity 
and adaptability of health centers in addressing the needs of their 
community, as well as pointing out that health centers are in the 
forefront of the provision of state of the art health care.
    Health Centers are extremely creative in their ability to generate 
revenues to address the ever increasing number of uninsured and working 
poor who are coming through their doors. We multiply the Federal 
dollars made available through the federal grant.
    Unity like all other Community Health Centers faces this challenge 
on a daily basis. We must constantly insure that our ability to survive 
as a private non-profit is essential, so that we can continue to remain 
faithful to our mission, a mission ``to provide health care to all 
regardless of ability to pay''. Unity currently participates in a 
District of Columbia sponsored Alliance program, which is essentially a 
local sponsored uncompensated care pool for uninsured patients under 
200% of poverty. We rely on Medicaid, and a vital component of the 
Medicaid program for us, and for all health centers is the Prospective 
Payment System (PPS). The PPS system is a method which enables health 
centers to be compensated for the care they provide to Medicaid 
patients at a reasonable rate of reimbursement. In a time of budget 
crunch at the Federal and State levels it is important that the PPS 
system remains in place for the viability of health centers.
    While we are extremely grateful for the President's Five Year 
Initiative to expand access to care through Community Health Centers it 
is also important to point out that Unity's base grant has remained 
stagnant for almost five (5) years. The President's Initiative 
increases access through ``new starts'' and ``new access points'' but 
does not provide for any base adjustment to existing grantees like 
Unity, whose numbers of uninsured are rising. Unity like most health 
centers is creative in building partnerships with other entities, 
hospitals, health care institutions and corporations to support the 
strategic interests of their mission. One such partnership of which 
Unity is extremely proud is our partnership with United Health Care 
(United), Minnesota. This joint venture results in an annual investment 
of $1,000,000 over several years by United to one of Unity's health 
centers to develop a ``Center of Excellence'' where the model of care 
management can be implemented in treating several chronic diseases, 
such as diabetes, cardio-vascular, and asthma, as well as the 
development of systems to insure improved outcomes in the area of pre-
natal care. This ``Center of Excellence'' drawn from many of the 
concepts of the Institute for Health Care Improvement (IHI) will serve 
as a model for further expansion of the concept throughout Unity. 
Without the financial support of United Health Care, Inc. Unity could 
not from its existing revenue undertake such a broad based initiative.
    For over twenty years it has been my privilege to serve the 
patients who come to our health centers. I am grateful for how they 
challenge us, and for the trust they place in us. I have also been 
privilege to work alongside a committed group of health care 
professionals, physicians, nurse practitioners, physician assistants, 
specialists, nurses and social workers. Their commitment to Unity and 
indeed to the health center movement nationwide is the soul of our 
success. Many of these professionals come to us through the National 
Health Service Corps (NHSC) or the Corps Loan Re-Payment Program. This 
is a vital cog in the machine of recruitment and retention for our 
health centers. At Unity we witness young African American physicians 
returning to their neighborhoods giving back to the very people who are 
their neighbors. Their willingness to come to Unity, often for salaries 
much less than could get in the commercial market, is another example 
of the unique role that health centers play in the community, because 
of their ability to attract such dedicated, committed professionals.
    I thank you again for allowing me to testify before you Sub-
Committee and I am available to answer any questions.

    Mr. Whitfield. Thank you, Dr. Goetcheus.
    And Mr. Manifold, thank you for joining us. As you can 
tell, our schedule is so chaotic around here, we do appreciate 
your coming in. I introduced you earlier, but I am going to 
call on Dr. Shi to go on and make his statement, and then we 
will go back to you.
    Would you turn your microphone on?

                     TESTIMONY OF LEIYU SHI

    Mr. Shi. Thank you, Mr. Chairman. Thank you, members of the 
subcommittee for inviting me to testify at your hearing, a 
review of community health centers: issues and opportunities.
    My name is Leiyu Shi. I am a faculty member of the Johns 
Hopkins Bloomberg School of Public Health. I am also co-
director of the Johns Hopkins Primary Care Policy Center for 
the under-served populations.
    For the past 15 years, I have conducted research related to 
various aspects of community health centers. Today, I would 
like to share with you some of my and our team's research work 
related to the role of health centers in improving health care 
access, quality, and outcome for the Nation's vulnerable 
populations, particularly the uninsured and racial/ethnic 
minorities.
    Due to time constraints, I will highlight the findings in 
my presentation and the PowerPoint slides provide the specifics 
of the findings. Data from which these studies were conducted 
come from a variety of sources, including that regularly 
submitted by the federally qualified health centers, regular 
surveys targeting health centers, new data collection by myself 
or our research team, and also existing national surveys. The 
published studies are listed at the end of the handouts and are 
available upon request.
    I would like to start by highlighting the profile of health 
center patients. Those are in part one of the handouts.
    Health center patients are predominantly racial/ethnic 
minorities. Over 64 percent of those are minorities. Health 
centers rely heavily on Medicaid funding. Indeed, Medicaid is 
the single most important funding for health centers for the 
past 14 years. Health centers are primary care safety net 
providers for the uninsured, as over 41 percent of health 
center users are uninsured. They are also primary care safety 
net providers for the poor, as over 65 percent of health center 
users are below the Federal poverty line.
    Health center patients are sicker than patients seen in any 
other settings in the country, except emergency rooms. I would 
like to give some examples of research comparing access to 
primary health care between health center patients and patients 
seen in other settings. Those are in part two of the power 
point handouts.
    Among the uninsured patients, those seen by health centers 
are more likely to have usual source of care than those seen in 
any other places, 97.5 percent versus 64.9 percent. Health 
center uninsured patients also have more doctor visits than 
uninsured patients seen elsewhere, 56 percent versus 33.3 
percent with four or more visits per year. Health center 
patients even outperform nationally privately insured patients 
on certain access indicators. For example, 97.4 percent health 
center uninsured and 99.3 percent health center Medicaid 
patients have usual source of care compared to 91.2 percent 
nationally privately insured with usual source of care. Over 54 
percent of health center uninsured and 65 percent health center 
Medicaid patients have four or more visits per year compared to 
55 percent of nationally privately insured patients with four 
or more doctor visits per year.
    I would like to now provide examples of research comparing 
access to preventive health care between health center patients 
and patients seen elsewhere. Those are in part three of the 
handouts. In terms of cancer screening, pap tests among health 
center females remain significantly higher than females below 
200 percent Federal poverty line in the Nation. Mammography 
screening among health center females remains significantly 
higher than the females below 200 percent Federal poverty line 
in the Nation. Health center diabetic patients use more 
preventive services, including eye exam, foot exam, flu shot, 
than diabetic patients nationwide. Health center uninsured and 
Medicaid adults are more likely to receive health promotion 
counseling, including smoking, alcohol, exercise, diet, drugs, 
STDs, than U.S. Medicaid and uninsured patients seen elsewhere.
    Let us turn to examples of research comparing quality of 
health care between health center patients and patients seen 
elsewhere. Those are in part four of the slides. Health center 
Medicaid patients are significantly less likely to be 
hospitalized for potentially avoidable conditions than those 
obtaining care elsewhere. Health centers patients receive 
comparable or even better quality primary care services than 
managed care HMO patients, especially in the comprehensiveness 
of services provided and the continuity of care.
    Finally, I would like to summarize that the above examples 
of research indicate that health centers provide better access 
to and quality of care for the Nation's uninsured and low-
income minorities than elsewhere for the same vulnerable 
groups. Their continuous support is critical to the Nation's 
uninsured and low-income individuals. Providing basic primary 
health care services to all is a valued national health policy 
objective.
    Thank you very much.
    [The prepared statement of Leiyu Shi follows:]

  Prepared Statement of Leiyu Shi, Co-Director, Johns Hopkins Primary 
     Care Policy Center for Underserved Populations, Johns Hopkins 
              University Bloomberg School of Public Health

    Distinguished representatives, dear ladies and gentlemen, thank you 
for inviting me to testify at your hearing titled ``a review of 
community health centers: issues and opportunities.''
    My name is Leiyu Shi. I am a faculty member from the Johns Hopkins 
Bloomberg School of Public Health. I am also Co-Director of the Johns 
Hopkins Primary Care Policy Center for the Underserved Populations. I 
have a doctorate in public health and masters in public administration 
and business administration. For the past 15 years, I have conducted 
research related to various aspects of community health centers. Today 
I would like to share with you some of my and our team's research work 
related to the role of health centers in improving access, quality, and 
outcome for the nation's vulnerable populations particularly the 
uninsured and racial/ethnic minorities. Due to time constrain, I will 
highlight the findings in my presentation. The attached power point 
slides provide the specifics of the findings. Data from which these 
studies were conducted come from a variety of sources including data 
regularly submitted by federally qualified health centers (e.g., the 
Uniform Data System), regular surveys targeting health centers (e.g., 
Health Center User/Visit Survey), new data collection by myself or our 
research team (e.g., Sentinel Centers Network Project, numerous surveys 
of health centers), and existing national surveys (e.g., National 
Health Interview Survey). The published studies are listed at the end 
of the slides and are available upon request. Further questions, 
comments, or discussions can be directly to me through e-mail at 
[email protected].
    I'd like to start by highlighting the profile of health center 
patients (see Part I of the power point slides). Health center patients 
are predominantly racial/ethnic minorities (64%). Health centers rely 
heavily on Medicaid funding (33%). Health centers are primary care 
safety-net providers for the uninsured (41%) and the poor (65% below 
FPL). Health center patients are sicker than patients seen in other 
settings.
    I'd like to give some examples of research comparing access to 
primary health care between health center patients and patients seen in 
other settings (see Part II of the power point slides). Among the 
uninsured patients, those seen by health centers are more likely to 
have usual source of care than those seen elsewhere (97.5% vs. 64.9%). 
Health center uninsured patients also have more doctor visits than 
uninsured patients seen elsewhere (56% vs. 33.3% with 4 or more visits 
per year). Health center patients even outperform nationally privately 
insured patients on certain access indicators. For example, 97.4% 
health center uninsured and 99.3% health center Medicaid patients have 
usual source of care compared to 91.2% nationally privately insured 
with usual source of care. Over 54% of health center uninsured and 
64.6% of health center Medicaid patients have 4 or more doctor visits 
per year, compared to 54.9% of nationally privately insured patients 
with 4 or more doctor visits per year.
    I'd like to provide examples of research comparing access to 
preventive health care between health center patients and patients seen 
elsewhere (see Part III of the power point slides). In terms of cancer 
screening, pap tests among health center females remain significantly 
higher than females below 200% FPL in the nation. Mammography 
screenings among health center females remain significantly higher than 
the females below 200% FPL in the nation. Health Center diabetic 
patients use more preventive services (including eye exam, foot exam, 
flu shot, pneumovax) than diabetic patients nationwide. Health center 
uninsured and Medicaid adults are more likely to receive health 
promotion counseling (including smoking, alcohol, exercise, diet, 
drugs, STDs) than U.S. Medicaid and uninsured patients).
    Let's turn to examples of research comparing quality of health care 
between health center patients and patients seen elsewhere (see Part IV 
of the power point slides). Health center Medicaid patients are 
significantly less likely to be hospitalized for potentially avoidable 
conditions than those obtaining care elsewhere. Health centers patients 
receive comparable or even better quality primary care services than 
managed care (HMO) patients especially in the comprehensiveness of 
services provided and the continuity of care.
    Finally, I'd like to share examples of research comparing outcomes 
of care between health center patients and patients seen elsewhere (see 
Part V of the power point slides). Babies born to health center mothers 
enjoy lower rates of low birth weight than those born elsewhere. There 
is significantly less racial disparity in low birth weight rate within 
health centers than within the nation as a whole (3.25 times vs. 5.6 
times). Had the health center program become available to all the low-
income blacks in this country, 17,107 fewer low birth weight incidences 
would result annually.
    In conclusion, I would like to emphasize that the above examples of 
research indicate that health centers provide better access to and 
quality of care for the nation's uninsured and low-income minorities 
than elsewhere for the same vulnerable groups. Their continual support 
is critical to the nation's uninsured and low-income individuals if 
providing basic primary health care services to all is a valued 
national health policy objective.

    Mr. Whitfield. Thank you, Dr. Shi.
    And at this time, Mr. Manifold, as you are aware, this is 
an investigative hearing, and I would like to swear you in for 
your testimony.
    [Witness sworn.]
    Mr. Whitfield. Thank you very much, and you may proceed 
with your opening statement.

                TESTIMONY OF RODERICK V. MANIFOLD

    Mr. Manifold. Thank you for your indulgence, Mr. Chairman, 
members of the committee.
    Thank you for inviting me to testify before you today about 
Central Virginia Health Services, our community health center 
in central Virginia. I am Rod Manifold, and I am the CEO of 
CVHS. Our health center really got started back in 1968 when a 
lady named Buelah Wiley slumped down in a chair at the local 
Community Action Program offices and said, ``We should not have 
to drive an hour and a half one way to take a child to see the 
doctor.'' From that moment, community activities began that 
culminated in the establishment in 1970 of Central Virginia 
Community Health Center, now called Central Virginia Health 
Services.
    Today, our health center is a 10-site family of health 
centers serving 18 counties and cities that are located from 
the northern neck of Virginia to the city of Petersburg, south 
to the North Carolina State line and west as far as Albemarle 
County and Charlottesville. Central Virginia Health Services is 
the oldest community health center organization in Virginia and 
is celebrating its 35th year of operation in 2005. Last year, 
Central Virginia served over 34,000 people, and it is still 
operated as it was in 1970 by a board of directors made up of 
community members that are committed to its mission. In fact, 
63 percent of our board members are users of our services. This 
community representation tempered with the responsibility for 
the mission of the entire health center is one of the hallmarks 
of the health center movement.
    As in the 1970's, poverty and lack of access to care are 
still primary reasons for the existence of Central Virginia and 
the many other health centers around Virginia and around the 
country. Lack of income, racial disparities, and lack of access 
are all reasons why health centers are needed in central 
Virginia. In the Central Virginia Health Services sites in 
2004, more than half of our patients were minorities, 30 
percent were below the Federal poverty guideline, and 31 
percent were completely uninsured.
    As you may know, community health centers do charge fees to 
all of these patients. These are not free clinics, because 
Congress in its wisdom set them up to collect fees on a sliding 
scale basis from each and every one of our patients. All 
consumers of our services participate in funding their 
community health center based upon their ability to pay. It 
gives them a kind of ownership of the health center in their 
community, and it clearly states to them that these services 
have a value.
    In recent years, under the President's initiative to expand 
health centers, Central Virginia, like many other health 
centers around the country, has been able to expand services 
and add additional access points for care in many communities. 
We competed for and received a grant for a new access point in 
Charles City County that has helped create a totally new health 
center with medical, dental, and behavioral health services in 
a county that previously had one part-time doctor serving the 
community only three half-days per week and no dentist or 
psychologist. Additionally, we receive grants to expand medical 
capacity in two existing health centers, and we also received a 
grant to add dental services in a health center that was 
previously providing only medical services. All of these 
additional services and sites would not have been possible 
without the HRSA grants awarded under the President's 
initiative.
    In addition to thanking this subcommittee for its support 
of the expansion of the program, I would be remiss if I didn't 
also discuss the critical importance of the Medicaid program to 
our health center. We respect that your committee has a very 
difficult challenge in looking at reductions in the Medicaid 
program. That being said, we do want to make one thing very 
clear. The prospective payment system that Congress has given 
to health centers because of our unique place in the safety net 
is very important to health centers. We know that our patients 
in that safety net will be our patients regardless of what sort 
of payment methodology is created here. Obviously, if the PPS 
was tinkered with, health centers could suffer greatly. In 
addition, if Medicaid primary care benefits are reduced, our 
patients will still need those services. We will just have to 
use the Federal grant, which is designed to serve the many 
uninsured patients in our centers, to subsidize the Medicaid 
program and its patients.
    In conclusion, Mr. Chairman and members of the 
subcommittee, I appreciate the opportunity to discuss our work 
at Central Virginia Health Services, and we appreciate the 
recent expansion opportunities provided to all health centers. 
We also stand ready to work with you as you debate changes in 
the Medicaid program that may have a significant impact on our 
operations and the patients we serve.
    Thank you for your time, and I am happy to answer any 
questions you may have.
    [The prepared statement of Roderick V. Manifold follows:]

Prepared Statement of Roderick V. Manifold, Executive Director, Central 
                     Virginia Health Services, Inc.

    In 1968 a staff member named Beulah Wiley of the Community Action 
Program in Cumberland County, Virginia returned from taking a child to 
the doctor at the University of Virginia Medical Center. She reportedly 
slumped down in a chair at the CAP offices and said, ``We should not 
have to drive an hour and a half, one way, to take a child to see the 
doctor.'' From that moment community activities (and I emphasize that 
word community) began that culminated in the establishment in 1970 of 
Central Virginia Community Health Center, located in Buckingham County 
and serving three counties.
    Today that health center has grown to a ten-site family of health 
centers serving 18 counties and cities that are located from the 
Northern Neck of Virginia to the city of Petersburg, south to the North 
Carolina state line and west as far as Albemarle County and 
Charlottesville. Central Virginia Health Services, as it is called 
today, is the oldest community health center organization in Virginia 
and is celebrating its 35th year of operation in 2005. Last year 
Central Virginia served a diverse population of over 34,000 people in 
rural and urban sites across its many community service areas. It is 
still operated, as it was in 1970, by a board of directors made up of 
community members that are committed to its mission. In fact, as many 
of you may know, at least 51% of the board members of a community 
health center must be consumers of the health center's services. Last 
year, 63% of our board members were users of our services. This 
community representation tempered with responsibility for the mission 
of the entire health center is one of the hallmarks of the health 
center movement. Being patients as well as leaders of the policy-
setting board makes our members the best possible representatives of 
their communities and of the thousands of patients we serve.
    As in the 1970's, poverty and lack of access to care are still 
primary reasons for the existence of Central Virginia and the many 
other health centers around Virginia and around the country. The high 
poverty rate, severe health care disparities, and the lack of access to 
the health care system are all reasons why health centers are needed in 
central Virginia. In the Central Virginia Health Services sites in 
2004, for example, more than half (51%) of our patients were 
minorities, 30% were below the federal poverty guideline, and 31% were 
completely uninsured. These numbers of high need are not unusual for a 
community health center. In fact, in one of our urban centers, over 50% 
of our patients are uninsured and fully 70% are below the federal 
poverty guideline.
    As you may know, community health centers do charge fees to all of 
these patients. These are not free clinics, because Congress in its 
wisdom set them up to collect fees on a sliding scale basis from each 
and every one of our patients. All consumers of our services 
participate in funding their community health center based upon their 
ability to pay. It gives them a kind of ``ownership'' of the health 
center in their community, and it clearly states to them that these 
services have a value. Last year Central Virginia Health Services 
collected from our various payer sources (not including the federal 
grant we receive to assist the uninsured patients), 24% of our patient 
income from private insurance companies, 30% from Medicaid, 20% from 
Medicare, and 26% directly from patients' payments. As an example of 
those patient payments, we have a collection rate of over 95% from our 
Medicare patients for the services they receive from our providers. 
While these numbers are not the same in every health center, virtually 
all health centers work to develop a broad spectrum of payer sources, 
in addition to the HRSA grant.
    In recent years, under the President's initiative to expand health 
centers, Central Virginia, has been able to expand services and add 
additional access points for care in many communities. We competed for 
and received a grant for a new access point in Charles City County, a 
jurisdiction with a minority population of over 75%. This grant helped 
to create a totally new health center with medical, dental and 
behavioral health services in a county that previously had one part-
time private doctor serving the community only three half days per week 
and no dentists or psychologists. Additionally we received grants to 
expand medical capacity in two existing health centers, and we also 
received a grant to add dental services in a health center that was 
previously providing only medical services. All of these additional 
services and sites would not have been possible without the HRSA grants 
awarded under the President's Initiative and funded by Congress. And 
these grants have stimulated private foundations to provide funding for 
additional services to be provided in several of our existing health 
centers.
    Of perhaps even more compelling interest to this subcommittee and 
your full committee, are some issues related to Medicaid and Medicare. 
Frankly, as a community health center director, I worry about these two 
major payer sources for our patients. Remember that we health centers 
are the true safety net providers of primary care for many of our 
nation's most vulnerable citizens. And I mean, we really are working in 
the frayed bottom of that safety net. We live day to day, and we get 
very concerned when Congress begins to discuss cuts to the Medicaid 
program. We respect that your committee and the Medicaid Commission 
have a very difficult challenge in looking at reductions in the 
Medicaid program. That being said, we do want to make one thing very 
clear: the prospective payment system (PPS) that Congress has given to 
health centers because of our unique place in the safety net is very, 
very important to health centers. We know that our patients in that 
safety net will be our patients regardless of what sort of payment 
methodology is created here. Obviously, if the PPS was tinkered with, 
health centers could suffer greatly. In addition, if Medicaid primary 
care benefits are reduced, our patients will still need those services. 
We will just have to use the federal grant, which is designed to serve 
the many uninsured patients in our centers, to ``subsidize'' the 
Medicaid program and its patients. Furthermore, if Medicaid eligibility 
limits are lowered, and more patients are moved off the Medicaid rolls, 
we in health centers will still serve those patients, only they will 
then join the ranks of the uninsured. Reductions in benefits and/or 
eligibility levels for Medicaid will be a real double whammy to health 
centers and their patients, and could well bring about drastic 
reductions in programs and services--exactly the opposite of the goal 
for the President's Initiative. At Central Virginia, our providers and 
staff know these patients very well, and we know that they will look to 
us for their care, regardless of whether they have Medicaid or not.
    Also of interest to this subcommittee, of course, is the Medicare 
Part D program. The provision of pharmaceuticals to Medicare patients 
will be the largest contributor to better health outcomes for our 
health center Medicare patients since the inception of the Medicare 
program itself. We look forward to 2006 and we hope that the 
development of training and orientation programs and materials for 
seniors and for us caregivers of seniors will come in time for every 
Medicare recipient to benefit fully from this new service. We know that 
CMS and other agencies are working to meet the deadline set by Congress 
for the initiation of this program. Please know that we in community 
health centers will do everything possible to assist in this monumental 
effort, because we truly know how important it is to the health of our 
individual patients.
    I would like to tell you about another part of the community health 
center story in one of our communities: Farmville and Prince Edward 
County, Virginia. In the mid-1980's the Piedmont Health District 
serving these two localities and the surrounding counties had one of 
the highest infant mortality rates in the Commonwealth of Virginia. In 
1985 Central Virginia Health Services, the Virginia Department of 
Health, and the federal government collaborated to open the Women's 
Health Center in Farmville. This OB-Gyn practice started small with one 
physician and a tiny group of support staff. The Health Center for 
Women and Families, as it is called today, now provides the only 
obstetric services in this rural community. Our center there has two 
full time OB-Gyn physicians, one full time family practice physician, 
and one part time nurse midwife doing deliveries in the local hospital 
and, along with a full time nurse practitioner, they also provide 
virtually all of the prenatal care for the community. This is a real 
success story for Farmville and the surrounding area. While several 
community hospitals in Virginia have recently closed down their labor 
and delivery service due to skyrocketing malpractice insurance and 
other factors, Southside Community Hospital, with our assistance, has 
been able to not only keep its community obstetric program, but to make 
it grow and thrive. By the way, the infant mortality rate has gone down 
over the past twenty years and the community and its families are all 
the better for that positive outcome.
    I would like to close with a story about the first community health 
center patient in Virginia. Dr. Mike Shepherd, a University of Virginia 
physician and the first physician of Central Virginia Community Health 
Center, recounts this story of opening day on the Friday after 
Thanksgiving in 1970. I have told it many times because I believe it 
illustrates why health centers are an absolute necessity in many 
communities around our country. A woman in her eighties was brought to 
the center by her family on that first day. She was being interviewed 
by the nurse taking her health history. The nurse asked the woman when 
was the last time she was seen by a doctor. The woman thought for a few 
moments and finally said, ``Nineteen and twenty-three.'' And that is 
why health centers are needed. Here was woman who was not seen by a 
doctor for nearly 50 years. And, while we don't find many patients 
these days with such a long time between visits, we do know that we 
serve people who need us and who would not be seen if it were not for 
the health center in their communities.

    Mr. Whitfield. Thank you, Mr. Manifold.
    And I would ask all of you, are any of you familiar with 
some community health centers over the last couple of years 
that have gone into bankruptcy or have gone out of operation? 
Are any of you aware of any that have gone out of business?
    Mr. Hawkins. On a national level, Mr. Chairman, what I can 
tell you is I have not seen data for the last couple of years, 
but I have no reason to suspect it is different from the data I 
have seen for the previous 10 years. In any given year, three 
to five health centers will have their grant pulled. They will 
be defunded. They will be folded into another center. An effort 
is always made by, I am going to call them the feds, HRSA to 
keep the services going when an existing health center runs 
into trouble. But that is three to five out of 1,000. So that 
is a failure rate of less than 1 percent. I have never seen it 
exceed 1 percent.
    Mr. Whitfield. And they are basically folded in with 
another when that occurs?
    Mr. Hawkins. Most often. I think it is quite rare when HRSA 
has pulled the resources completely out of the community, but 
they do insist that centers be well managed.
    Mr. Whitfield. Right. Now patients pay on a sliding scale. 
Some do not have to pay anything, and others pay full price. 
Those of you who operate a center, could you tell me the range 
of prices that are paid per visit by a patient? From zero to 
what?
    Mr. Manifold. Well, we established these sets of charges 
based on the statute that basically sets it at the cost of 
doing business the usual and customary in the community. So you 
could be, in some communities, as much as $50 or $60 or $70 a 
visit for someone who is able to pay the full charge.
    Mr. Whitfield. So if I come in and I am over the poverty 
level, and say I am at 200 percent of the poverty level, and I 
come in Petersburg, Virginia to the clinic, what would I be 
expected to pay per visit?
    Mr. Manifold. If you are over 200 percent of the poverty 
level?
    Mr. Whitfield. Yes.
    Mr. Manifold. You would pay the full charge, whatever it is 
in that particular community.
    Mr. Whitfield. So it would be, maybe, $50 or $60?
    Mr. Manifold. It could be, yes. I can't tell you right off 
the top of my head what it is. Part of it depends on your 
health and what sort of services you receive at that time.
    Mr. Whitfield. Okay. So it does depend on the service? It 
is not just the one fee.
    Mr. Manifold. Just like any other health care institution, 
yes.
    Mr. Whitfield. Okay. Now I have heard some discussion about 
the President's budget and even though he is requesting more 
money for the centers, people are concerned that because each 
center receives a grant each year, that even though more money 
being available and wanting to create more new centers that the 
existing centers are a little bit concerned about whether or 
not they are going to continue to receive their grant each 
year. Is that a concern or is that not a concern?
    Mr. Hawkins. Nationally, I think, Mr. Chairman, every 
health center must go through a competing grant renewal process 
every, what is it, Rod, 3 years or 5?
    Mr. Manifold. Yes, three to five.
    Mr. Hawkins. Three to 5 years depending on how good their 
record is and how well they are operated. The best operated 
ones perhaps every 5 years. They do have to submit 
documentation and annual audits, et cetera, every year. I will 
let the actual health center folks answer, but I will tell you 
what we have heard from health centers is not so much that they 
are concerned about losing their current grant, it is that the 
grant doesn't keep pace with the increased costs.
    Mr. Whitfield. Okay.
    Mr. Hawkins. Health center cost increases on a per-patient 
basis are among the lowest in the health care system, usually 
about 4 percent a year, and that is over the last 8 years.
    Mr. Whitfield. And what is the maximum grant that one can 
receive?
    Mr. Hawkins. There is no ceiling on that. Although not on a 
formula basis, it is done often related to per-patient cost or 
per-uninsured patient----
    Mr. Whitfield. Well, what grants do you all receive? The 
ones here.
    Mr. Manifold. Well, at Central Virginia, we have added 
various sites over the years from that original site in 1970.
    Mr. Whitfield. Right.
    Mr. Manifold. And so each time that we have been able to 
add a site, we have been able to get additional funding for 
that site, which then stays with it?
    Mr. Whitfield. How much?
    Mr. Manifold. Well, I can tell you that in 1995, we were 
getting $250,000 per year to start a new health center site. 
Now you must provide more services. You must provide dental, 
behavioral health----
    Mr. Whitfield. But do you have an overall figure of what 
your center receives?
    Mr. Manifold. What Central Virginia receives?
    Mr. Whitfield. Yes.
    Mr. Manifold. We receive $5.2 million in Central Virginia.
    Mr. Whitfield. Okay. Okay.
    Mr. Manifold. It is about 34 percent of our operation----
    Mr. Whitfield. Okay. What about you, Ms. Sibilsky, in 
Michigan?
    Ms. Sibilsky. I am a primary care association.
    Mr. Whitfield. Right.
    Ms. Sibilsky. We are not a health center, specifically.
    Mr. Whitfield. Oh, you are not?
    Ms. Sibilsky. No.
    Mr. Whitfield. So----
    Ms. Sibilsky. We are a Statewide association that works 
with health centers.
    Mr. Whitfield. So you don't receive any grants?
    Ms. Sibilsky. We do receive a grant to do technical 
assistance and support to health centers as well as going to 
communities to help them get ready to be able to provide that 
primary care.
    Mr. Whitfield. How much is your grant that you receive?
    Ms. Sibilsky. We receive about $625,000 for the technical 
assistance component.
    Mr. Whitfield. Okay. Okay. And what about you, Dr. 
Goetcheus?
    Ms. Goetcheus. I was just getting the answer to that, $6.4 
million is what we----
    Mr. Whitfield. $6.4 million.
    Ms. Goetcheus. [continuing] receive.
    Mr. Whitfield. Okay.
    Ms. Goetcheus. Just in regard to what was asked as far as 
the base funding, we do get concerned. The health care costs 
for insurance for our folks go up----
    Mr. Whitfield. Right.
    Ms. Goetcheus. [continuing] as well as just basic expenses, 
so we do get very concerned about base funding.
    Mr. Whitfield. Now I have heard different answers on this 
question. Can you or can you not spend money on capital 
projects from the grant money?
    Mr. Hawkins. On acquisition and lease, yes; on 
construction, modernization, renovation, no.
    Mr. Whitfield. But on acquisition and lease, yes.
    Mr. Hawkins. Yes.
    Mr. Whitfield. But for renovation and modernization, no.
    Mr. Hawkins. Any bricks and mortar. If you need to put in 
an elevator to make the facility ADA compliant, no go.
    Mr. Whitfield. Okay.
    Mr. Hawkins. If you need to wire the facility for 
electronic health records, no.
    Mr. Whitfield. Right.
    Mr. Hawkins. If you need to paint the interior of the 
facility, you may not use the grant dollars for that purpose. 
It is prohibited.
    Mr. Whitfield. Okay.
    Mr. Hawkins. That was stripped from the statute 10 years 
ago.
    Mr. Whitfield. Okay. Okay. Now someone made the comment 
that community health centers provide care for 10 percent of 
the Medicaid population at a cost of only 1 percent of the 
total Medicaid dollars. Is that correct?
    Mr. Hawkins. That is correct, Mr. Chairman. Six million 
people, it is less than $3 billion. The last number I have is 
$2.5 billion in total Medicaid payments to health centers for 
approximately 6 million Medicaid recipients. That is under $500 
per patient per year for the four visits that Dr. Shi 
mentioned.
    Mr. Whitfield. And some of you may have heard in my opening 
statement I made the comment we have people on Medicare, we 
have people on Medicaid, and then we have a lot of uninsured 
who are working who have jobs, but their employer does not 
provide their health insurance. They are paying taxes for 
Medicare and taxes for Medicaid, but they can not afford to buy 
their own health insurance and they maybe do not have a 
community health center area to visit. So I would ask the 
question, do you believe that community health centers have the 
capacity with the right resources available to be the primary 
health and preventive care providers for the country for the 
uninsured, let us say? Or is that capability not----
    Ms. Sibilsky. It would be a wonderful model with limitless 
resources to be able to provide. I believe in the model I 
worked with modeled for 26 years, comprehensive, primary care, 
prevention, and community based. It is also a wonderful part of 
a whole system of care, and that is the way I think we have to 
look at it, because there are not limitless resources. It is a 
tremendous model, especially in under-served communities.
    Mr. Hawkins. It is a model for primary care, Mr. Chairman. 
I have been in it for 35 years, and I don't know that even I, 
in my ideal world vision, would see health centers even as the 
primary care provider for all Americans, although there are 
those who would say that they would only wish that they could 
get primary care for their family like they have seen delivered 
at a health center. But for uninsured, for low-income, both 
publicly insured and uninsured, for isolated rural, for inner 
city communities, for those working people that you talk about, 
with or without insurance coverage, every American needs, and 
Dr. Shi can speak to this, two things for good health, and plus 
their own thing, and that is insurance coverage to make the 
care affordable and a health care home, a family doctor who is 
the organizer of their care. I don't see health centers doing 
specialty care, doing inpatient hospital, or long-term care, 
but primary care and being the care manager for each 
individual, organizing referrals, et cetera, down the road.
    Mr. Shi. I just want to add that I do believe that the 
community health centers are a very well suited model for 
community-based primary care for all Americans. And many 
physicians' offices are not equipped to provide enabling 
services and culturally sensitive care that community health 
centers are able to provide.
    Mr. Whitfield. Right. Okay. And you studied them quite a 
bit. So thank you.
    Mr. Shi. Yes.
    Mr. Whitfield. My time is expired, so I recognize Mr. 
Stupak.
    Mr. Stupak. Thank you, Mr. Chairman, and thank you all for 
being here and doing what you do. I have quite a few health 
centers in my District, and I am always amazed at the work they 
do on a very, very thin dime.
    Why was the brick and mortar stripped out 10 years ago? You 
said that. Was it alleged abuse within the program or what 
happened? Because I mean, it seems to be a big issue with 
health care centers.
    Mr. Hawkins. It is a cautionary tale, and what can happen 
some time when something is inadvertent and unintentional. In 
the process of stripping out language that related to the Davis 
Bacon wage and hour law, which had been in the statute since 
1978, the Congress inadvertently, we believe, and certainly 
even those who were involved in it told us they never intended 
to strip out the authority for construction, only the language 
that related to the Davis Bacon law. Unfortunately, what was 
stripped was all of the construction modernization and 
expansion language. And attempts to restore that since that 
time have not been successful.
    Mr. Stupak. Is there opposition from others for----
    Mr. Hawkins. No one opposes restoring the construction 
authority. The authority for health centers to use even a small 
portion, no one believes that a big part of the health center 
funding should go for bricks and mortar. It is patient care 
dollars. But no one opposes restoring the authority for some 
portion of that to be used for bricks and mortar. The divide, 
Mr. Stupak, is literally over whether to restore it without 
Davis Bacon or with Davis Bacon, and there, unfortunately, 
quite frankly, I don't think it is a divide up here. It is a 
divide out there.
    Mr. Stupak. Well, let me ask this question. There are a 
number of health care centers that have increased significantly 
in the last few years, and there is an increased likelihood 
that centers will be located in areas where they are in 
competition with other health centers and private 
practitioners. With resources being stretched, what safeguards 
are used, if you know, in the grant review process, this is 
really a question I had for HRSA, but I never got to it, to 
ensure that placement of health centers are in the proper 
location so that agency gets the best bang for its buck, its 
Federal dollars? How do you do that? I mean, actually some 
folks have said we don't want health centers where we have 
other private practitioners. And is that part of the problem 
here?
    Mr. Hawkins. It may be in some communities. I remember in 
south Texas 35 years ago a grave concern among the local 
private practice physicians at the startup of our health 
center, they all understood that there was a population that 
they didn't have the resources to care for. And they were happy 
to have the health center care for that population. They were 
deeply concerned about that center then being a place that 
might encourage people with private insurance to go.
    Mr. Stupak. I see.
    Mr. Hawkins. As time went on, I think all of the private 
practitioners, in fact, they all donated their time to the 
facility, they came to see, and I will defer to my colleagues 
who are out there today.
    Mr. Stupak. Sure, I would be interested to what Dr. 
Goetcheus thought on that one.
    Mr. Hawkins. They came to see it much more as a benefit 
than not.
    Ms. Goetcheus. In terms of DC, the need is so great that 
two of the new starts that have just come are within a few 
blocks of one of our health services. The need is so great; we 
are all very busy. I think----
    Mr. Stupak. Do specialists, though, not want you in the 
area because you may detract from their patients? Specialists?
    Ms. Goetcheus. Specialists are hard to obtain, and they are 
very hard to obtain in terms of accepting Medicaid or here in 
the District, trying to find those specialists who will accept 
that kind of insurance. That is why we have brought specialists 
to our sites. One of the limiting factors has been in terms of 
the Federal tort for them. For example, we have so many HIV 
patients, so we have hired two infectious disease physicians to 
be a part of our staff, because trying to find access otherwise 
for them with Medicaid or no insurance is very hard.
    Mr. Stupak. It is very difficult. Sure.
    Mr. Chairman, if I may, with your permission, the 
reinstatement of oral health benefits for Medicaid adults, I 
think every one of our witnesses here this afternoon mentioned 
adult oral health care and the benefits thereof, and this 
actually happens to be from Ms. Sibilsky's group. It is a 
three-page document, and if you don't mind, I would like to 
place it into the record and--well, it is already in the 
record. Okay. Great.
    But Kim, could you just mention some of the highlights you 
found? I found this really fascinating. Michigan did it for the 
first time, and then unfortunately we have to cut it out after 
being so successful because there is no money there. But you 
have all mentioned it, and I just want to----
    Ms. Sibilsky. Yes. For a $9.2 million savings in general 
fund for the State budget, we have done an assessment of 
inappropriate care in the emergency room, which begins to 
approach that $9.2 million. When you then look at the Medicaid 
managed care billings that are addressing the issues that would 
appropriately be handled within the health centers in their 
dental component, you get very, very close to the $9.2 million 
savings. And that doesn't even address how ill people get when 
they have that primary infection in their mouth: heart disease, 
diabetes, perinatal health is just directly impacted. I think 
that it is a service that has been seen to be not a primary 
care service, but is now being looked at and sadly being looked 
at so closely because we are in such big trouble with it. I 
would hope that some day it is seen to be a mandatory service 
under Medicaid and not an optional service, because it is such 
a critical need.
    Mr. Stupak. And then I am a little confused, and maybe you 
can help me on this. From what I have read, the Surgeon General 
of the United States keeps saying that we don't need this 
service, the oral health care for folks, or do I have that 
right? He encourages or discourages it?
    Ms. Sibilsky. I can't speak to that, Mr. Stupak. I am 
sorry.
    Mr. Stupak. Okay. So in Michigan now, are they getting 
dental care, the patients?
    Ms. Sibilsky. At this point, under the Medicaid program, 
only emergency care is being delivered and paid for. For any 
dental services beyond that to adults that are being delivered 
in the health centers is being subsidized by the Federal grant 
as uninsured. So you have Medicaid-covered adults categorized 
as uninsured for dental services. So the grant is subsidizing 
Medicaid on those services.
    Mr. Stupak. Okay. I talked about, earlier, rural programs, 
and I didn't get to ask all of my questions, because I was 
concerned about the nursing act. I was concerned about the huge 
cut that we saw in the funds to try to lure specialists to our 
rural areas or under-served areas. And in those two programs, I 
think one was cut like $100 million this year and then next 
year it is going to be $11 million and then that just about 
wipes about that program. That is the program to attract 
specialists to our areas. And if we don't fund these programs, 
what is going to happen to bring your specialists in? You all 
talk about collaborative efforts you have with other people. 
Are these specialists volunteering their time, or do they 
expect some kind of reimbursement, because I just don't see how 
we are going to continue to do what you are doing as we are 
expanding the number of health care centers when the programs 
we have to provide rural health and to recruit physicians and 
everything else is being severely cut? I mean, Dr. Burgess 
talked about we need, for doctors, higher reimbursement, but 
you have got to have doctors there first before you have to 
worry about reimbursements, and we are not getting the doctors. 
Am I wrong?
    Ms. Sibilsky. I would like to cite the large amount of 
volunteerism that is actually happening within the State of 
Michigan right now. Physicians went into health service for 
altruistic reasons, and when they feel the intensity of the 
problem the way that they are feeling it today, they do 
volunteer. And that is why the Federal torts claims act 
coverage for free clinics has been very helpful and why 
extending that into health centers is going to be even more 
important. The training programs are under siege with the State 
budgets. For them to be under siege with the Federal budget 
puts us, once again, right in the middle of the fire. This is 
not a simple Medicaid issue that we are dealing with. We are 
under duress on every side. And so the programs you asked 
about, for example, the rural health outreach program that has 
helped communities innovate in order to attempt to invent 
themselves out of these problems through collaborative efforts 
and outreach efforts. To have those zeroed out is also a very 
big problem for rural communities.
    Mr. Stupak. Yes, it is about a 70 percent cut.
    Mr. Manifold, how about the rural flexibility grant 
programs? Have you used that? Has that helped? Michigan, right 
now we have got some high unemployment. We are having some 
tough times in Michigan, but Virginia seems to be doing a 
little bit better from what I read in the local papers.
    Mr. Manifold. We do not use that program in Virginia, that 
I know of, not in the health center arena, so I can't speak to 
that issue.
    Mr. Stupak. That is interesting.
    Mr. Manifold. Unless I am not understanding the 
terminology.
    Mr. Stupak. Well, the rural flexibility grant program 
actually helps our hospitals in northern Michigan go into the 
critical access hospitals, which are the smaller hospitals that 
provide critical access in really remote rural areas, and they 
get a pretty good reimbursement. And that program actually is 
one of those that has really been a great help to us, and we 
see it zeroed out in the budget, so I thought you just might 
have the same thing.
    Mr. Manifold. Yes. Because the critical access hospitals in 
Virginia are few and far between, many in southwest Virginia, I 
can't say that our particular arena of health centers in 
Central Virginia has any connection directly with any critical 
access hospitals in Virginia.
    Mr. Hawkins. Mr. Stupak, if I could add, though.
    Mr. Stupak. Sure.
    Mr. Hawkins. Across the country, we have heard from health 
centers who have worked very closely with critical access 
hospitals in their communities. Health centers help those 
hospitals keep their doors open. They staff them, especially in 
the taking evenings and weekends, et cetera, and they have 
reported. I mean, the affiliation is in partnerships that have 
developed across the country between health centers and 
hospitals and especially in rural communities where they are so 
crucial to one another. They are interdependent. It is 
heartening to see, because each is helping to keep the other in 
business for the benefit of the community.
    Mr. Stupak. Sure. One more, if I may.
    Dr. Shi, you mentioned in your oral testimony that health 
center patients receive ``comparable or even better quality 
primary care services than managed care HMO patients, 
especially in the comprehensiveness of service provided and the 
continuity of care.'' When I was asking Mr. Smith the questions 
there, and even Dr. Duke, they kept talking about other sources 
of funding. The only other sources of funding I have really 
seen being pushed is probably managed care or, as you all do, 
private fundraising to keep you guys open. If we continue to 
move toward HMOs or managed care, do you feel there will be a 
decline in the quality of service provided to our patients?
    Mr. Shi. Compared to community health centers, I agree. 
Yes, it is on my page 36 of the handouts. I have the details of 
that study.
    Mr. Stupak. Okay.
    Mr. Shi. It compares HMO with health center patients in 
terms of the primary care they received from the doctors. And 
we look at various domains of primary care using our primary 
care assessment tool. We find that----
    Mr. Stupak. There it is.
    Mr. Shi. Yes. If you look at comprehensiveness of services, 
health centers are rated much higher than HMOs, and the 
continuity of care, they are also rated higher than HMOs. On 
the other indicators of primary care quality, they are 
comparable. And the overall primary care score is also higher 
among health center patients than among HMOs.
    Mr. Stupak. Thank you. Thank you for the time.
    Mr. Whitfield. There are a number of areas I want to get 
into in just a minute here.
    On the managed care issue, I know there was some testimony 
that because managed care pays so little on reimbursement, that 
the State, I believe, has to make up that difference in the 
reimbursement to the community health center in most States or 
all States, is that correct?
    Mr. Hawkins. All States.
    Mr. Whitfield. Okay. Okay. And so Dr. Shi is making the 
argument that the managed care, we are underpaying but they are 
not providing the quality of health care. But on Michigan just 
a minute, the dental program in Michigan was dropped. That was 
a decision that the State of Michigan made, and it sounds like 
it was a short-sighted decision, because they are saving $9.2 
million by dropping it, but maybe infection rates have gone up 
and health care has gone up and so overall Medicaid costs have 
probably escalated. Is that right?
    Ms. Sibilsky. We are seeing symptoms of that.
    Mr. Whitfield. Okay. Now I know that there are some loan 
guarantee programs out there for the community health centers. 
And maybe you, Ms. Sibilsky, have even made the argument during 
the 1980's that some changes were made to the community health 
center program that gave you the flexibility of running it more 
as a business than as a government entity and that sort of 
freedom provided you with some innovative opportunities. Would 
you expand on that a little bit for us?
    Ms. Sibilsky. I believe that much of the value of health 
centers has been displayed in its ability to be a business and 
be viable and be managed accordingly. It has spurred innovation 
to keep us viable. It has also helped us, I believe, to become 
a bipartisanly supported program.
    Mr. Whitfield. Right.
    Ms. Sibilsky. Communities, as Mr. Manifold says, and I will 
yield to him, want to participate in something that they can 
pay for and receive value.
    Mr. Whitfield. Right.
    Ms. Sibilsky. And I believe very strongly in those precepts 
in our program.
    Mr. Whitfield. Well, you know, one of the frustrating 
things for me, having been elected to Congress in 1994, we have 
been talking about trying to address the uninsured program, and 
I know people go in and out of uninsured status, but we have 
some areas of the country that have wonderful community health 
centers, like your area, Mr. Manifold, where more and more 
people are going to those centers. And then we have other 
centers that the taxpayers don't have anything. And so we have 
some people paying taxes, and they have a tremendous program, 
and others are paying taxes that have nothing. And that is why 
I was asking this question about using this as a model to be 
the primary care for the Nation. And I think the consensus was, 
among this group at least, that you would probably agree with 
that.
    Now let me ask this question. Would you agree if State 
Medicaid programs individually could use their Medicaid dollars 
to expand community health centers? I mean, they are already 
paying a lot of health care providers. Maybe they could get a 
group together and say won't you provide this service under the 
community health center umbrella. Would you support that kind 
of a concept?
    Mr. Hawkins. Mr. Chairman, if it were an allowable use of 
Medicaid dollars. Although, I suppose, under administrative 
cost expenses, and I assume what you are talking about is the 
startup costs for establishing and getting a health center 
going.
    Mr. Whitfield. Right. Right.
    Mr. Hawkins. The one big question, then, that would come up 
is the Federal grants that Mr. Manifold receives, that Dr. 
Goetcheus' center receives really, if you look at how a health 
center budget breaks out, and then the patient population by 
payer source, the Federal grants really truly go to cover care 
for the uninsured. So I guess the only question left would be, 
then, would Medicaid be paying for the uninsured? They don't at 
health centers today.
    Mr. Whitfield. Right.
    Mr. Hawkins. And there is always a concern. We have heard 
that from Medicare and Medicaid. We are happy to pay for care 
for our beneficiaries, but we don't want to be paying for 
others.
    Mr. Whitfield. Right. Well, just kind of discussing things 
here, I read an article not too long ago that General Motors is 
now paying more for its health care costs than it is for its 
material for the car or the vehicles that they produce. What 
would you think about if General Motors could put money into 
establishing a community health center under all of the Federal 
guidelines with all of the drug discounts, the tort claim 
liability protection and whatever, but they had to put the 
money into it to expand it to make it available to more people? 
Is that a concept that would be totally ridiculous, or is that 
one that you would be willing to maybe explore?
    Mr. Hawkins. I don't think it is ridiculous at all, Mr. 
Chairman. The same day that the CEO of GM came out and made 
that statement about the sheer cost of health care there was an 
article in the Wall Street Journal, and I will be happy to get 
you a copy of it for the record. A company named Quad Graphics 
in Wisconsin, it is a printing company, and it does business 
with Mars Bars and M&M and places all over the country. It 
makes the wrapper paper. The article pointed out that Quad 
Graphics is a relatively small employer. It has got printing 
plants around the country. It was fed up with its increasing 
health insurance costs, and it opened up a primary care center 
in its main printing plant in Wisconsin and watched its total 
health care bill drop like a rock.
    Mr. Whitfield. Really?
    Mr. Hawkins. Yes. Saving 15 percent or more in health care 
spending. They are, obviously, a self-insured plan. So they 
reap the benefits of the investment in that primary care 
center. It is a measure for the ages, because it is not just 
any kind of primary care when you have organized primary care 
with a focus on, through the collaboratives, providing quality 
care, the kind of standards that health centers must operate 
under. And then I would argue, the strong community oversight 
that ensures that that center responds to the real local 
problems, that is the measure for success.
    Mr. Whitfield. Right.
    Mr. Hawkins. And I think that Quad Graphics got it right, 
as one business.
    Mr. Whitfield. Would you give us a copy of that?
    Mr. Hawkins. I would be glad to do so, sir.
    Mr. Whitfield. All right. Provide that for us.
    Do you have any questions, Mr. Stupak?
    Mr. Stupak. Mr. Chairman, I want to ask Ms. Sibilsky this.
    You all do a great job, and I am seeing this. I am really 
concerned about this expansion on community health centers and 
how we are going to get reimbursed. It just seems to me, and I 
tried to get more out of Mr. Smith that during these difficult 
economic times, while Michigan is having it, and I am sure 
other parts of the country are, too, that Medicare 
reimbursement should be going up as you are seeing more and 
more people. And I think I pointed to Michigan with a 30-
percent increase but yet we have been able to hold the cost at 
about 5 percent.
    Ms. Sibilsky. Right.
    Mr. Stupak. And when I was trying to ask these questions, I 
kept hearing about other sources of funding and all of that. 
And the only other sources of funding that I really know or see 
is your great job in getting private contributions into the 
system. And it certainly helps out a lot. And you mentioned 
this in your written testimony about the prospective payment 
system gives community health centers a higher fee per office 
visit than a private physician would receive, and you explained 
that at a center might include other services not included in 
an office visit with a private doctor. Could you explain that a 
little bit more just to clarify it for me?
    Ms. Sibilsky. Right. An encounter is the terminology we 
use, and an encounter is all of the services delivered to an 
individual in a day at a health center for medical. Now since 
we have gone into mental health and substance abuse services 
and dental care, you could actually have three encounters a 
day. But if you are talking about the medical encounter, it can 
include lab, it can include x-ray, it can include education, 
our whole bundle, pharmacy. It is the whole bundle of services 
delivered to an individual in 1 day is one encounter.
    Mr. Stupak. So the reimbursement is for that one encounter?
    Ms. Sibilsky. Correct.
    Mr. Stupak. Okay. So if I go in and I have got a bad knee 
and I want you to look at it, but you might talk to me about--
--
    Ms. Sibilsky. Your weight.
    Mr. Stupak. What is wrong with it?
    Ms. Sibilsky. Excuse me. I am sorry. I have no intention 
of----
    Mr. Stupak. I am only teasing. I am only teasing.
    Ms. Sibilsky. I am sorry, Mr. Stupak.
    Mr. Stupak. No, no, no. I am only teasing.
    Ms. Sibilsky. But one person's weight.
    Mr. Stupak. How about my blood pressure being here in 
Congress?
    Ms. Sibilsky. Okay. Blood pressure.
    Mr. Stupak. So that is the difference. So if I went to a 
doctor's office, I would get multiple bills, then, would I not, 
for the service, but not for the encounter of the day?
    Ms. Sibilsky. Yes, you would. Absolutely.
    Mr. Stupak. I see. I see.
    Ms. Sibilsky. Absolutely. And so when we were talking about 
it is the benefit of prospective payment to our health centers 
allowing us to be able to budget, we know, on a prospective 
basis, what we are going to be receiving from Medicaid.
    Mr. Stupak. Okay.
    Ms. Sibilsky. And so we can project what we can spend.
    Mr. Stupak. Sure.
    Ms. Sibilsky. And it forces us to economize and to 
creative, in the legal sense of the term, work.
    Mr. Stupak. Okay. But then in your testimony you also 
talked about how the waiver program may threaten the 
prospective payment system.
    Ms. Sibilsky. Yes.
    Mr. Stupak. Okay. Explain that.
    Ms. Sibilsky. Well, for example, with the SCHIP program, 
when it came into Michigan, we were very supportive of that 
program, of course. And we are not concerned especially about 
receiving the FQHC prospective payment assurances under SCHIP, 
because it was going to be for kids.
    Mr. Stupak. Right.
    Ms. Sibilsky. And kids are lower cost. However, under the 
Michigan adults benefit waiver, as you recall, that is an SCHIP 
waiver that covers childless adults up to 35 percent of 
poverty. These are people who have been out of health care, 
except perhaps through a voucher, for years. And so what it 
does is it gives the SCHIP payment for adults who are terribly 
complicated. I mean, Dr. Goetcheus sees these people. They are 
on the streets. They are dual diagnosis: mental health and 
substance abuse, and they are expensive. So waiver programs, we 
believe that population should be served, and we are seeing 
half to two-thirds of those folks within our clinics, but 
actually at about 85 percent of fee for service, which is, 
itself, at about 60 percent of reasonable cost.
    Mr. Stupak. Well, but 60 percent. What are you actually 
getting paid, then, for these adults? Because SCHIP, it is not 
very large reimbursement at all.
    Ms. Sibilsky. No, it is probably between $25 and $30 for an 
encounter.
    Mr. Stupak. For everything for that day?
    Ms. Sibilsky. For everything, because all of the people who 
we serve receive the same types of services, the FQHC bundle of 
services.
    Mr. Stupak. And obviously the sliding scale doesn't help 
you, because there is nothing there.
    Ms. Sibilsky. Thirty-five percent of poverty is about $260 
a month.
    Mr. Hawkins. In Medicaid or SCHIP, you can't bill for any 
underpayment. That would be balance billing. It would violate 
the Federal statute.
    Ms. Sibilsky. Right.
    Mr. Stupak. Okay.
    Mr. Whitfield. Dr. Goetcheus, one question I just want to 
ask you.
    You mentioned something about 2,400 individuals are coming 
from prison back to DC. Is that per year?
    Ms. Goetcheus. Per year.
    Mr. Whitfield. Is that right?
    Ms. Goetcheus. And they are scattered all over the United 
States.
    Mr. Whitfield. Each year.
    Ms. Goetcheus. For instance, in Rivers, North Carolina, 
there are 1,000 District residents in that prison. What we have 
set up is some telecommunication so we can try to have, even in 
groups and individuals, to try to talk with them about when you 
get back into the District, you need your medications. This is 
where you come. If you are coming to a homeless shelter, 
because a lot of them end up in homeless shelters, this is the 
shelter we want you to come to, because we have a health 
service there and we want you to come in. And we have social 
workers there, and we will try to get you jobs. And but it is 
2,400 a year coming from the prisons around the United States 
back into the District and 50 a day coming out of DC jail back 
into the community.
    Mr. Whitfield. Per day?
    Ms. Goetcheus. Per day.
    Mr. Stupak. I found this statement intriguing and the 
theory. Mr. Hawkins, I think you mentioned it. For 1 percent, 
you are providing for 10 percent of the people, right?
    Mr. Hawkins. That is correct, Mr. Stupak.
    Mr. Stupak. So in theory, if we gave you 2 percent, could 
you provide for 20 percent?
    Mr. Hawkins. In theory, yes.
    Mr. Stupak. Could you go 10 percent at 100 percent?
    Mr. Hawkins. For 100 percent?
    Mr. Stupak. No, no, no, 10 percent for 100 percent.
    Mr. Hawkins. Well, and keep in mind, please, that that is 2 
percent of total Medicaid spending, which includes hospital and 
nursing homes.
    Mr. Stupak. Sure.
    Mr. Hawkins. But about 25 percent of Medicaid goes for 
physician services. And so by dint of that, your math is good. 
For 10 percent of Medicaid spending, or about half of what is 
spent on physician services today, yes, we could provide the 
care for 100 percent of Medicaid beneficiaries. Certainly, for 
the 40 million who are non-disabled, non-aged. You know, we do 
have health centers that provide care to frail elderly and 
disabled individuals, but those who need to be 
institutionalized in a nursing home or what have you, you know, 
we do the visits, inpatient visits. I don't know that we could 
do the long-term care. That is a huge expense. But for the 40 
million Medicaid beneficiaries who are adults, children mostly, 
and relatively non-disabled adults, yes, we could do it. And we 
would save, just as we do now, Medicaid more money today than 
all of the money that Medicaid pays health centers. In effect, 
they get that care for free, and we still give them a further 
return on investment. The savings exceed the $2.5 billion that 
Medicaid pays health centers today compared to any other 
providers. That is what the record shows. So for 10 percent of 
the dollars, we would give you 100 percent of the patients and 
give you an even greater return. Lower hospitalizations, fewer 
specialty referrals, most importantly, a healthier population.
    Mr. Stupak. Sure. Someone said, you know, that they feel 
that health care is a right and not necessarily a privilege in 
this country. If we did the uninsured population and gave them 
the option, if you will, of moving either into a CHIPs program, 
a Medicare program, or a Federal health employees benefit 
package, in your opinion, would it be--I am trying to find a 
way to ensure, you know, everyone who doesn't have health care 
coverage, and we are actually working on some legislation to do 
this, to give them an option. If you are child is on the SCHIP 
program, or in Michigan we call it ``My Child'', why can't 
that, usually a single parent, get on the program, too? Or 
going through the Medicaid program, why can't people under 65 
buy into the Medicare system sooner? Why can't those who fall 
in between come into the Federal employees' health benefit 
package, because I am sure you must see Federal employees at 
some of your clinics, because we are in remote areas? I am just 
trying to find a way to find coverage and at the same time keep 
the costs reasonable for everybody. Comments on that crazy 
utopian idea?
    Mr. Hawkins. No, no, not necessarily.
    I think two things, too. I mean, the question you want to 
ask is for the 6 counties in your District and for the 16 in 
yours, Mr. Chairman, that don't have a health center today and 
our poor county. Their low-income population is above the 
national average. Why can't they have a health center? You 
asked that earlier of the appropriate authorities.
    Mr. Stupak. Right.
    Mr. Hawkins. I wish I could answer it. If only we had it. I 
think in an ideal world, something like that, giving people a 
choice but giving them an option of coverage, would be 
incredibly important.
    I just want to say one other thing. I am no Ellen 
Greenspan, but I think there is a business argument to be made 
for the fact that we are not competitive in this global 
environment, because of the costly fragmented health care 
system we have today with multiple payers, each of whom plays 
games and tries to push the cost off on somebody else.
    Mr. Stupak. Sure.
    Mr. Hawkins. I think there is a good business argument to 
be made for a system, and I don't understand why America's 
businesses, GM included, they are the first ones to be speaking 
out. They are picking up 50 percent of the tab today. I don't 
understand why they are not demanding change for this. But I am 
not in that part of the business world.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you.
    I just want to ask one brief question, and then we will 
conclude.
    On this issue of physicians, we touched on it a little bit, 
but how difficult is it to find physicians, and what are the 
retention issues? And would you all comment on that, those of 
you involved?
    Mr. Manifold. I will make a comment on that.
    We have had awfully good luck at Central Virginia over the 
years. Now one of the reasons why we have that luck, and it is 
not luck in that sense, is because of the support systems, for 
example the National Health Service Corps has helped us to 
recruit. But we have also had good relationships with the two 
teaching institutions in Virginia, the Medical College of 
Virginia and the University of Virginia. And with those 
arrangements, we actually, in our particular situation, and I 
know there are other health centers that do this, we actually 
teach residents at our site. Medical residents come out. We 
even have had dental students over the years. And now we have 
psychology students coming out to our sites and being taught. 
And that helps us to get to know them. They get to know us. 
Those kind of arrangements like that, where we have a good 
teaching kind of relationship, does help us to find good 
providers along the way, and we have even had people who said, 
``Gosh, I came out here to your health center. I learned 
something. I don't want to be a primary care doctor. I am going 
into surgery.'' You know. ``This is not what I want to do.''
    Mr. Whitfield. Right.
    Mr. Manifold. So you have both sides of that coin, and that 
is a good thing, because had that gentleman come to us at work 
and then said, ``Wait a minute here. I don't like this,'' the 
connection with the teaching institution is very strong.
    Mr. Whitfield. Ms. Sibilsky?
    Ms. Sibilsky. Yes, I would like to support what Mr. 
Manifold said. I would also like to cite an example of that 
where 100 percent of the fourth year dental students at the 
University of Michigan are rotating through community health 
centers, and as a result, the recruitment rates have just 
escalated beautifully because they have learned that they are 
valued organizations and in good communities. Also, the Area 
Health Education Center, the AHEC program, funded to the Bureau 
of Health Professions, which we were just funded for in 
Michigan about a year ago, is starting to develop those kinds 
of relationships for us. Also, the waiver program has been a 
real benefit. And we have found amazing acceptability of those 
providers within rural and remote communities. So thank you.
    Mr. Shi. I just want to add that in addition to physicians, 
non-physician primary care providers also are the backbone in 
community health centers. Those include nurse practitioners, 
physician assistants, and other advanced nurses. And we did 
studies showing that they provided comparable quality care to 
primary care physicians in most of the primary care services.
    Mr. Whitfield. Right. Good point. Good point.
    Dr. Goetcheus?
    Ms. Goetcheus. I would just echo the same. We have 
relationships with all of the medical schools. There are three 
here in DC that have students and residents, have four family 
practice fellows that spend clinical time with us has been a 
wonderful way to recruit, but the most important way has been 
because of National Health Corps. And one of the things I 
always say is that because many of the physicians who have come 
to us are minority. And some of them have grown up in these 
very neighborhoods where they have been out east of the river, 
and what a wonderful witness that is to that community. So I 
don't know, we could not, in terms of recruitment, do it. It 
would be much more difficult without National Health Corps. I 
am just, every day, grateful for it.
    Mr. Hawkins. I would just say nationally that one thing 
health centers have learned over the last 40 years is there are 
three strategies to recruit and keep your staff. No. 1, get 
your staff involved with teaching hospitals. They are part of 
that system. They are not renegades and mavericks and lone 
rangers. They are actually mainstream. No. 2, expose those new, 
soon-to-be doctors to the experience of working in a health 
center, and you will, more often than not, have someone who is 
very interested in coming to work for you down the line. And 
the third successful strategy that many health centers have 
employed is grow your own. Find young people in your community 
who have the promise and the hope and who look like the people 
you serve and help send them off to get an education, a medical 
education, a dental education, a nursing education, and they 
will come back. They will come back and serve the community 
that grew them.
    Ms. Sibilsky. I would like to give Mr. Stupak an example of 
that. I was the administrator of the health center in Alcona 
County, which is one of yours, and I think this was about 20 
years ago. I was administering that clinic, and a young medical 
student came in, and he said to me, ``Do you think you will be 
recruiting doctors in about 10 years when I come out of medical 
school and residency program?'' I said, ``I venture to say we 
would be delighted to have you, and I would almost give you a 
guarantee of hire.'' He came back in 10 years and was also 
married to a doctor, and we got two out of that one.
    Mr. Stupak. That is great. You know, you mentioned doctors, 
but what about nurses? One of the questions I was going to ask 
earlier, you know, we had the nurse reinvestment act on this 
committee, and I think we all supported it. And back last time 
we had a nurse shortage I think was in the mid 1970's or so. 
Back then, Congress put in like $150 million to help nurses, to 
recruit them and pay for their education. Well, I think it was 
actually $153 million. This past year, we only put in $150 
million. I mean, in 30 years, if my math is right, we haven't 
increased the funding for the program, but yet the demand is 
just as great. I mean, in the 1970's, we had it for a while and 
then it went away. Now it is back again, because we have this 
shortage. Do you recruit and use nurses? And you must, in your 
fields all of the time, right?
    Ms. Goetcheus. It is one of our most difficult people to 
recruit is to get nurses. It is very, very difficult. And as we 
are talking about the collaboratives and the importance of 
education and care management, the nurses are key here. And so 
at least for us, it has been very, very difficult to recruit 
nurses.
    Mr. Stupak. And the nurses we talked to, they say at $150 
million, which was 30 years ago, like 98 percent of them are 
rejected for any financial aid, even though we have this great 
need for nurses. I mean, I just can't figure this one out other 
than we need some more bucks here just to help them out. I 
mean, they are not asking for a lot, just a little help with 
their schooling and come work in your clinics and centers. It 
would be of great help to us all.
    Mr. Hawkins. Health centers are up against shortages in any 
number of areas. Nursing is one. Dentists. The number of 
dentists are declining in the dental school. We actually 
started, we, the National Association, working with a medical 
school to help start a dental school, because the need is so 
great. Primary care physicians, pharmacists, and mental health 
counselors are all in significantly short supply.
    Mr. Stupak. Thank you.
    Mr. Manifold. We have six dental sites in our Central 
Virginia family, and four of the positions are filled right now 
and two are not filled. And we have a mighty strong effort. We 
have gotten some changes to Virginia law that helps to allow 
for more dentists to come into the State. And it is still 
virtually a nightmare for us, because we have the money, we 
have the chairs, we have everything we need, and it is still 
very, very difficult to find those dentists.
    Mr. Whitfield. Well, I want to thank you all so much for 
your testimony. We really enjoyed spending Wednesday afternoon 
with you, and I am sure Mr. Stupak and I both would say that we 
look forward to maintaining contact with you as we move forward 
to try to address some of these issues. So thank you for your 
time and your testimony.
    And I will say that we will keep the record open for 30 
days, and we are going to ask members to submit any questions 
that they have for the record within the next 7 days.
    And with that, the hearing is adjourned.
    [Whereupon, at 6:03 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

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