[Federal Register Volume 61, Number 65 (Wednesday, April 3, 1996)]
[Rules and Regulations]
[Pages 14639-14658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7787]



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[[Page 14640]]


DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405 and 491

[BPD-728-F]
RIN 0938-AF14


Medicare Program; Payment for Federally Qualified Health Center 
Services

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

ACTION: Final rule.

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SUMMARY: These regulations establish, as a Medicare benefit, outpatient 
services furnished by a Federally Qualified Health Center (FQHC) and 
establish requirements for coverage and payment of FQHC services. An 
FQHC is one of the following: An entity that is receiving a grant under 
section 329, 330, or 340 of the Public Health Service (PHS) Act; a non-
grant receiving entity that is determined by the Secretary to meet the 
PHS Act requirements for receiving a grant; certain native American 
health centers; and certain facilities that have previously been 
identified as Federally funded health centers.
    These regulations implement certain provisions of the Omnibus 
Budget Reconciliation Act of 1990 and the Omnibus Budget Reconciliation 
Act of 1993.

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

FOR FURTHER INFORMATION CONTACT: Helen Klein, (410) 786-4641 (FQHC 
coverage issues) Randy Ricktor, (410) 786-5650 (FQHC payment issues)

SUPPLEMENTARY INFORMATION:

I. Background

    On June 12, 1992, we published in the Federal Register, at 57 FR 
24961, a final rule with a comment period, which established a new 
Medicare benefit, outpatient services furnished by FQHCs. This benefit 
is authorized by section 4161(a) of the Omnibus Budget Reconciliation 
Act of 1990 (OBRA '90), which amends section 1861(aa) of the Social 
Security Act (the Act). The statutory provisions are effective on 
October 1, 1991.
    OBRA '90 defines an FQHC as an entity that is receiving a grant 
under section 329, 330, or 340 of the PHS Act; is receiving funding 
from such a grant under a contract with the recipient of such a grant 
and meets the requirements to receive a grant under section 329, 330, 
or 340 of the PHS Act; based on the recommendation of the Health 
Resources and Services Administration (HRSA) within the Department of 
Health and Human Services, is determined by the Secretary to meet the 
requirements for receiving such a grant; or was treated by the 
Secretary, for purposes of Medicare Part B, as a Federally funded 
health center (FFHC) as of January 1, 1990.
    Subsequent to the June 12, 1992 regulations, the Omnibus Budget 
Reconciliation Act of 1993 (OBRA '93) further amended section 1861(aa) 
of the Act relating to the definition of FQHCs. Section 13556 of OBRA 
'93 expanded the definition of FQHCs to include outpatient programs 
operated by tribes, tribal organizations under the Indian Self-
Determination Act, or by an urban Indian organization receiving funds 
under Title V of the Indian Health Care Improvement Act. This provision 
was effective as if it had been included in the OBRA '90 legislation. 
Thus, such organizations may qualify for FQHC status, and under certain 
circumstances, as early as October 1, 1991. We are implementing this 
provision in a separate Federal Register rule.
    The Act defines FQHC services as the same type of services provided 
by rural health clinics (RHCs) under the Medicare program, plus 
preventive primary health services.

II. Provisions of the Final Rule With Comment Period

    The rule described in considerable detail the requirements an 
entity must meet to qualify as an FQHC, what services the FQHC must 
furnish, and the methodology we will use to determine how much we pay 
an FQHC. We provided that an entity that meets the requirements must 
enter into a signed agreement with us and must terminate any other 
Medicare provider agreement.
    Under provisions of our final rule, services that are payable under 
the Medicare program when furnished by an FQHC are the same outpatient 
services that are currently covered as RHC services, plus preventive 
services. FQHC services do not include services furnished to hospital 
patients. RHC services include services furnished by physicians, 
physician assistants, nurse practitioners, nurse-midwives, qualified 
clinical psychologists, clinical social workers, and services and 
supplies furnished incident to professional services of these 
practitioners. In certain home health agency shortage areas, RHC 
services may also include visiting nurses' services.
    Preventive services include medical social services, nutritional 
assessment and referral, preventive health education, children's eye 
and ear examinations, prenatal and post-partum care, well child care, 
including periodic screening, immunizations, voluntary family planning 
services, and services outlined in the recommendations of the U.S. 
Preventive Services Task Force for patients age 65 and older. 
Preventive services do not include eyeglasses, hearing aids, group or 
mass information programs or health education classes, or preventive 
dental services. Preventive services covered under special provisions 
of Medicare, such as screening mammography, may be provided by an FQHC 
only if the center meets the special provisions that govern those 
benefits.
    Our regulations state that qualified clinical psychologists and 
clinical social workers who furnish FQHC services must be legally 
authorized to perform those services under State law. We clarified that 
nurse-midwives, clinical social workers, and clinical psychologists are 
employees of the FQHC.
    Payment provisions for FQHCs parallel the provisions for payment of 
RHCs. We pay freestanding FQHCs on an all-inclusive rate basis, subject 
to a test of reasonableness. We apply payment limits to the all-
inclusive rate per visit. We pay provider-based FQHCs in accordance 
with 42 CFR parts 405 and 413 of the Medicare regulations. For 
additional description, see the June 12, 1992 final rule (57 FR 24961). 
Issues regarding the interaction between managed care and Medicare 
entities, such as FQHCs, are under consideration by us, and therefore, 
not addressed in this final rule.

III. Analysis of and Responses to Public Comments

    In response to the publication of the final rule with a comment 
period in the Federal Register on June 12, 1992, we received 48 public 
comments. The comments were submitted by a wide variety of health care 
centers, consultants and local and national organizations. We reviewed 
all the comments, and the comments and our responses are in the order 
that the issues appeared in the June 12, 1992 rule.

Qualification Requirements

    Comment: A few commenters objected to application of the conditions 
for coverage requirements in 42 CFR part 491 to FQHCs and believed it 
is without legal basis. They noted that the language in the Medicaid 
law is nearly identical, and Medicaid does not place health and safety 
requirements on FQHCs. The commenters argued that by virtue of 
receiving grants under the PHS Act, these centers already must meet

[[Page 14641]]
stringent standards established by HRSA and further standards are 
unnecessary.
    Response: When the Congress created the FQHC benefit, it envisioned 
that FQHC services would be provided under the same conditions as RHCs 
services are furnished. Thus, FQHC services are defined in section 
1861(aa)(3)(A) of the Act as ``services of the type described in 
subparagraphs (A) through (C) of paragraph 1 of section 1861(aa).'' As 
a result, the services of FQHCs are to be identical to those of RHCs.
    Similarly, section 1861(aa)(3)(B) of the Act provides that ``any 
reference to a rural health clinic or a physician described in 
paragraph (2)(B) is deemed a reference to a Federally qualified health 
center, respectively.'' This means that physician-directed FQHCs are to 
be treated identically to their RHC counterparts. Finally, section 
1861(aa)(5) of the Act provides the same definitions of physician 
assistants, nurse practitioners and clinical nurse specialists for RHCs 
and FQHCs.
    These provisions of the Act indicate that the Congress built upon 
the statutory and regulatory provisions for coverage and payment of 
RHCs and intended that we use those provisions as a model for the FQHC 
program. Therefore, we believe that the Congress expected us to apply 
the same rules to FQHCs that we apply to RHC services and to 
professionals providing RHC services.
    Based on the above, we believe there is a rationale for applying 
all or part of the RHC requirements to the services furnished in FQHCs. 
While HRSA may monitor the health and safety standards for a subset of 
FQHCs that are grantees, for some FQHCs (in other words, ``look-
alikes,'' which are entities that are not receiving grants under the 
PHS Act but meet grant requirements, and some former FFHCs), there is 
no other alternative for monitoring the quality of the service 
furnished. Without our oversight, there would be no assurance that 
facilities furnish safe services.
    In addition, the Congress has given us the responsibility to 
establish standards to ensure the health and safety of beneficiaries in 
all other statutorily-created types of facilities, and it would be 
extraordinary to interpret the law as preventing application of such 
standards in regard to FQHCs. There is nothing in the law that would 
support the view that the Congress intended for us to be without the 
power to assure the safety and efficacy of FQHC services.
    We believe the health and safety requirements we established are 
minimal and are not a burden on the vast majority of centers that want 
to provide high quality care. In fact, we informally surveyed RHCs and 
FQHCs regarding the difficulties involved in participating in the 
Medicare program, and no one noted concerns with the health and safety 
requirements we extended to FQHCs. Likewise, no commenters on this 
document raised concerns with any particular requirement. However, 
should further correspondence indicate documented difficulties with a 
specific condition, we will be open to considering refinement, as 
appropriate.
    Finally, we note that we are implementing the requirements in a 
fashion that is as administratively simple as possible. That is, we are 
not surveying potential FQHCs prior to participation or on a routine 
basis. Rather, centers merely attest to meeting the requirements. The 
standards thus establish a set of expectations for FQHCs to monitor 
themselves and provide an enforcement mechanism for those very few 
centers that do not take adequate health and safety precautions. In the 
absence of such health and safety standards, we would have no means to 
protect beneficiaries from potentially serious health and safety 
threats that have materialized with other types of providers and 
suppliers over time. Given the statutory provision referencing RHC 
procedures, we are confident that the Congress intended that we place 
health and safety requirements on FQHCs.
    We concede that Medicaid currently has no regulations for FQHCs, so 
it is premature to argue that the Medicaid program does not have health 
and safety requirements for FQHCs. However, the Medicaid program does 
require provider agreements between the State agency and an FQHC before 
the Medicaid program pays the FQHC.
    Although the Medicare and Medicaid FQHC legislation is similar in 
language, the two programs are separate and autonomous. The Medicaid 
program is a Federal and State partnership and allows more flexibility 
in determining FQHC approval. Since Medicaid regulations have not yet 
been issued, we are not in a position to discuss any additional 
requirements that may be added.
    Comment: Several commenters noted that the statutory provisions for 
FQHC eligibility refer to FQHCs using the term ``entity.'' The 
regulations require that each site be approved, which the commenters 
believed exceeds our statutory authority. If site-specific approval is 
maintained, the commenters suggested that we clarify that an entity may 
submit combined cost reports and use a combined payment rate for all 
sites within that entity.
    Response: While we independently approve each site for Medicare 
participation and assign it a unique provider number, each site of a 
potential FQHC need not independently meet the PHS Act grant 
requirements. The fact that a site is within the scope of a grant or 
approved look-alike application is sufficient. However, each site must 
independently attest to meeting the conditions in part 491 subpart A.
    We believe the site specific requirement also has advantages for 
Medicare beneficiaries and FQHCs and is supported by law. Section 
1861(aa)(2)(K) of the Act gives us the authority to establish standards 
to ensure the health and safety of beneficiaries receiving services at 
RHCs, and consequently, we believe, at FQHCs. We believe that 
establishing specific requirements for individual site approval allows 
us to fulfill this role. If facilities are not independently approved, 
it is difficult to determine if each site is adequately meeting the 
required health and safety standards.
    There are advantages to the FQHC in this policy. The site-specific 
approval requirement allows each site in the entity to continue to 
operate despite individual problems that may arise in other sites under 
the same corporate entity. Corporate entities are typically large 
private or public organizations which have, as their organizational 
components, facilities that must independently meet the conditions 
established in 42 CFR part 491, subpart A. By requiring individual site 
approval, all of the sites of an entity are not jeopardized if one site 
does not meet health and safety requirements. If we were to use entity-
based approval, as suggested by the commenter, we would not allow an 
individual site that continues to meet all of the conditions to provide 
FQHC services if another site in that parent entity did not meet the 
Medicare safety standards. In addition, requiring site-specific 
approval enables us to provide enhanced service to our beneficiaries. 
Specifically, we are able to respond to beneficiary requests for the 
names and addresses of approved facilities that are providing Medicare 
FQHC services.
    Although each site within a corporate entity is independently 
approved and given a unique Medicare provider number, entities have the 
option to file a single consolidated cost report for the entire entity 
or individual cost reports for each site within the entity. We provided 
instructions in the intermediary and RHC/FQHC manuals

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that address payment for FQHC network entities.
    Finally, we do not believe that the law intended that every site 
operated by an entity be entitled to FQHC status, especially if the 
sites are not within the scope of the PHS Act grant, without 
independently qualifying as ``look-alikes.'' Only by using site-
specific approval can we carry out the statutory intent of providing 
FQHC status to a site that meets the conditions of the law, while 
excluding a site that is part of an entity, but falls outside the scope 
of a PHS Act grant or does not otherwise meet the FQHC eligibility 
criteria.
    Comment: One commenter requested clarification of our position 
regarding provider-based FQHCs, which are not receiving grants under 
the PHS Act, but meet grant requirements as ``look-alikes.'' The 
commenter noted that the definition of a provider-based FQHC as an 
integral and subordinate part of a provider and HRSA governance 
requirements have prompted some centers to establish independent 
governance and yet remain located at or near hospital grounds. The 
commenter requested assurance that such co-location would not result in 
provider-based designation.
    Response: Section 405.2462 defines a provider-based FQHC as a 
clinic or center that is an integral and subordinate part of a 
hospital, skilled nursing facility, or home health agency participating 
in Medicare (that is, a provider of services). The clinic or center is 
operated with other departments of the provider under common licensure, 
governance, and professional supervision. These stipulations must be 
met for us to consider an FQHC as provider-based. Simply being located 
in or near a hospital does not qualify an entity as a provider-based 
facility. The converse is also true. An entity may be provider-based 
despite the fact that it is located outside of the provider. A center 
with independent governance cannot be considered a provider-based FQHC.
    The basis for HRSA governance requirement is to ensure that the 
services that are provided are responsive to the community. Therefore, 
HRSA requires that a center approved under sections 329 and 330 of the 
PHS Act have a governing board, the majority of which are users of the 
facility.
    Comment: One commenter urged that we review the definition and 
scope of authority of community governing boards in FQHCs. The 
commenter noted that the requirement for community governing boards 
excludes from the FQHC benefit clinic facilities that are owned by 
academic health science centers.
    Response: The definition and scope of authority of community 
governing boards are found in sections 329(f)(3)(G) and 330(e)(3)(G) of 
the PHS Act. The sections specify that the center has established a 
governing board which (1) is composed of individuals, a majority of 
whom are being served by the center and who, as a group, represent the 
individuals being served by the center, and (2) selects the services to 
be provided by the center, schedules the hours during which such 
services will be provided, approves the center's annual budget, 
approves the selection of a director for the center, and, except in the 
case of a public center, establishes general policies for the center.
    The purpose of an FQHC is to provide community-based, family-
oriented primary care. The statutory governance requirement ensures 
that the services that are provided are responsive to the health needs 
and concerns of the community. An academic health science center can 
qualify as an FQHC if its board meets the requirements of sections 329, 
330 or 340 of the PHS Act and the provisions of this regulation.
    Comment: One commenter noted that Sec. 491.5 requires that a center 
be located in a rural or urban area that is designated as a shortage 
area. The commenter requested that shortage area be clearly defined in 
the regulations. Several commenters noted that the PHS law does not 
require the FQHC to be located in a medically underserved area, but 
merely to document that it serves a medically underserved population.
    Response: Section 491.2 defines a shortage area as a geographic 
area designated by the Department as having either a shortage of 
personal health services (under section 1302 of the PHS Act) or a 
shortage of primary medical care manpower (under section 332 of that 
Act). The designation of shortage areas is quite complex and is handled 
by HRSA.
    Section 491.5(d) specifies the criteria for designation of shortage 
areas. Factors considered include the ratio of primary care physicians 
practicing in the area to the resident population and the infant 
mortality rate.
    The commenter is correct in that HRSA does not require that the 
FQHC be located in a shortage area. Rather HRSA requires that the FQHC 
either be located in a medically underserved area (MUA) or serve a 
medically underserved population (MUP).
    According to 42 CFR 51c.102(e), an MUP is defined as the population 
of an urban or rural area designated by the Secretary as an area with a 
shortage of personal health services. This designation was developed 
because there were populations that required medical care but were 
located in areas that did not receive MUA designation. The Secretary 
analyzes the demographics and medical manpower of the population to 
determine whether or not the population should receive designation. 
Therefore, an MUP can be located in an area that is not an MUA.
    In response to the concern expressed by this commenter, we are 
revising Sec. 491.5(a) to specify that an FQHC may be located in a 
shortage area or may serve a medically underserved population. We are 
also adding a new paragraph (e) that defines medically underserved 
population in the same way as HRSA does, as indicated above.
    Comment: Two commenters objected to application of the ``four walls 
test'' in Sec. 491.5 to an FQHC. They believed that this provision 
limits cost-based payment to only those services provided at the clinic 
or center site. The commenters noted that it may be difficult to have 
some specialists come to the center site to provide care and 
recommended that all services furnished under arrangements with the 
FQHC be payable on a cost basis.
    Response: The ``four walls test'' requires that the objects, 
equipment and supplies necessary for the provision of the services 
furnished directly by the clinic or center be housed in a permanent 
structure or mobile unit that has fixed, scheduled locations. The 
requirement that the clinic or center be housed in a permanent 
structure ensures that the equipment, records, supplies and whatever 
else is necessary to provide the defined services are in one permanent 
place.
    The ``four walls test'' is not a requirement that limits cost-based 
payment to only those services provided at the clinic or center, and it 
does not restrict a physician from providing services off-site. A 
physician, including any specialist under contract to the FQHC, can 
have an agreement with the FQHC to provide FQHC services off-site.
    For reasons discussed later in this preamble, we have reconsidered 
our policy on contracting for professional staff members other than 
physicians. FQHCs may provide services of physician assistants, nurse 
practitioners and other professionals under contract. These 
professionals may provide services in skilled nursing facilities or in 
the homes of beneficiaries. However, an FQHC may not bill services 
provided to hospital patients as FQHC services.
    Comment: Several commenters noted that Sec. 491.8 requires that 
nurse practitioners or physician assistants be

[[Page 14643]]
available to furnish patient care services at least 60 percent of the 
time. However, the Omnibus Budget Reconciliation Act of 1989 (OBRA '89) 
changed the requirement to 50 percent. They recommended that we revise 
the regulation to state that such coverage is required 50 percent of 
the time.
    Response: We note that the referenced RHC requirements pertaining 
to staffing mix percentages in Sec. 491.8 do not apply to FQHCs. When 
the FQHC regulations were published on June 12, 1992, the existing RHC 
regulations had not been updated to include changes from the Omnibus 
Budget Reconciliation Act of 1987 (OBRA '87), OBRA '89 and OBRA '90. As 
a result, the FQHC regulations were incorporated into the existing RHC 
regulations, which still reflected earlier statutory thresholds for 
such coverage. We are preparing to issue a proposed rule that 
incorporates these changes and will update the RHC provisions in 
Sec. 491.8 and solicit public comment. We are, however, authorized by 
OBRA '90 to issue a final rule for FQHCs that includes only the OBRA 
'90 amendments.
    Comment: One commenter objected to the exclusion of psychologists 
from the list of practitioners in Sec. 491.8(a)(6), which specifies 
staff that must be available in order for the center to be open. The 
commenter recommended that we revise the regulation to include 
specialty providers in all areas of operation of the centers. Further, 
the commenter was concerned that the language with regard to medical 
direction in Sec. 491.8(b)(1)(i) could be interpreted to require that a 
physician may supervise psychological services that are within the 
scope of the psychologist to furnish without medical direction.
    Response: As noted above, OBRA '90 authorizes us to implement the 
FQHC regulations as a final rule. We do not have authority under that 
law to modify the RHC provisions without publishing a notice and 
soliciting public comment. When the FQHC regulations were published 
June 12, 1992, the existing RHC regulations had not been updated to 
include any changes in the law. As a result, the regulations concerning 
the policy board and medical supervision did not contemplate 
involvement of psychologists, as psychologists' services were not RHC 
covered services at the time the regulations were promulgated.
    Section 1861(ii) of the Act provides coverage for clinical 
psychologist services that would otherwise be covered if furnished by a 
physician or as incident to a physician's service. In addition, under 
this statutory provision clinical psychologists can provide services as 
authorized under State law without the supervision of a physician. We 
are revising Sec. 491.8(b)(1) to clarify that clinical psychologists 
can provide services, as permitted under State law, without the 
supervision of a physician in FQHCs.
    Comment: Two commenters objected to the requirement in 
Sec. 491.9(b)(2) regarding the development of patient care policies. 
This paragraph requires that the policy development committee of the 
center include at least one member who is not on the center's staff. 
They expressed concern that the use of non-staff personnel is an 
unnecessary expense and is burdensome. They also believed the 
requirement is unnecessary given the level of review already in place 
by HRSA for its grantees.
    Response: We believe that the provisions of Sec. 491.9(b)(2) are 
necessary to ensure the health and safety of beneficiaries. Patient 
care policies were developed to provide guidelines on how a facility 
will care for its patients. In addition, the policies ensure that the 
providers adhere to appropriate procedures and protocols. The 
requirement for a non-staff representative to assist in developing 
patient care policies is necessary to ensure that the services are 
responsive to the needs of the community. The non-staff representative 
does not have financial interests in the provider and, as such, will 
likely be more objective and unbiased in favor of the provider in the 
decision making process. This requirement is intended to ensure that 
the concerns of the population served will be paramount and that the 
provider will address the specific health needs of the community. Given 
the HRSA governance requirement for a constituent majority board, we 
believe this requirement will not be burdensome to most FQHCs.
    Comment: One commenter objected to annual surveys of RHCs and FQHCs 
as wasteful.
    Response: We are not planning to conduct routine surveys of FQHCs, 
and FQHCs will not be routinely required to submit documentation to 
HCFA demonstrating compliance with program requirements. However, we 
plan to survey an FQHC if we receive a complaint about a health and 
safety issue at the FQHC. During the survey, the FQHC must provide 
documentation of compliance with the requirements in part 491.
    Comment: Two commenters noted that FQHC grantees are subject to 
extensive review by the HRSA on an annual basis. They believed this 
review is sufficient to meet any evaluation assurances that should be 
necessary. Therefore, the requirement in Sec. 491.11 that a clinic or 
center carry out or arrange for an annual evaluation of its total 
program should not be applicable to FQHCs.
    Response: An FQHC is expected to conduct annual evaluations in 
accordance with Sec. 491.11, which specifies what the annual program 
evaluation must include and what the evaluation must determine, but it 
does not prescribe how the annual program evaluation must be conducted 
or the kind of evaluation that must be conducted. The purpose of the 
annual evaluation is to evaluate utilization of services, evaluate 
compliance with established policies, and determine if changes are 
needed. We would expect that every organization would conduct this 
self-assessment at least annually regardless of Medicare requirements.
    With regard to the concern that HRSA reviews are adequate and, in 
support of elimination of this requirement for FQHCs, we note that not 
all FQHCs are grantees under the PHS Act; thus, all FQHCs would not be 
subject to the HRSA standards. In support of retaining the requirement, 
we note that the standard should not be burdensome to the centers 
because, to the extent that HRSA reviews cover the scope of the 
requirement, additional evaluation and documentation will not be 
necessary. Thus, should we survey an FQHC for compliance with part 491 
conditions in response to a complaint, documentation submitted to HRSA 
for HRSA program purposes would be acceptable as evidence of compliance 
with 42 CFR 491.11 if the review included the items specified in the 
requirement.
    Comment: Another commenter was in favor of annual compliance 
reporting and recommended that, to ease administrative burden, HCFA and 
HRSA use a single form, and HCFA provide additional details specifying 
when such reporting is to be completed and where it is to be forwarded.
    Response: We are not requiring annual compliance reporting. FQHCs 
must review themselves, and they must maintain documentation of their 
review in the event that we choose to survey a center. We will evaluate 
an FQHC only if we discover a problem or receive a complaint. In such 
cases, the review would encompass only the matter addressed in the 
Medicare regulations, but we would coordinate the review with HRSA to 
avoid duplicative efforts. Section 491.11 requires that an FQHC perform 
an annual self-evaluation of its program. We believe this is a 
reasonable requirement so that an FQHC assesses utilization of 
services, compliance with

[[Page 14644]]
established policies, and determines if changes are needed.
    Comment: One commenter wanted to know when a listing of FQHCs would 
be available.
    Response: There is a list of FQHCs currently available from the 
Health Standards and Quality Bureau, System Management Branch, 6325 
Security Blvd., Baltimore, Maryland, 21207. The charge for the list is 
$25.00. For more information, you may telephone Mike Moran at (410) 
597-5851.

Content and Term of the Agreement

    Comment: One commenter requested that we clarify the 
recertification process for FQHCs.
    Response: For Medicare purposes, there will be no routine 
recertification of FQHCs. Once a facility is approved, it will remain a 
Medicare-participating FQHC until termination of the agreement, as 
provided in Sec. 405.2436. We plan to survey an FQHC if we receive a 
complaint about a health and safety issue at an FQHC or if a health and 
safety problem is identified in another way.
    HRSA has an annual process to determine eligibility for FQHC 
status. For grantees, this consists of an application process for 
funding, and for look-alikes, this consists of an annual application 
and review, either of which could result in HRSA recommending 
decertification of the FQHC to HCFA.
    Comment: Two commenters noted that the RHC law and regulations 
provide that an RHC retains its status even if the area in which it is 
located loses its rural shortage area designation. They requested 
similar protection for FQHCs.
    Response: Section 1861(aa)(2)(K) of the Act specifies that an RHC 
may maintain its approval even if the area in which it is located loses 
its rural shortage area designation. In accordance with the Act, 
Sec. 491.5(b)(1) allows an RHC to retain its approval. The Act, 
however, does not include a similar provision for an FQHC.
    We note that the current language in the regulation does not 
clearly state that the protection for area designation applies 
exclusively to RHCs. Therefore, we are revising Sec. 491.5(b)(1) to 
clarify this.
    Comment: One commenter objected to the requirement that centers 
must terminate other provider agreements prior to, or simultaneous 
with, signing an FQHC participation agreement. The commenter believed 
that there is no statutory support for this requirement, and this 
requirement may adversely affect some centers. One example cited by the 
commenter is that an RHC could be adversely affected if it gave up its 
RHC status to become an FQHC and the area is redesignated from 
medically underserved because the protection afforded an RHC is not 
offered to an FQHC.
    Response: We are revising Sec. 405.2430(a)(1)(iii) to clarify that 
a freestanding FQHC must terminate other provider agreements for 
entities that operate at the same time as the FQHC. The intent of this 
provision is to prohibit an entity from using the same space, staff, 
and resources simultaneously as two distinct provider types. We believe 
this provision is necessary to ensure the health and safety of our 
beneficiaries and to avoid program abuse.
    We do not intend by this provision that an FQHC and another 
provider/supplier type may not be commonly owned or housed in the same 
building. Rather, the intent of the provision limiting freestanding 
FQHCs to a single provider agreement is to prevent the entity from 
using the same staff, space, and resources for two or more different 
provider types at the same time.
    We believe that this provision is necessary to ensure the health 
and safety of our beneficiaries. That is, if an FQHC is using the same 
space, staff and resources as two different providers at the same time, 
there is no assurance that the staff will be devoting its efforts to 
the FQHC operation and not the other provider type. Without these 
assurances, it is possible that beneficiaries could come to the FQHC 
expecting to receive adequate health care, only to learn that the other 
provider type is using the FQHC's resources at that time.
    In addition, we established a very simplified cost report mechanism 
for FQHCs. This cost report does not permit the allocation of costs 
among multiple provider types. If we were to allow the simultaneous use 
of the same space, staff and resources as multiple providers, we would 
need to develop a more sophisticated cost report. A more complicated 
report could place an administrative burden on the centers, the vast 
majority of which do not wish to engage in multiple provider 
activities.
    We note that the Medicare program does not generally allow the 
concurrent use of a facility as multiple health care providers. For 
example, the regulations require that ambulatory surgical centers be 
used exclusively for providing surgery to patients who do not require 
hospitalization. Furthermore, the skilled nursing facility regulations 
require separate space, staff and resources (or distinct part) for its 
non-certified portion. Thus, we believe there is ample precedent for 
the requirement we are establishing.
Coinsurance
    Comment: One commenter noted the distinction between the basis of 
coinsurance (charges) and the basis of payment (all inclusive rate) and 
asked for clarification.
    Response: The commenter is correct. There is a difference between 
the basis of coinsurance and the basis of payment. In accordance with 
section 1833(a)(3) of the Act, payment for FQHC services may not exceed 
80 percent of its cost. Section 1866(a)(2)(A) of the Act, referred to 
in section 1830(a)(3), addresses coinsurance liability of 
beneficiaries, providing that coinsurance be based on charges. 
Consequently, our regulations provide that an FQHC may not charge 
beneficiaries more than 20 percent of the charge for the service 
furnished regardless of the payment the FQHC receives from Medicare.
    We believe that, on average, many FQHCs will recover their costs 
under this provision. While it is possible that, in situations 
involving minimal services, the FQHC will recover less than its cost, 
it will recover more than its costs in certain other visits involving 
high charge services.
    We acknowledge that FQHCs must use a sliding fee schedule for 
beneficiaries within 200 percent of poverty levels. Thus, FQHCs with a 
high proportion of Medicare beneficiaries subject to the sliding fee 
could receive less than cost from their Medicare population. However, 
we believe that the law is clear regarding Medicare payment and 
beneficiary coinsurance liability.

Effective Date

    Comment: One commenter requested clarification of the effective 
date for those centers that had previously obtained ``look-alike'' 
status under the Medicaid program.
    Response: In accordance with Sec. 405.2434(b)(2), an FQHC's 
effective date may be October 1, 1991, if it met all Federal 
requirements on that date and if it applied to be a Medicare FQHC by 
August 11, 1992. An entity that requested to become an FQHC by filing a 
signed agreement within 60 days of publication of the regulation could 
elect to choose an effective date from October 1, 1991 (the effective 
date of the law) up to and including August 11, 1992. An entity does 
not qualify as an FQHC on October 1, 1991 unless it met all Federal 
requirements on that date. The preamble to the June 12, 1992 regulation 
states that Medicare will pay for FQHC

[[Page 14645]]
services furnished on or after October 1, 1991 by entities that met the 
criteria in the regulation on that date and file a signed statement 
within 60 days of the date of publication.
    More specifically, an entity that is not receiving a grant under 
the PHS Act but meets grant requirements, and applied for and obtained 
FQHC status under the Medicaid program, and was approved without a 
waiver could be paid for services from October 1991 if the entity met 
the requirements in part 491 and applied to Medicare timely. The 
earliest date for which an entity can qualify is October 1, 1991. HRSA 
makes a recommendation about an entity's status after the entity has 
applied and met all HRSA requirements, and we make the decision to 
approve the entity as an FQHC. If an entity was approved as a Medicaid 
FQHC ``look-alike'' without waiver after October 1, 1991, the earliest 
date of FQHC approval for such a center is the date we approve the 
entity as an FQHC.
    Comment: One commenter objected to the August 11, 1992 date for 
filing for approval as an FQHC from October 1991. The commenter 
believed that we should permit exceptions to the August 11, 1992, date 
for centers that provide a ``good cause'' explanation for their delay.
    Response: We and the National Association of Community Health 
Centers (NACHC) have made extensive efforts to assist centers in 
applying to become FQHCs. Letters were sent to each grantee, ``look-
alike,'' and FFHC to make them aware of the process for FQHCs to 
receive payment as an FQHC from October 1, 1991.
    We have already processed payment adjustments to take into account 
entities that acted timely to apply for FQHC status effective October 
1, 1991. Making payment to 1991 for FQHCs that did not file in time 
would be administratively burdensome because it involves the entity 
refunding previously collected deductibles to beneficiaries and billing 
for past preventive services. We believe the ``window'' we permitted 
for FQHCs to qualify to October 1991 was generous, and we believe that 
our letters and the letters from NACHC gave facilities adequate time 
and information to apply and qualify. Therefore, we are maintaining the 
policy in our 1992 rule.

Scope of Services

    Comment: One commenter believed the law defines FQHC services as 
those generally furnished by community health centers (CHCs). He noted 
that this is considerably different from RHC services and recommended 
revision of the scope of services to reflect this.
    Response: The Act does not define FQHC services as the services 
provided by CHCs. Section 1861(aa)(3)(A) and (B) of the Act defines the 
scope of FQHC benefits in terms of those benefits enumerated in the RHC 
law (section 1861(aa)(1)(A)-(C) of the Act) and preventive primary 
health services that a center is required to provide under sections 
329, 330 and 340 of the PHS Act. The law does not require that a center 
be a CHC to qualify as an FQHC; it does provide that a facility may 
qualify as an FQHC if it meets the requirements to become a CHC under 
section 330 of the PHS law. We do not have the authority to expand the 
FQHC scope of benefits beyond those specified in the law.
    Comment: Several commenters objected to the regulation's definition 
of preventive primary health services. Some commenters believed that 
all services required under section 330 of the PHS Act, such as 
transportation services, should be covered as preventive services.
    Response: Section 1861(aa)(3) of the Act specifies that FQHC 
services include those benefits defined as RHC services in section 
1861(aa)(1)(A)-(C) of the Act and preventive primary health services 
that are required under sections 329, 330 and 340 of the PHS Act. A 
service must first be recognized as a preventive primary health service 
under PHS law and HRSA guidelines to be included as a preventive 
primary health service for Medicare FQHC purposes. If a service is not 
included as a primary preventive service under the PHS Act and the HRSA 
guidelines, there is no authority for Medicare to cover the service.
    42 CFR parts 51c and 56 define preventive services as medical 
social services, nutritional assessment and referral, preventive health 
education, children's eye and ear examinations, prenatal and post-
partum care, perinatal services, well child care (including periodic 
screening), immunizations and voluntary family planning. Based on the 
U.S. Preventive Services Task Force Report for persons age 65 or older, 
HRSA further requires its grantees to provide additional preventive 
services that are specified in Sec. 405.2448.
    Transportation services are helpful in promoting access to 
preventive health care, especially for individuals living in 
underserved areas. Such services, however, are not defined as 
preventive services by HRSA, thus we do not have the authority to 
include such services as FQHC preventive services.
    Comment: One commenter recommended that the rule be clarified to 
allow for the inclusion of advanced practice mental health nurses under 
the FQHC benefit. The commenter believed it was the intent of the law 
to include these practitioners under ``specialized nurse 
practitioners;'' however, they are not all technically classified as 
nurse practitioners.
    Response: The Act does not recognize or specifically refer to the 
services of advanced practice mental health nurses. We do not have the 
authority to expand the FQHC scope of benefits beyond those the 
services of practitioners described in the Act. The FQHC scope of 
benefits includes some, but not all, categories of advanced practice 
nursing. For example, it does not include clinical nurse specialists. 
Other categories of advanced practice nursing such as physician 
assistants and nurse practitioners may provide mental health services 
covered under the FQHC benefit. Services provided by clinical nurse 
specialists, for example, could be covered only if they were ``incident 
to'' services as provided in section 1861(aa)(1)(B) of the Act. This 
section provides for coverage of services furnished incident to the 
services of physicians, certain mid-level practitioners, clinical 
psychologists, or clinical social workers.
    Comment: Numerous commenters objected to the provision that limits 
FQHC services to those furnished outside a hospital. FQHCs routinely 
follow their patients to the hospital setting and noted that it is 
burdensome to bill the carrier separately for these services as non-
FQHC services. Further, this mechanism provides an opportunity for 
duplicate billing. Some commenters noted that RHCs may bill for 
hospital services and believe the same policy should be applicable to 
FQHCs.
    Response: There are two reasons why FQHC services are limited to 
those furnished outside of the hospital: (1) Section 1861(aa)(3) of the 
Act requires that FQHC services be provided only to outpatients, and 
(2) section 1862(a)(14) of the Act prohibits payment for services 
furnished to hospital patients, except as specified in the law. Section 
1862(a)(14) of the Act, in enumerating those who may receive payment 
for services furnished in a hospital, does not include either RHCs or 
FQHCs. Therefore, payment cannot be made for FQHC services to hospital 
patients.
    The Social Security Amendments of 1983, Pub. L. 98-21, on April 7, 
1983, added section 1862(a)(14) to the Act. This section prohibits 
payment under Medicare for any service provided to a hospital inpatient 
that is not furnished by the hospital itself or furnished under 
arrangements made by the hospital with

[[Page 14646]]
the entity furnishing the service. Section 1862(a)(14) of the Act also 
states that certain services are specifically excluded from this 
prohibition. The exclusion is limited to physicians' services, services 
described by section 1861(s)(2)(K)(i) of the Act (certain physician 
assistant services, nurse practitioner, clinical nurse specialist, and 
nurse-midwife services), qualified psychologist services, and services 
of a certified registered nurse anesthetist.
    Section 1862(a)(14) of the Act was further revised by section 
9343(c) of the Omnibus Budget Reconciliation Act of 1986 (OBRA '86), 
Pub. L. 99-509, to apply to hospital outpatients as well as hospital 
inpatients. As a result, the law now prohibits payment, except as 
specifically enumerated, for both hospital outpatients and inpatients. 
By its terms, then, section 1862(a)(14) of the Act prohibits Medicare 
payment for FQHC services provided to a hospital patient.
    However, we do not believe it is the intent of the law to prohibit 
FQHC practitioners from following their patients to a hospital setting. 
The law provides two alternative payment mechanisms for such services. 
First, the FQHC may look to the hospital for payment for the services. 
Second, FQHC practitioners can follow patients to a hospital and 
provide services, but the practitioner may not bill those services as 
FQHC services. Instead, FQHC physician visits are covered under other 
Part B provisions of Medicare as physician services, and the FQHC 
practitioner must bill the Medicare carrier to receive payment.
    Section 1842(b)(6) of the Act provides that a facility, under 
certain conditions, may bill the program for the services of its 
employees. In such a case, it is not necessary that a FQHC practitioner 
employed by an FQHC bill for the services provided in hospitals; 
rather, the FQHC may bill the program on behalf of its employees using 
the form HCFA-1500. These bills must be sent to the local carrier 
instead of the intermediary processing cost-based claims are paid using 
the routine part B payment methodology (in most cases resource-based 
relative value system fee schedules).
    Despite the commenters' allegations to the contrary, an RHC cannot 
bill for hospital services. The same statutory requirements that extend 
to an FQHC apply to an RHC as well.
    Comment: Several commenters objected to the exclusion of diagnostic 
x-rays from the definition of FQHC services. They supported inclusion 
of such services under the FQHC benefit as incident to a physician's 
service. They argued that this would promote administrative ease in 
bill submission.
    Response: Section 1861(aa)(1)(A) of the Act defines RHC (and, thus 
FQHC) services to include physicians' services and such services and 
supplies as are covered under section 1861(s)(2)(A) of the Act if 
furnished as an incident to a physician's professional service and 
items and services described in section 1861(s)(10) of the Act 
(pneumococcal and influenza vaccine).
    The technical component of x-ray services, as distinct from 
physician services, is covered under section 1861(s)(3) of the Act. 
Therefore, it is not included in the definition of FQHC services. We 
have no authority to change this requirement under current law. 
However, we are interpreting the law as permitting the professional 
component of the x-ray to be included as an FQHC-covered service as a 
physician service. Moreover, though the technical component of x-ray 
services is not covered under the FQHC benefit, it may be claimed under 
Part B of Medicare by billing the carrier.
    Comment: One commenter noted that the exclusion of radiology and 
hospital services from the scope of FQHC services presents a problem in 
waiver of the deductible. By virtue of its mission, an FQHC is treating 
a population that generally has insufficient funds to meet necessary 
medical expenses. The exclusion of some services from the scope of FQHC 
services will result in a deductible liability for those excluded 
services and present a financial hardship for low income beneficiaries. 
The commenter recommended that we waive the deductible for all services 
provided in an FQHC, regardless of whether they are FQHC services or 
not.
    Response: Section 1833(b)(5) of the Act provides that the Medicare 
deductible does not apply to FQHC services. Section 1861(aa)(3) (A) and 
(B) of the Act defines the scope of FQHC services in terms of those 
services furnished by an RHC and preventive primary health services 
that a center is required to provide under the PHS law and HRSA 
guidelines.
    The rationale for excluding the technical component of radiology 
services to hospital inpatients from the definition of FQHC services 
has been discussed in the prior two responses. Section 1861(s)(3), and 
not 1861(s)(2)(A), of the Act is the basis for the diagnostic x-ray 
benefit; thus, the technical component of x-ray services is not 
included within the FQHC benefit. In accordance with sections 
1861(aa)(3) and 1862(a)(14) of the Act, FQHC services cannot be 
provided to hospital patients. We have no authority to waive the 
deductible for these services, which are not FQHC services.
    We acknowledge that paying the deductible for these services may be 
difficult for some beneficiaries. Beneficiaries suffering financial 
hardship may be eligible for assistance under the Qualified Medicare 
Beneficiaries (QMB) Program. A qualified Medicare beneficiary is an 
individual who is entitled to Medicare hospital insurance benefits 
under Part A, with or without payment of premiums, who also has an 
income that does not exceed 100 percent of the Federal poverty level 
and has resources that do not exceed twice the maximum amount 
established for Supplemental Security Income eligibility.
    Under the QMB program, Federal financial participation is available 
to State Medicaid agencies for medical assistance for the beneficiary's 
Medicare cost sharing expenses. The expenses include Medicare Part A 
and Part B deductibles and coinsurance. Medicaid pays the coinsurance 
and the deductible. This will help beneficiaries to avoid the out-of-
pocket costs. The QMB program provides a mechanism to assist those 
beneficiaries with limited means to pay the deductible.
    Comment: One commenter noted that although nurse-midwives are 
mentioned in several places throughout the FQHC regulation, 
Sec. 405.2446, which defines the FQHC covered scope of services, does 
not include nurse-midwives.
    Response: We agree with the commenter and are revising 
Sec. 405.2446 to include the services of nurse-midwives as covered FQHC 
services. We intend to propose a change to the definition of nurse-
midwife in a proposed rule on RHCs currently in process, which will 
also affect FQHCs. In the meantime, State law governs which nurse-
midwives qualify to provide services in FQHCs.
    Comment: One commenter recommended coverage of clinical nurse 
specialists as FQHC practitioners. These health care practitioners are 
registered nurses with master's degrees in a defined clinical area of 
nursing. They are similar to nurse practitioners and are educated and 
trained to provide preventive services and primary care. OBRA '90 
recognizes these health care practitioners as independent providers in 
rural areas. Therefore, the commenter believed that we should cover the 
individual services of these practitioners within the scope of FQHC 
services. In addition, the commenter wanted the phrase ``clinical nurse 
specialist'' added to the definition of an FQHC visit.

[[Page 14647]]

    Response: The Act does not clearly provide coverage for clinical 
nurse specialists services in an RHC or FQHC. Although the definition 
of a clinical nurse specialist is included in section 1861(aa)(5) of 
the Act, the Act does not explicitly include these practitioners in the 
scope of the benefit.
    Comment: One commenter recommended that the adjective 
``specialized'' be removed as a modifier to nurse practitioner as most 
States do not use this term in licensing nurse practitioners.
    Response: We have been advised by nursing associations that the 
term ``nurse practitioner,'' which is defined in Sec. 405.2401(c)(17), 
encompasses all specialties among nurse practitioners. Consequently, it 
is not necessary to use the term ``specialized'' and we are removing 
the definition of ``specialized nurse practitioner'' from 
Sec. 405.2401.

Primary Preventive Services

    Comment: Several commenters objected that we did not include dental 
services as preventive care covered under the FQHC benefit. They noted 
that the U.S. Preventive Services Task Force Report includes an oral 
health component and argued that such services are essential for 
elderly patients. Further, preventive primary dental services are 
separately mandated in section 329 and 330 of the PHS Act. Therefore, 
the commenters believed that the Congress did not intend to exclude 
dental services from the FQHC benefit and that its failure to amend 
section 1862(a)(12) of the Act was a technical oversight.
    Response: Dental services are not included in the HRSA definition 
of preventive primary health services; they are considered a separate 
benefit under HRSA services. The PHS Act provides for preventive dental 
services as a primary health care benefit separate from preventive 
primary health services. That is, section 329(a)(6)(C) of the PHS Act 
defines preventive primary health services, while a different section 
of the law, section 329(a)(6)(F), defines preventive dental services. 
In defining the scope of FQHC preventive services, the Act specifically 
refers only to preventive primary health care services in sections 329, 
330 and 340 of the PHS Act.
    Further, section 1862 of the Act contains an exclusion for dental 
services, prohibiting payment for services in connection with the care, 
treatment, filling, removal or replacement of teeth or structures 
directly supporting the teeth. OBRA '90 did not amend section 
1862(a)(12) of the Act to remove the exclusion of dental services for 
FQHCs. However, it did amend other provisions of section 1862(a). As a 
result, the regulations exclude dental services from the definition of 
FQHC preventive primary health services and will continue to do so.
    Although the U.S. Preventive Services Task Force Report includes an 
oral health component for the elderly, that oral component is 
categorized as a counseling service by the Task Force. The report 
intended that a primary care practitioner would briefly examine a 
patient's mouth for visible signs of disease and counsel the patient to 
see a dentist if there is a need for routine prophylactic services. If 
the beneficiary had need of prophylactic or other dental services, he 
or she would be referred to a dentist. The oral health component is not 
the same as dental services.
    Comment: Several commenters objected to the exclusion of screening 
mammography services as an FQHC preventive service. Although this 
service is payable under Part B, they note that application of the 
deductible and having to make an appointment to have the mammogram 
performed at another facility would deter some of the most needy 
population from getting this valuable service.
    Response: Sections 1834(c) and 1861(s)(13) of the Act provide for 
coverage of screening mammography for certain women entitled to 
Medicare, subject to frequency limitations, quality standards and 
special payment rules. The Act provides coverage of screening 
mammography services only in a facility that meets the Medicare 
requirements for certification. An FQHC may provide and bill for 
screening mammography services under the mammography benefit as long as 
it meets the applicable quality standards and coverage requirements. 
The quality standards are designed to protect the health and safety of 
Medicare beneficiaries.
    As explained above, the scope of benefits under FQHCs does not 
include radiological services. In addition, the Act contains special 
provisions for the coverage of screening mammography as a Medicare 
benefit, and those provisions apply to FQHCs in the same manner as they 
apply to other entities.
    Comment: One commenter believed that we should recognize services 
listed in the U.S. Preventive Services Task Force Report for people 
under age 65 as preventive services for purposes of the FQHC benefit.
    Response: By definition, the Medicare program is a Federal health 
insurance program for people age 65 or older and certain disabled 
individuals. Section 1861(aa)(3)(B) of the Act specifies that FQHC 
services include preventive primary health services that a center is 
required to provide under sections 329, 330 and 340 of the PHS Act. A 
service must first be recognized as a preventive primary health service 
under HRSA guidelines in order to be included as an FQHC preventive 
primary health service.
    HRSA defines preventive primary health services in 42 CFR parts 51c 
and 55 as medical social services, nutritional assessment and referral, 
preventive health education, children's eye and ear examinations, 
prenatal and post-partum care, perinatal services, well child care 
(including periodic screening), immunizations, and voluntary family 
planning services. These are the required preventive primary health 
services as defined by HRSA. Thus, these are the preventive primary 
health services that we require in an FQHC.
    In preparing the final rule with comment period for FQHC preventive 
services, we noted that this list of services was not likely to 
significantly benefit the majority of Medicare beneficiaries. We worked 
with HRSA to expand the HRSA-required preventive primary health 
services. The ``Guide to Clinical Preventive Services,'' prepared under 
the supervision of the U.S. Preventive Services Task Force, provides 
further recommendations for clinical practice on additional preventive 
interventions. HRSA adopted the policy that the list of preventive 
primary health services recommended by the task force in the ``Guide to 
Clinical Preventive Services'' for people aged 65 or older is 
consistent with the preventive primary health services that its 
grantees are already required to provide.
    The commenter believed that we should recognize services 
recommended for people under age 65 as preventive services for purposes 
of the FQHC benefit. The ``Guide to Clinical Preventive Services'' 
lists the same preventive services for both the under age 65 and the 
over age 65 populations, with the exception of counseling regarding 
sexual practices. The sexual practices category includes sexually 
transmitted diseases, partner selection, contraceptive devices, and 
unintended pregnancy. Since, the HRSA regulations at 42 CFR part 55 
already include the majority of these services under preventive health 
education and family planning, we do not believe it is appropriate to 
explicitly include these in the list of preventive primary care 
services under Medicare.
    Comment: One commenter noted the value of proper nutrition in 
health outcomes, particularly with diseases of

[[Page 14648]]
hypertension, obesity and diabetes. The commenter requested 
clarification regarding the provision of dietician services under the 
``incident to'' provision if they are provided by a consultant.
    Response: The FQHC benefit includes services furnished by certain 
professionals. Section 1861(aa)(1) of the Act defines these 
professionals as a physician, nurse practitioner, physician assistant, 
clinical psychologist or clinical social worker. The benefit also 
includes services furnished ``incident to'' the services of these 
professionals as long as the individual furnishing the service is an 
employee of the FQHC.
    Dietician services could be covered FQHC services if provided to 
the beneficiary as ``incident to'' services. Dietician services must 
meet the criteria for ``incident to'' services established in sections 
406 and 410 of the Medicare RHC and FQHC Manual. These sections state 
that services and supplies incident to a physician's or mid-level 
practitioner's professional services are covered as FQHC services as 
long as they are: furnished as an incidental, although integral, part 
of a professional's services; of a type commonly furnished either 
without charge or included in the FQHC's bill; of a type commonly 
furnished in a physician's office; services provided by clinic 
employees other than those services listed in section 400A of the 
Medicare RHC and FQHC Manual furnished under the direct, personal 
supervision of a physician or mid-level practitioner; and furnished by 
a member of the clinic or center's staff who is an employee of the 
clinic or center. These criteria follow the longstanding criteria for 
services ``incident to'' physician services.
    The Medicare RHC and FQHC Manual provides that there must be a 
physician's or mid-level practitioner's personal service furnished to 
which the non-physician's services is an incidental, although integral, 
part. This does not mean, however, that each occasion of service by a 
nonphysician need also always be the occasion of the actual rendition 
of personal professional services by the physician or mid-level 
practitioner. This requirement is also met for nonphysician services 
furnished during a course of treatment in which the physician or mid-
level practitioner performs an initial and subsequent service with a 
frequency that reflects his or her active participation in, and 
management of, the course of treatment. This means that there must have 
first been a direct, personal, professional service furnished by a 
physician or mid-level practitioner to initiate the course of treatment 
of which the nonphysician service is an incidental part. In addition, 
there must be subsequent services performed by the physician or mid-
level practitioner of a frequency that indicates his or her continuing 
active participation in and arranging the patient's course of 
treatment.
    Dietician services that are provided in an FQHC may be covered if 
they are provided directly by a physician or appropriate mid-level 
practitioner or are incident to his or her services. This does not 
include services that are provided independently by a dietician without 
the active involvement of the FQHC physician or mid-level 
practitioners.
    Consistent with our longstanding policy, as reflected in section 
406 of the Medicare RHC and FQHC Manual, ``incident to'' services must 
be furnished by a member of the clinic staff who is an employee of the 
clinic. Thus, in order for dietician services to be covered FQHC 
services, the dietician must be an employee of the FQHC. To determine 
the employer/employee relationship, the ``usual common law rules,'' 
that are referred to in section 210(j)(2) of the Act, are applied. In 
applying these rules, we consider not only who pays a person's salary 
and fringe benefits but also other factors including who has hiring and 
firing authority and who pays Federal Income Contributions Act (FICA) 
taxes and withholds income tax.
    The requirement that personnel who perform ``incident to'' services 
must be employees of the clinic or center for purposes of coverage is a 
longstanding Medicare policy. The basis for this requirement is in 
section 1861(s)(2)(A) of the Act. This section limits coverage of 
``incident to'' services to those services that are commonly furnished 
in physicians' offices and are commonly either furnished without charge 
or included in the physicians' bills. We have consistently interpreted 
this provision to exclude coverage of ``incident to'' services provided 
by non-employees of physicians, and in this case, of clinics. In 
addition, the employer/employee relationship requirement ensures that 
physicians will have the authority to exercise appropriate medical 
supervision and management control over the qualifications and 
performance of non-physicians for whose services he or she will be 
billing Medicare. Since the PHS Act encourages FQHCs to contract to 
provide services, we do not wish to create barriers to, and burdens on, 
FQHCs that wish to contract for non-physician professional services. 
Therefore, payment may be made for services provided by FQHC contracted 
professionals. However, this FQHC provision does not apply to RHC 
services. We plan to address this issue in a future proposed rule.
    Comment: One commenter recommended that nutritional education and 
counseling be listed as a separate preventive primary health service.
    Response: As noted above, the Act links preventive primary health 
services to the PHS requirements. Although HRSA guidelines include 
nutritional assessment, they do not include nutritional counseling and 
education. Because the HRSA guidelines do not specifically include 
nutritional education and counseling as a preventive primary health 
service, we do not have the authority to include these as preventive 
services in the FQHC regulations.
    Nutritional education and counseling are tools to maintain or 
improve an individual's nutritional status. Generally, nutritional 
education and counseling can be defined as a means of educating the 
patient. Nutritional education and counseling for a Medicare 
beneficiary could be covered if it is provided to the beneficiary as a 
service that is ``incident to'' the service of a particular 
practitioner. The beneficiary must see an attending FQHC professional 
for a medical reason to which the nutritional education and counseling 
is incident. For example, nutritional education for a diabetic patient 
being actively monitored by an FQHC practitioner could be covered as an 
``incident to'' service.
    We note that encounters with a nurse or dietitian that are not 
associated with a visit by an FQHC practitioner are not billable as 
visits. The costs of the personnel providing the educational services, 
however, may be included in the center's allowable costs.
    Comment: One commenter requested clarification of what is meant by 
nutrition assessment and who could perform the assessment. The 
commenter recommended that a registered dietitian is the best qualified 
professional to provide the service.
    Response: HRSA guidelines include nutritional assessments and 
referrals as preventive primary health services; therefore they are 
covered as FQHC preventive primary health services. Because nutritional 
assessments are FQHC covered preventive services, any professional in 
an FQHC can provide these services. We believe that most physicians, 
nurse practitioners, and physician assistants, have the skills 
necessary to conduct a nutritional assessment as a preventive primary 
health service for Medicare beneficiaries.

[[Page 14649]]

    However, the physician may use the services of a dietician employed 
by the FQHC for those beneficiaries who require extensive assistance in 
making dietary changes. As noted above, the services of a dietician may 
be covered under the FQHC benefit when the service is provided to the 
beneficiary as ``incident to'' the services of a physician, nurse 
practitioner, or a physician's assistant service. An FQHC professional 
must see the beneficiary for a medical reason to which the services of 
a dietician are incident. The initial face-to-face encounter with the 
attending professional is necessary for the service to be billed as an 
FQHC visit. The definition of a visit is discussed at Sec. 405.2463.
    Comment: Several commenters voiced strong objections to the 
exclusion of group counseling as a preventive service. They believed it 
is more efficient for the center to furnish needed counseling services, 
such as diabetic education, in a group setting rather than to use 
valuable physician time.
    Response: As noted above, the Act links the definition of 
preventive primary health services under the FQHC benefit to the PHS 
law. Group counseling is not included as a preventive primary health 
service in the PHS law. As a result, we do not have the authority to 
include such services as FQHC preventive services.
    In addition, group counseling is seldom a medical service, and 
generally, no active medical treatment is provided during a classroom 
situation. Moreover, there is an absence of scientific evidence that 
group counseling, such as smoking cessation classes, alters behavior or 
health status of individuals. Although group counseling services, such 
as diabetic education, are not covered preventive services, individual 
counseling services could be considered covered FQHC services if they 
are provided to the beneficiary as an ``incident to'' service.
    Comment: One commenter noted that items five and six in the 
preventive services list both say prenatal. The commenter believed that 
one of the preventive services should be perinatal care.
    Response: Section 1861(aa)(3)(B) of the Act specifies that FQHC 
services include preventive primary health services that a center is 
required to provide under sections 329, 330 and 340 of the PHS Act. In 
developing the FQHC regulations, we looked to 42 CFR parts 51c and 56 
of the HRSA regulations. These regulations are repeated in 
Sec. 405.2448 exactly as they are in the HRSA regulations; the HRSA 
regulations do not include perinatal services. However, the PHS law 
(see 45 U.S.C 329(a)(6)(C)) does provide for perinatal services. 
Therefore, we are revising Sec. 405.2448 to include perinatal care as a 
covered preventive service.
    Comment: Several commenters objected to the requirement in the 
preventive services definition that services be furnished by a 
physician or an employee of the center. The commenters noted that many 
centers make extensive use of contract services in the provision of 
preventive care services that may not be needed on a daily basis.
    Response: The FQHC benefit includes a provision for services 
furnished ``incident to'' the services of FQHC professionals as long as 
the individuals furnishing the services are employees of the FQHC. As 
we noted above, it is a longstanding Medicare policy, based on our 
interpretation of section 1861(s)(2)(A) of the Act, that an individual 
who performs ``incident to'' services must be an employee of the clinic 
or center for purposes of coverage.
    The list of FQHC preventive primary health services includes the 
type of services that does not generally require the skill level of a 
specialist. It is our intent that preventive primary health services, 
for the most part, involve a screening process to detect health 
conditions that could indicate adverse health outcomes. Patients should 
be referred for diagnostic services if the initial screening indicates 
a potential problem. Thus, we believe that the preventive primary 
health services specified in the regulations can be provided by the 
staff of the FQHC. As a result, we are retaining the requirement that 
FQHC preventive services be provided by either a physician or an 
employee of the center.
    Comment: One commenter questioned how his facility, which provides 
noninvasive diagnostic services can be reimbursed through FQHCs.
    Response: It is not clear what the commenter meant by ``noninvasive 
diagnostic services.'' Diagnostic laboratory services must be billed by 
the entity providing the services. Consequently, if the commenter 
intended to refer to laboratory services, the entity must bill for such 
services itself. As noted previously, diagnostic radiological services 
are not covered FQHC services. Thus, an entity could not be paid under 
the FQHC benefit for the technical component of radiological services. 
Although diagnostic radiological services are not covered FQHC 
services, a supplier can be paid for these services furnished to FQHC 
patients under normal Medicare Part B payment rules.
    Comment: One commenter expressed concern that physicians and nurse 
practitioners are untrained in hearing testing and the fitting of 
hearing aids. The commenter recommended that Medicare ensure that 
beneficiaries have access to hearing aid distributors either for the 
initial FQHC covered hearing screening service or for follow-up 
services. The commenter suggested that we require that any patient 
whose screening shows that follow-up care is necessary be referred to a 
State licensed or National Board for Certification-Hearing Instrument 
Sciences (NBC-HIS) certified hearing aid distributor.
    Response: According to section 1862(a)(7) of the Act, diagnostic 
audiological services for the purpose of fitting a hearing aid are not 
Medicare covered services. It would be inappropriate for the Medicare 
program to regulate referrals for such noncovered services.
    The HRSA guidelines provide that hearing screening is a preventive 
primary health service. The skills that are needed to provide 
diagnostic services for hearing screening are minimal, and they can be 
acquired by staff with minimal training. Therefore, we believe that 
FQHC staff generally are qualified to perform hearing screening 
services for Medicare beneficiaries.
    According to the Medicare Carrier's Manual, section 2070.3, 
additional diagnostic services beyond hearing screening are covered by 
Medicare when a physician orders such testing for the purpose of 
obtaining additional information necessary for his or her evaluation of 
the need for or appropriate type of medical or surgical treatment for a 
hearing deficit or related medical problem. However, additional service 
is not covered when the medical or surgical treatment is already known 
by the physician or is not under consideration and the diagnostic 
services are performed only to determine the need for or the 
appropriate type of hearing aid.
    Comment: One commenter advised us of an upcoming HRSA directive 
requiring testing for tuberculosis of certain high risk patients. Since 
this will be a required preventive primary health service for all 
grantees, the commenter recommended that the Medicare list of 
preventive services be similarly amended.
    Response: Since the Act links the definition of primary preventive 
services in an FQHC to the services required by HRSA of its grantees 
under sections 329, 330 and 340 of the PHS Act, we believe that the 
regulations should reflect HRSA guidelines. HRSA has sent a memorandum 
to grantees to

[[Page 14650]]
notify them that tuberculosis testing will be included as a preventive 
primary health service. Therefore, we are revising Sec. 405.2448 to 
specify that FQHC covered preventive primary health services include 
testing of certain high risk patients for tuberculosis.
Clinical Psychologist and Clinical Social Workers
    Comment: One commenter requested clarification as to why the RHC 
regulations were not similarly amended to include clinical 
psychologists and clinical social workers in accordance with changes 
made in the law years earlier.
    Response: OBRA '87 added coverage of clinical psychologists in RHCs 
and OBRA '89 added coverage of clinical social workers in RHCs. We are 
in the process of developing a proposed rule to make those changes to 
the RHC regulations. Unlike the OBRA '89 provisions affecting RHCs, 
OBRA '90 authorized us to issue final regulations and add coverage of 
FQHCs without first issuing a proposed rule and soliciting public 
comment.
    Comment: One commenter noted that the regulations state that 
clinical psychologist and clinical social worker services are covered 
if provided by a center employee. The commenter believed that it is 
often more efficient to contract for such service in the FQHC setting 
and recommends modification of the regulations to cover such purchased 
services.
    Response: Previously, we permitted facilities to contract only for 
physician services. After considering the comment, we came to the 
conclusion that it would be inconsistent with the provisions of the PHS 
Act (as explained elsewhere in this preamble) to prohibit an FQHC from 
contracting for the services of clinical psychologists and clinical 
social workers. Therefore, we are revising Sec. 405.2450 to provide 
that the services of clinical psychologists and clinical social workers 
may be covered if they are furnished by an individual who owns, is 
employed by, or furnishes services under contract to the FQHC. We are 
also revising Secs. 405.2468 and 491.9(a)(3) to clarify that a clinical 
social worker or clinical psychologist may furnish services under 
contract to the FQHC.
    Comment: One commenter objected to the limitation on clinical 
social worker service to those necessary to the diagnosis or treatment 
of mental illnesses. They noted that, given the special needs of the 
patient population served by FQHCs, social workers may perform other 
health related services for patients.
    Response: Section 1861(hh)(2) of the Act provides that clinical 
social worker services include services performed by a clinical social 
worker for the diagnosis and treatment of mental illnesses. The Act 
does not indicate that any different definition of services provided by 
a clinical social worker should apply for purposes of the FQHC benefit.
    The comment implies that the services of clinical social workers 
are needed to provide non-medical services to the FQHC population. Even 
if such services might be helpful to the FQHC population, non-medical 
services are not covered by Medicare under any circumstances.
    Comment: Several commenters objected to the application of the 
62\1/2\ percent mental health limitation to the FQHC clinical 
psychologist and clinical social worker. They argued that if the 
Congress had intended this limitation to apply, it would have 
explicitly stated so in the Act.
    Response: Section 1833(c) of the Act states:

    Notwithstanding any other provision of this part, with respect 
to expenses incurred in any calendar year in connection with the 
treatment of mental, psychoneurotic and personality disorders of an 
individual who is not an inpatient of a hospital at the time such 
expenses are incurred, there shall be considered as incurred 
expenses for purposes of subsections (a) and (b) only 62\1/2\ 
percent of such expenses.

This section of the Act clearly indicates that there is a mental health 
treatment limitation of 62\1/2\ percent for clinical psychologist and 
clinical social worker and other practitioner treatment services 
consistent with State law and makes clear that the limitation applies 
unless it is explicitly waived elsewhere in the law. This result is 
consistent with section 1861(hh)(2) of the Act, which defines clinical 
social worker services as services performed by a clinical social 
worker for the diagnosis and treatment of mental illnesses.
    Since there is no statutory exception for FQHCs, the limitation on 
payment for mental health treatment applies to all FQHCs, free-standing 
and provider-based.

Payment Issues

Productivity Screening Guidelines
    Comment: A commenter stated that the productivity standard of 4200 
visits for a full time equivalent physician is not a reasonable 
standard and acknowledged that HRSA uses this standard but stated that 
HRSA applies the standard differently in regard to HRSA's encounters as 
opposed to HCFA's visits.
    Response: Our use of the term ``visit'' is meant to be synonymous 
with the term ``encounter'' used by HRSA. The same concern about 
conflicting use of terms by us and HRSA was raised when we implemented 
productivity screens for the RHC program. At that time, we and HRSA 
agreed on the meaning of the terms ``encounter,'' as used by HRSA, and 
``visit,'' as used by us; they were to be used interchangeably. (This 
issue was addressed in a final notice, Rural Health Clinic Payment 
Limits and Productivity Screening Guidelines, published in the Federal 
Register on December 1, 1982 at 47 FR 54165). We and HRSA agreed to a 
common definition of these two terms to eliminate any difficulties 
caused by the use of different terms. Clinics also found it difficult 
to comply with the separate productivity guidelines and reporting 
requirements used by us and HRSA. As a result we adopted the 
productivity screening guidelines used by HRSA. We continue to use the 
HRSA guidelines.
    Since the time that we and HRSA originally reached agreement on the 
common meaning of ``encounter'' and ``visit,'' the RHC program has 
expanded and the FQHC program has been implemented. We have reexamined 
our definition. We are modifying the definition of a ``visit'' to 
accommodate the addition of clinical psychologists and clinical social 
workers (Sec. 405.2463). This change is discussed in more detail in 
answer to other comments. We will continue to use the HRSA productivity 
guideline of 4200 visits for full time equivalent.
    Comment: A number of commenters stated that the screening 
guidelines are not appropriate for all FQHCs. For instance, a commenter 
stated that, without special attention, small rural health centers and 
those in frontier areas would be penalized by the productivity and 
overhead screens. Two other commenters stated that the standard should 
be lowered and that separate and lower standards should be developed to 
apply to FQHCs with home visiting and teaching programs. The commenter 
stated that Federal policy is clearly moving in the direction of 
providing incentives to increase the number of primary care physicians 
and that health centers will be increasingly asked to take on the role 
of residency training and argued that a productivity standard should 
not impede this policy direction. Additionally, two other commenters 
stated that the hourly standard, used in the past by the FFHCs, of 2.4 
visits per hour is a more realistic standard than the one we had 
published.

[[Page 14651]]

    Response: We use the same guidelines applied by HRSA in the grant 
review process and the ongoing monitoring of its programs. We believe 
it is appropriate to use uniform productivity guidelines rather than 
developing separate guidelines. If, however, an FQHC cannot meet these 
guidelines, the FQHC's intermediary has the authority to modify the 
productivity guidelines. An FQHC that has atypical circumstances may 
request exceptions to the guidelines from its intermediary.

Provider-Based/Freestanding FQHCs

    Comment: Commenters questioned the need for different payment 
methodologies for freestanding and provider-based FQHCs and why 
provider-based FQHCs use an intermediary other than the intermediary 
used by the freestanding FQHCs and stated that the Act does not provide 
for a distinction between provider-based and freestanding FQHCs.
    Response: As we stated in the June 12, 1992 final rule, the same 
qualification and coverage rules apply to both provider-based FQHCs and 
independent FQHCs. Section 1833(a)(3) of the Act allows the Secretary 
latitude in defining the payment methodology for FQHCs. Consistent with 
the RHC payment methodology, we believe, at this time, that two 
different methodologies should apply to provider-based and freestanding 
FQHCs, as well. Like an RHC, an FQHC that is an integral part of a 
provider should follow the rules applicable to the provider, since it 
is a provider component. Having the provider's intermediary pay the 
FQHC under the same cost reporting and payment procedures used by other 
components of the provider is more efficient, both from the standpoint 
of the intermediary and the provider. This promotes consistency and 
rationality in the payment system, eliminates duplicate audits and 
minimizes the possibility of program abuse.
    Comment: A commenter pointed out that there is a cap for payment to 
freestanding FQHCs but not provider-based FQHCs.
    Response: While there is no payment limit (cap) for provider-based 
FQHCs as there is for freestanding FQHCs, the allowable costs of 
provider-based FQHCs' are controlled by the Medicare principles of 
reimbursement. These principles permit us to determine if costs are 
reasonable and limit reimbursable costs to those that are allowable and 
necessary for the efficient delivery of services.
    Comment: One commenter stated that freestanding FQHCs electing 
payment on a reasonable charge basis will not be reimbursed for 
preventive services and requested that the regulation clarify that 
provider-based FQHCs will be paid for preventive services. Another 
commenter suggested that the payment for these additional preventive 
services be specifically addressed and recommended that payment for 
these services be on an actual cost basis.
    Response: All freestanding FQHCs are paid on an all-inclusive rate 
basis subject to tests of reasonableness. Freestanding FQHCs do not 
have the option to elect payment on a reasonable charge basis. Further, 
Sec. 405.2446(b) specifies that FQHC services that are paid for under 
the Medicare program include preventive services specified in 
Sec. 405.2448. This coverage applies to all FQHCs, freestanding as well 
as provider based. In addition, we do not believe that it is necessary 
to address specifically the payment method for these preventive 
services. Except for their purpose, these preventive services do not 
differ from the other services provided in a provider-based FQHC and 
therefore, are paid under the same reasonable cost principles as all 
other services.
    Comment: One commenter questioned whether the lesser of costs or 
charges limitation, which currently is applied to provider-based FQHCs, 
should be applicable to any type of FQHC, as section 1833(a)(2) of the 
Act specifically provides that this limitation does not apply to FQHCs.
    Response: Section 1833(a)(2) of the Act requires that the lesser of 
costs or charges limitation apply with respect to the facilities not 
excepted under that subparagraph; the requirement simply does not apply 
to FQHCs. Authority for payment for FQHCs is contained in section 
1833(a)(3) of the Act, which provides that payment for FQHCs is based 
on reasonable costs that are ``related to the cost of furnishing such 
services or which are based on such other tests of reasonableness as 
the Secretary may prescribe in regulations * * *''.
    Given this broad grant of authority to use ``other tests of 
reasonableness,'' we are authorized to apply tests of reasonableness 
that are required to be applied to other Medicare facilities, such as 
the lesser of costs or charges provision.

Visits

    Comment: Several commenters expressed concern with the number of 
visits per day we allow for payment purposes. They suggested that if a 
patient sees more than one physician or practitioner or has a medical 
and mental health service on the same day more than one visit should be 
allowed.
    Response: We have considered the comments, and we are amending the 
regulations to permit payment for more than one visit per day under 
certain circumstances. We are revising the definition of visit in 
Sec. 405.2401 and moving it to Sec. 405.2463, ``What constitutes a 
visit.'' We now provide that Medicare pays for an additional visit per 
day if a patient has a ``medical visit'' and an ``other health visit'' 
on the same day. A ``medical visit'' is defined as a face-to-face 
encounter between a clinic or center patient and a physician, physician 
assistant, nurse practitioner, nurse-midwife, or visiting nurse. An 
``other health visit'' is defined as a face-to-face encounter between 
an FQHC patient and a clinical psychologist, clinical social worker, or 
other health professional for therapeutic mental health services. This 
change permits payment for more than one visit, but it does not change 
any other part of the method for determining allowable visits. We still 
would allow only one medical visit per day. Readers should note that an 
increase in visits will affect the FQHC all-inclusive rate calculation, 
as provided in Sec. 405.2464.

Pneumococcal Vaccine

    Comment: A commenter noted that the preamble stated that 
pneumococcal vaccine would be paid at 100 percent of the Medicare 
reasonable cost of the vaccine and its administration. However, the 
Annual Reconciliation section of the regulation did not address how we 
would pay for pneumococcal vaccine.
    Response: We are revising Sec. 405.2466(b), Annual Reconciliation, 
to provide that, for RHCs and FQHCs, payment for pneumococcal vaccine 
and its administration is made at 100 percent of Medicare reasonable 
cost.
    Additionally, we are making a corresponding revision to the Annual 
Reconciliation section of the regulation for influenza vaccine. In 
accordance with sections 4071 and 4072 of OBRA '87, influenza vaccine 
and its administration became a covered Medicare service under section 
1861(s)(10)(A) of the Act effective May 1, 1993.
    Section 1833(a)(3) of the Act specifies that services described in 
section 1861(s)(10)(A) are exempt from payment at 80 percent of 
reasonable costs. For RHCs and FQHCs, payment for influenza vaccine and 
its administration is at 100 percent of reasonable cost. Like 
pneumococcal vaccine, influenza vaccine will be treated as a pass 
through

[[Page 14652]]
and not included in the all-inclusive rate or subject to the payment 
limit.
    Prior to this change, costs of influenza vaccine were included in 
the calculation of the all-inclusive rate and subject to the FQHC 
payment limit. Therefore, the FQHC payment limit(s) has been adjusted 
to reflect the removal of influenza vaccine from the calculation of the 
all-inclusive rate. Removal of the influenza vaccine and its 
administration results in a reduction of approximately 1 percent to the 
FQHC payment limits.

    Note: Influenza vaccine costs were included in the original 
calculation of the preventive service adjustment as discussed in the 
June 12, 1992 final rule, at 57 FR 24972.

Contracted Services

    Comment: A commenter stated that if a physician is an independent 
contractor on the staff of the facility and not a physician whose 
services are purchased on a limited basis the physician should not be 
characterized as a contracted physician that is subject to the fee 
schedule.
    Response: To determine whether a physician is considered an 
employee, the ``usual common law rules,'' referred to in section 
210(j)(2) of the Act, are applied. These rules not only consider who 
pays the practitioner's salary but other factors such as who has hiring 
and firing authority, and who pays FICA taxes and withholds income tax. 
When a physician is considered staff of the FQHC, the physician's 
salary is included on the cost report and is used in determining the 
facility's all-inclusive payment rate.
    Comment: A commenter stated that the allowable cost of contracted 
physician services is limited to the resource based relative value 
scale (RBRVS) fee schedule for the Medicare program, which is 
significantly below market. The commenter further stated that this 
limit would restrict the FQHCs' ability to attract needed physicians 
and specialists to their communities. The commenter stated that we 
should establish another test of reasonableness.
    Additionally, another commenter stated that a more appropriate test 
of reasonableness for contracted services would be the amount that non-
participating physicians may receive for services they provide to 
Medicare beneficiaries.
    Response: We believe that payment for contracted physician services 
should be limited to amounts accepted by the large majority of 
physicians. According to the Report to Congress on Physician 
Participation, Assignment, and Extra Billing in the Medicare Program, 
dated October 2, 1992, there has been a continuing increase in the 
number of physicians accepting assignment on claims. When a physician 
accepts assignment on a claim, he or she agrees to accept the Medicare 
allowed amount as payment in full for the services provided to the 
beneficiary. The Report to Congress stated that allowed charges for 
Medicare assigned claims represented 83.6 percent of the total allowed 
charges in 1991. This is consistent with trends indicating that 
physician assignment rates have increased and have maintained a high 
level. Moreover, readers should note that the limit on contracted 
physician services is a screening guideline and not an absolute payment 
limit. The guideline is applied to assess the reasonableness of 
payments for physician services purchased by the center. The fiscal 
intermediary may modify application of this screen for atypical 
circumstances. For example, the screen may be modified if the 
intermediary determines that access to care is significantly affected. 
We believe that the amounts paid under the physician fee schedule are 
appropriate limits for contracted physician services.

Payment Limit

    In response to the FQHC payment methodology published on June 12, 
1992, we received comments from 18 commenters regarding the application 
of a payment limit. Six of these were from health centers and eight 
were from organizations and persons representing the health centers' 
interests. The remaining four commenters were organizations 
representing hospitals, physicians, and nurses. Discussion of comments 
regarding the FQHC payment limit have been organized into the following 
categories: General Payment Limit; Adjustment For Projected FQHC Visit 
Mix; Primary Care Family Practice Adjustment; Urban and Rural 
Determination; Urban and Rural Payment Difference; and Exceptions 
Option.

General Payment Limit

    Comment: Many of the commenters questioned the method used to 
calculate the payment limits. Commenters stated that a payment limit of 
this nature is not required by the Congress, is not consistent with 
Congressional intent and exceeds statutory authority. Commenters were 
concerned that we used the RHC payment limit as a base for determining 
the reasonable costs for FQHC services. In addition, commenters stated 
that the payment limit methodology is not based on empirical data, not 
based on cost and is not equitable.
    Response: The same statutory payment authority applies to RHCs and 
FQHCs. This authority provides the Secretary latitude in determining a 
payment methodology and in determining costs based on tests of 
reasonableness defined in regulations. In order to implement this new 
benefit in a manner consistent with the language of the law, we adopted 
the RHC methodology for use in the FQHC program. We believe that the 
Congress designed the FQHC program as a parallel program to the RHC 
program. Not only is the payment authority identical but the core 
services are also the same. The Congress added preventive services to 
this core set of services for FQHCs, and these services are unique to 
the FQHC program.
    Inherent in the adoption of the RHC methodology is the use of the 
productivity screens and an overall limit on payment. The RHC payment 
limit established for independent facilities in 1978 and updated in 
1982 was not only accepted by the Congress, it was written into law in 
OBRA '87 as a test of reasonableness for costs of RHC services, 
including clinical psychologist services, which were added to the 
benefit in the same legislation. The law provided for an update to the 
limit for 1988 and an annual update each year thereafter. We agree that 
an annual update is important for the viability of both the RHC and 
FQHC benefits. We also believe that, while it is critical to apply an 
overall limit to ensure efficiency and economy, we must establish a 
limit that takes into account the differences in the two benefits.
    The FQHC methodology we created adjusts for differences between the 
RHC and FQHC benefits using available cost data. We have made 
adjustments to the RHC limit accounting for the general increase in 
physician payments resulting from the physician fee schedule amounts, a 
projected higher ratio in FQHCs than in RHCs of physician visits 
compared to mid-level practitioner visits, the addition of primary 
preventive services, and the fact that some FQHCs are located in urban 
areas.
    In constructing our preventive service adjustment, we used 
allowable charge data. We believe that the calculation of this 
adjustment is consistent with the methodology used to compute the RHC 
limit, which used allowable charge data and is now statutorily set. We 
do not see any conflict between our methods and the intent of the 
Congress.
    Comment: One commenter stated that the payment limits are 
unreasonable with respect to actual reasonable costs. The commenter 
stated that FFHCs in

[[Page 14653]]
Massachusetts received rates in the $78 to $88 range with a limit of 
approximately $96. The commenter contended that the FQHC payment limits 
understate the actual cost per visit for these section 329 and 330 
grantees that were previously paid as FFHCs. Another commenter 
recommended that we adopt the FFHC State-wide payment limits for the 
next 3 years while the reasonable costs of FQHCs are studied. The 
commenter stated that a limit should be developed based on future data.
    Response: We do not believe it is appropriate to compare FFHC and 
FQHC limits. The FQHC payment methodology and scope of services is 
different from those in the former FFHC program. The comments indicate 
confusion regarding the differences between the two benefits. Even with 
these basic differences, we are concerned that we do not disadvantage 
centers that were paid as FFHCs and that is why we are allowing an 
exception for these entities for a 3-year period.
    FFHCs were formerly paid on a ``cost related to reasonable charge 
basis,'' which also resulted in an all-inclusive rate per visit based 
on facility-specific costs. Application and computation of the FFHC 
all-inclusive rate is significantly different from application and 
computation of the FQHC rate. The FQHC all-inclusive rate is paid when 
there is an encounter between a patient and a physician, physician 
assistant, nurse practitioner, clinical psychologist, or clinical 
social worker. The FFHC all-inclusive rate was paid only when there was 
an encounter between a patient and a physician. The FQHC all-inclusive 
rate per visit is calculated based on total allowable FQHC cost divided 
by physician, physician assistant, nurse practitioner, clinical 
psychologist, and clinical social worker visits. The FFHC rate per 
visit was calculated based on total allowable FFHC costs divided by 
physician visits. As a result, the FFHC all-inclusive rate formula had 
a divisor of only physician visits thus yielding a higher rate per 
visit.
    Further, the scope of services for the FQHC and FFHC benefits is 
different. Section 1861(aa)(3) of the Act identifies FQHC services as 
physician, physician assistant, nurse practitioner, clinical 
psychologist and clinical social worker services, and services and 
supplies incident to the services of these practitioners. In addition, 
preventive primary health services that a center is required to provide 
under sections 329, 330 and 340 of the PHS Act are also included as 
FQHC services. Medicare freestanding FQHCs are paid an all-inclusive 
rate for these services for each encounter that meets the definition of 
a visit. FQHCs could receive additional payment for Medicare covered 
services that are outside of the FQHC scope of services.
    The FFHC scope of services could potentially have included all 
Medicare Part B services. Therefore, total allowable FFHC services 
could have included a broader array of services. Medicare Part B 
services outside of the FQHC scope of services (such as other 
diagnostic and therapeutic services that a clinic obtains from an 
independent laboratory) were covered FFHC services, and included in the 
rate paid to FFHCs. All Medicare Part B services performed in an FFHC 
were included in determining the all-inclusive rate and paid for under 
the FFHC methodology for each FFHC visit. For these reasons, we do not 
believe the FFHC payment limits are appropriate for the FQHC benefit.
    Comment: One commenter stated that the use of FFHC information in 
combination with RHC data to develop the FQHC payment limits does not 
assure adequate reasonable cost reimbursement for all FQHCs. The RHC 
and FFHC programs are optional programs in which organizations choose 
to participate. Entities granted FQHC status under OBRA '90 that did 
not participate in the FFHC program may be significantly different from 
FFHCs and RHCs in case load.
    Response: As discussed in a prior response, we believe that the 
Congress designed the FQHC program as a parallel program to the RHC 
program, and we used the RHC payment limit as a basis for developing 
the FQHC payment limits. We adjusted the RHC payment limit based on 
FFHC data for a projected higher physician visit mix and for the urban 
differential. We understand the concern that the cost experience of 
FFHCs may not necessarily be representative of the costs of FQHCs as a 
whole. We analyzed 1990 data provided by the Public Health Service's 
Bureau of Primary Health Care Common Reporting Requirements (BCRR) 
Report to determine whether the cost per encounter would differ for 
FFHCs and other section 329 and 330 grantees. The data indicate that 
the median cost per visit for FFHCs was slightly higher than the median 
cost per visit for community and migrant health centers that were not 
paid as FFHCs. Since FFHC costs were actually higher than other section 
329 and 330 grantees, we believe that using FFHC data would result in 
adequate reasonable cost payments.
    We also considered the application of a case mix adjustment; 
however, we do not believe one is necessary given the FQHC scope of 
services. We believe that, since the primary mission of the FQHC 
program is to provide outpatient primary care services, the services 
should not vary substantially from one patient population to another.
    As discussed in the preamble to the June 12, 1992 final rule with 
comment period, we will collect and analyze FQHC cost report data to 
determine if a payment limit adjustment is necessary. If after 
analysis, we find it necessary to adjust the methodology used to 
determine the FQHC limits currently in place, we will issue a proposed 
notice and the public will have an opportunity to comment.
    Comment: One commenter stated that we should describe the specific 
tests of reasonableness in regulation text so that these methods may 
not be changed without public review and comment.
    Response: We agree that a change in specific tests of 
reasonableness used to determine the all-inclusive rate should receive 
the benefit of public notice and comment. We will issue a proposed 
notice and the public will have the opportunity to comment if it is 
necessary for us to change the productivity or utilization screens used 
to determine the FQHC all-inclusive rate or to change the methodology 
used to calculate the FQHC payment limit.

Adjustment for Projected FQHC Visit Mix

    Comment: One commenter stated that the Secretary did not use 
factual data to determine the difference in cost created by the 
projected difference in case mix. The commenter believed there is no 
evidence that the ratio of physician to mid-level payments made under 
Part B have any relation to cost.
    Response: Since entities eligible for section 329, 330, and 340 
grants will comprise the majority of entities qualifying for the FQHC 
program, we anticipate that the frequency of physician services in 
FQHCs will be comparable to the frequency of such services in the 
former FFHC program, which consisted of section 329 and 330 grantees 
paid an all-inclusive rate. As discussed in the preamble to the June 
12, 1992 rule, we studied RHC and FFHC visit data to determine whether 
there is a difference in the number of physician visits as a percentage 
of total visits between the RHC benefit and FFHC program. Visit data 
from RHC cost reports indicated that physician visits were 59 percent 
of total visits while data from FFHC cost reports indicated that

[[Page 14654]]
physicians visits were 83 percent of total visits.
    We recognize that no specific FQHC study has been conducted to 
determine the differences in costs between the services of a physician 
and those of a mid-level practitioner. We used the amount of payment 
for nurse practitioners and physician assistants under usual Part B 
rules as a measure of the cost differences between a physician and a 
mid-level practitioner. Under Medicare Part B, the amount of payments 
for nurse practitioners (section 1833(r)(2)(B) of the Act) and 
physician assistants (section 1842(b)(12)(B) of the Act) are generally 
75 percent (in the case of services provided in a hospital) and 85 
percent (in the case of other services) of what a physician would be 
paid for the same service. We used the midpoint of these two 
percentages to arrive at 80 percent as proxy for the cost differences 
between mid-level practitioners and physicians.
    Lacking more specific FQHC cost data, we believe that the payment 
amount under Medicare Part B is a reasonable basis for determining 
average cost differences between visits of physicians and mid-level 
practitioners and for increasing the payment limit to account for the 
projected higher number of physician visits under the FQHC benefit as 
compared to the RHC benefit. As discussed earlier, we plan to evaluate 
actual FQHC cost data. After analysis, we will determine the 
appropriateness of the visit mix adjustment.

Primary Care Family Practice Adjustment (15 Percent)

    Comment: Section 6102 of OBRA '89 added section 1848 of the Act, 
which is the authority for the physician fee schedule. During the first 
year of transition to the physician fee schedule there was a general 
increase in payment of 15 percent for services provided by primary care 
and family practice physicians. As discussed in the preamble to the 
interim final rule, we made an adjustment to the FQHC payment limits 
accounting for this increase.
    One commenter stated that the 15 percent adjustment to the payment 
limit only covers the first year of the transition to the fee schedule. 
The remaining 4 years to fully implement the fee schedule will result 
in further increases. These increases should be recognized.
    Response: We have given consideration to the commenter's position. 
By 1996, the average payment amount for services typically provided by 
family practice physicians will increase by an estimated 28 percent 
under the fee schedule, as compared to reasonable charge payments. 
Since our intent in creating and applying the family practice 
adjustment is to reflect the circumstances of physicians being paid 
under the fee schedule, we have decided to provide a comparable 
increase to the FQHC payment limits. We are increasing the practitioner 
component of the FQHC payment limits by 13 percent to bring the total 
increase amount to 28 percent to simulate the estimated increase in 
average payment amounts for primary care physicians. This adjustment 
will be phased in over 3 years. For calendar year 1994, we have 
increased the practitioner portion of the FQHC payment limits by 6.5 
percent to correspond with the increase in payments for primary care 
services which has resulted from the continued transition to the full 
physician fee schedule. We previously announced this increase in the 
RHC/FQHC Manual. We will increase the payment limits by 3.25 percent in 
calendar year 1995 and calendar year 1996 to account for the full 28 
percent increase.
    The 28 percent increase is based on estimates published in the 
Federal Register (56 FR 59618) regarding the physician fee schedule 
regulation dated November 25, 1991; Table 1--Physician Fee Schedule 
Impact By Specialty. The 28 percent increase reflects the original 
estimation of the difference in payment amounts between what would have 
been paid under the reasonable charges payment methodology as compared 
to payments under the RBRVS fee schedule for services typically 
provided by family practice physicians. We believe it provides the most 
appropriate representation of the estimated differences in payment 
amounts. We have decided not to reflect the impact of the Medicare 
Volume Performance Standards since FQHC services are not subject to 
these targets. By adjusting the FQHC limits, we would avoid 
disadvantaging FQHC physicians and practitioners relative to physicians 
paid under the fee schedule.
    Comment: One commenter stated that payments for other practitioners 
should also reflect the 15 percent increase.
    Response: Implementation of the physician fee schedule resulted in 
a general estimated increase of 15 percent in 1992 for family practice 
physicians. We applied this increase to the practitioner component of 
the payment limit which resulted in a $6.99 increase for fiscal year 
1991. This increase applies to the payment limit for each FQHC visit, 
mid-level practitioner covered visits, as well as physician visits.

Urban and Rural Determination

    Comment: Two commenters indicated that the determination of urban 
and rural is unclear. Specific concerns focused on the need for 
clarification of specific population standards and whether adjustments 
to the classification (as provided for hospitals in Sec. 412.230) are 
applicable to FQHCs.
    Response: The definition of urban and rural is based entirely upon 
the most recent available data from the Bureau of Census and issued by 
the Office of Management and Budget. To be classified as an urban 
center, an FQHC must be located in a Metropolitan Statistical Area 
(MSA) or New England County Metropolitan Area (NECMA). Primary 
Metropolitan Statistical Areas (PMSAs) and Consolidated Metropolitan 
Statistical Areas (CMSAs) are considered as urban for FQHC 
classification purposes. FQHCs that are not in an MSA, PMSA, CMSA or 
NECMA cannot be reclassified as an urban FQHC.
    Urban areas can either be ``large'' or ``other.'' A large urban 
area means an urban area with a population of over one million (or more 
than 970,000 in NECMAs). An ``other'' urban area is an urban area that 
is not a large urban area and at a minimum includes a city with a 
population of 50,000 or more provided that the component county/
counties of the metropolitan statistical area have a total population 
of at least 100,000. The intermediary classifies FQHCs based on these 
criteria.

Urban and Rural Payment Difference

    Comment: Many commenters expressed concerns regarding the urban 
payment differential. Specific concerns include:
     Historical differences in payment policy have affected the 
recruitment and retention of qualified health professionals and have 
caused a false perception that rural areas are less expensive.
     Labor, transportation and other costs can be higher in 
rural areas.
     Rural centers may expand services to compensate for the 
closing of small rural hospitals. Thus, they may be providing the only 
available radiology and laboratory services in the area.
     The FFHC study used to determine urban and rural cost 
differences was not appropriate. Urban and rural visit mix and services 
are not necessarily comparable and cost differences are not related to 
location; cost differences are more likely the result of rural 
facilities providing a more limited scope of

[[Page 14655]]
services. Therefore, we do not think this factor is relevant to payment 
limits.
    Response: Our analysis of FFHC all-inclusive rates indicates a 
difference in urban and rural costs. FFHCs were authorized to provide 
the same scope of services regardless of urban or rural status. The 
analysis of FFHC all-inclusive rates included 128 urban and 85 rural 
FFHCs throughout the country. The analysis indicates that the median 
all-inclusive rate for FFHCs located in urban areas (as determined by 
using Bureau of Census data) is 16.3 percent higher than the median 
all-inclusive rate in rural areas. Since FFHCs were subject to the same 
State-wide payment limit without regard to urban/rural location, rural 
FFHCs did not have different incentives than urban FFHCs to hold down 
costs. Further, we obtained data from the Public Health Service based 
on the BCRR Report data and compared the cost per visit of 129 urban 
and 260 rural Community/Migrant Health Centers (section 329/330 
grantees) that did not participate in the FFHC program. The BCRR Report 
cost data indicated that the cost per visit for services was 
significantly higher in urban centers as compared to rural centers. 
While different costs are reported on the BCRR Report as compared to 
the Medicare cost report, we believe these data support our use of FFHC 
cost data as proxy for urban and rural FQHC cost differences. We will 
closely study urban and rural cost differences in the FQHC cost data 
analysis.
    We understand that rural centers might expand services to 
compensate for the closing of small rural hospitals and that many of 
these services may be outside of the FQHC benefit. While the expansion 
of services may extend beyond the FQHC scope of services, the Medicare 
per visit payment limits apply to covered FQHC services only. Medicare 
FQHCs can receive additional payments through the carrier for Medicare 
Part B services that are not included as FQHC covered services. 
Therefore, we do not think this factor is relevant to setting the 
payment limits.
    Comment: Some commenters believed that the urban and rural payment 
limit difference is inconsistent with general Federal policy direction. 
They stated that the Congress recognized that urban and rural providers 
should be treated equally by terminating the urban and rural 
Prospective Payment System (PPS) payment differential in fiscal year 
1995.
    Response: We would like to clarify that the Congress has not 
eliminated geographic payment differences for payment of PPS hospitals. 
Effective in fiscal year 1995, there will be two PPS standardized 
amounts, large urban and other. The rural and other urban PPS 
standardized amounts will be combined into one amount and a separate 
large urban standardized amount will continue to distinguish large 
urban areas. The hospital wage index will be applied to these 
standardized amounts. As such, payment amounts will generally be higher 
in urban areas as compared to rural areas. Given the current data 
limitations, alternative geographic payment limit adjustments are not 
feasible at this time. As mentioned previously, we will closely study 
urban and rural cost differences in the FQHC cost data analysis.

MEI Index

    Comment: One commenter expressed concern that separate application 
of the MEI to urban and rural payment limits will steadily exacerbate 
the urban-rural differential.
    Response: Although we recognize that the dollar difference between 
urban and rural payment limits will increase, the percentage difference 
of 16.3 percent will remain constant.
    Comment: One commenter requested clarification regarding 
publication of the MEI increase.
    Response: The annual MEI updates applicable to the FQHC payment 
limits will be announced in the RHC and FQHC manual, HCFA Publication 
27 of the HCFA Program Instructions Issuances System.
    We note that the preamble of the June 12, 1992 rule stated that 
FQHC payment limits would be updated by the MEI applicable to primary 
care physicians. We would like to clarify that in the absence of a 
specific MEI applicable to primary care physicians, the FQHC payment 
limits will be updated by the general MEI.

Exceptions Option

    Comment: Two commenters expressed opposition to the exceptions 
option. They stated that the exceptions option is an unreasonable 
imposition creating unnecessary administrative costs. In addition, 
requiring FQHCs to wait an entire year to file an exception will create 
cash flow problems for those granted an exception. Regional payment 
limits were also suggested as an alternative to the exceptions process.
    Response: The exceptions process allows former FFHCs the 
opportunity to retain the FFHC method of payment with minor adjustments 
for the FQHC scope of services for a 3-year period under certain 
conditions. No FQHC is required to seek an exception; rather a center 
may choose this option if the center can document a disadvantage due to 
a decrease in revenues as a result of the application of the FQHC 
payment limit. As discussed in the preamble of the interim final rule, 
this determination will be made based on a filing of the FFHC cost 
report.
    Any additional administrative costs resulting from the exceptions 
option are allowable costs that can be included in the determination of 
the all-inclusive rate. However, we expect exceptions to be limited in 
number and do not expect former FFHCs to be adversely affected. We 
believe it is essential that all centers, including former FFHCs, file 
based on the FQHC methodology so that we can gather cost data for our 
analysis.
    We considered developing regional limits; however, we decided not 
to do so. We believe that the Congress designed the FQHC benefit to 
parallel the RHC benefit. Therefore, we want the FQHC payment methods 
to be as consistent as possible with the RHC payment methods, which do 
not include regional cost limits. As discussed earlier, we will collect 
and analyze FQHC cost data to determine if any changes are necessary.

Billing Issues

    Comment: Two commenters requested clarification of the billing 
mechanism for non-FQHC services. One commenter noted that provisions 
for assignment of physician claims directly to the center were 
necessary so that the employment relationship between the physician and 
center is not disrupted.
    Response: In order to bill for non-FQHC services a clinic must have 
a separate Part B billing number. The FQHC must obtain the billing 
number from the Medicare Part B carrier. Entities that already have 
supplier numbers for use in billing Part B carriers need to contact the 
carriers' Provider Relations Staff to see if their FQHC status 
necessitates the issuance of new Part B billing numbers. FQHC provider 
numbers assigned for the purpose of billing the intermediary (Aetna) 
cannot be used to bill Part B carriers. HCFA regional offices and 
Medicare carriers have been requested to assist FQHCs that require new 
Part B billing numbers.
    We agree with the commenter on the issue of provisions of 
assignment. Section 1842(b)(6) of the Act specifies that Medicare may 
pay the center in which the physician provides services if there is a 
contractual arrangement between the facility and the provider. 
Therefore, there are existing provisions for assignment of physician 
claims directly to the center.
    Comment: One commenter noted the difference in billing practices 
between Medicaid and Medicare, and

[[Page 14656]]
recommended that all FQHC services for both programs be billed on the 
HCFA-1500 using Common Procedure Terminology (CPT) Codes.
    Response: There is no requirement for Medicare and Medicaid billing 
to be the same. Since payment for services covered under the FQHC 
benefit is made on a cost-related basis, claims are processed by a 
fiscal intermediary. All freestanding FQHC claims are processed by 
Aetna. Provider-based FQHC claims are processed by the intermediary 
that handles the main provider's claims.
    The Medicare Fiscal Intermediaries' systems are set up to process 
bills using the HCFA-1450 and the Carriers' systems are set up to 
process claims using the HCFA-1500. The HCFA-1450 has different data 
elements from the HCFA-1500. To use the HCFA-1500 for cost-related 
payment would require a complete revision of the billing systems 
maintained by our contractors.
    To recap, freestanding FQHCs must use the HCFA-1500 to bill for non 
FQHC services since they are not paid on a cost basis. The local Part B 
carrier pays for such services subject to the routine Part B coverage 
and payment provisions. Provider-based FQHCs bill the intermediary for 
all services on the HCFA-1450.

IV. Provisions of the Final Regulations

    For the most part, as stated elsewhere in this preamble, this final 
rule does not change the provisions of the prior final rule on which we 
solicited comments. Those provisions of this final rule that differ 
significantly from the earlier rule are:
     The definition of specialized nurse practitioner is 
removed (Sec. 405.2401 and Sec. 405.2468);
     A freestanding FQHC must terminate other provider 
agreements at the same time it becomes an FQHC 
(Sec. 405.2430(a)(1)(iii));
     The services of FQHC staff may be furnished under contract 
(Secs. 405.2450, 405.2468(b)(1), and 491.8(a)(3));
     In the definition of ``visit,'' (now in Sec. 405.2463) an 
allowance is made for two visits per day if the patient has a 
``medical'' and an ``other'' health visit on the same day 
(Sec. 405.2463);
     Nurse-midwife services are added to the list of covered 
FQHC services (Sec. 405.2446);
     Perinatal care and tuberculosis testing for certain high 
risk patients are added to the list of preventive services that are 
covered by an FQHC (Sec. 405.2448);
     Payment for pneumococcal and influenza vaccines and their 
administration at 100 percent of Medicare reasonable cost is added to 
Sec. 405.2466 (Note that payment for pneumococcal vaccine is not a new 
provision, as it was included in the June 12, 1992 final rule);
     We clarify that FQHCs must be located in a medically 
undeserved area or serve a medically undeserved population 
(Sec. 491.5);
     RHCs, but not FQHCs, retain certification even if the area 
loses its rural shortage designation (Sec. 491.5);
     Clinical psychologists provide FQHC services without the 
supervision of a physician (Sec. 491.8);
     We clarify that we have adjusted the FQHC payment limits 
to correspond with the estimated increase in payments for primary care 
services resulting from the continued transition to the full fee 
schedule. The current calendar year payment limits reflect this policy 
and a further increase is forthcoming in 1995.

V. Collection of Information Requirements

    This final rule does not contain any information collection or 
recordkeeping requirements that are subject to review by the Office of 
Management and Budget under the Paperwork Reduction Act of 1980 (44 
U.S.C. 3501 et seq.).

VI. Regulatory Impact Statement

A. Introduction

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612) unless the Secretary certifies that a final rule will not 
have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, all FFHCs, FQHCs, and RHCs are 
considered to be small entities. Individuals and States are not 
included in the definition of a small entity.
    In addition, section 1102(b) of the Act requires the Secretary to 
prepare a regulatory impact analysis if a rule may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 604 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 50 beds.

B. Provisions of the Final Regulations

    This final rule incorporates, with only minor technical and 
clarifying changes, the provisions of the final rule with comment 
published June 12, 1992 (57 FR 24961) which provided for coverage and 
payment of services provided by FQHCs, a category of health facility 
established by section 4161 of OBRA '90 and modified by OBRA '93. FQHC 
services are defined as the same type of primary health care services 
provided by rural health clinics under the Medicare program, plus 
preventive primary health services (services not previously covered by 
Medicare). An FQHC is an entity that is receiving a grant under section 
329, 330, or 340 of the PHS Act; a non-grant receiving entity that is 
determined by the Secretary to meet the PHS Act requirements for 
receiving such a grant; a facility that has been identified by the 
Secretary as a comprehensive federally funded health center as of 
January 1, 1990; or is an outpatient health program or facility 
operated by a tribe or tribal organization under the Indian Self-
determination Act or by an urban Indian organization receiving funds 
under title V of the Indian Health Care Improvement Act as of October 
1, 1991. As of March 1994, there were 1,260 participating FQHCs.

C. Positive Effect of Regulations

    In the initial regulatory impact statement, we indicated that the 
provisions of the final rule with comment will expand Medicare payment 
to community and migrant health center grantees and similar entities 
that qualify as FQHCs and serve the working poor. We noted that 
reporting requirements are less burdensome than previous requirements 
under the FFHC payment methodology (FQHCs are required to submit 2 cost 
reports annually, FFHCs were required to submit 3). In addition, these 
provisions benefit both beneficiaries and FQHCs by expanding Medicare 
coverage and payment to include primary and preventive health care 
services furnished by physicians and other health practitioners.

D. Comments on Initial Regulatory Impact Statement

    We received one comment on the initial regulatory impact statement 
published in the Federal Register June 12, 1992. The commenter stated 
that the final rule with comment failed to include a certification that 
the rule would not have an effect on small entities. We disagree with 
the commenter. The final paragraph of the regulatory impact statement 
stated that we determined, and the Secretary certified, that the final 
rule did not meet the requirements to be determined a major rule, nor 
did it meet criteria as having a significant economic impact on a 
substantial number of small entities.

[[Page 14657]]


E. Summary

    Because this final regulation makes only minor technical and 
clarifying changes to the final rule with comment published June 12, 
1992, we are not preparing analyses for either the RFA or section 
1102(b) of the Act, since we have determined, and the Secretary 
certifies, that this final rule will not result in a significant 
economic impact on a substantial number of small entities and will not 
have a significant impact on the operations of a substantial number of 
small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was not reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 491

    Grant programs--health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements, Rural areas.

    42 CFR chapter IV is amended as follows:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

Subpart X--Rural Health Clinic and Federally Qualified Health 
Center Services

    A. Part 405, subpart X, is amended as follows:
    1. The authority citation for subpart X continues to read as 
follows:

    Authority: Secs. 1102, 1833, 1861(aa), 1871 of the Social 
Security Act; 42 U.S.C. 1302, 1395l, 1395x(aa), and 1395hh.


Sec. 405.2401  Scope and definitions. [Amended]

    2. In Sec. 405.2401, paragraph (b) is amended by removing the 
definitions of ``specialized nurse-practitioner'' and ``visit.''
    3. Section 405.2430 is amended by revising paragraph (a)(1)(iii) to 
read as follows:


Sec. 405.2430  Basic requirements.

    (a) Filing procedures. (1) * * *
    (iii) The FQHC terminates other provider agreements, unless the 
FQHC assures HCFA that it is not using the same space, staff and 
resources simultaneously as a physician's office or another type of 
provider or supplier. A corporate entity may own other provider types 
as long as the provider types are distinct from the FQHC.
* * * * *
    4. Section 405.2446 is amended by revising paragraph (b) to read as 
follows:


Sec. 405.2446  Scope of services.

* * * * *
    (b) FQHC services that are paid for under this subpart are 
outpatient services that include the following:
    (1) Physician services specified in Sec. 405.2412.
    (2) Services and supplies furnished as an incident to a physician's 
professional services, as specified in Sec. 405.2413.
    (3) Nurse practitioner or physician assistant services specified in 
Sec. 405.2414.
    (4) Services and supplies furnished as an incident to a nurse 
practitioner or physician assistant services, as specified in 
Sec. 405.2415.
    (5) Clinical psychologist and clinical social worker services 
specified in Sec. 405.2450.
    (6) Services and supplies furnished as an incident to a clinical 
psychologist or clinical social worker services, as specified in 
Sec. 405.2452.
    (7) Visiting nurse services specified in Sec. 405.2416.
    (8) Nurse-midwife services specified in Sec. 405.2401.
    (9) Preventive primary services specified in Sec. 405.2448 of this 
subpart.
* * * * *
    5. In Sec. 405.2448(b), the semicolon at the end of each paragraph 
is changed to a period, paragraph (b)(20) is redesignated as (b)(21), 
paragraphs (b)(6) and (b)(19) are revised, and a new paragraph (b)(20) 
is added to read as follows:


Sec. 405.2448  Preventive primary services.

* * * * *
    (b) * * *
    (6) Perinatal services.
* * * * *
    (19) Risk assessment and initial counseling regarding risks.
    (20) Tuberculosis testing for high risk patients.
* * * * *
    6. Section 405.2450 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 405.2450  Clinical psychologist and clinical social worker 
services.

    (a) For clinical psychologist or clinical social worker 
professional services to be payable under this subpart, the services 
must be--
    (1) Furnished by an individual who owns, is employed by, or 
furnishes services under contract to the FQHC;
* * * * *
    7. A new Sec. 405.2463 is added to read as follows:


Sec. 405.2463  What constitutes a visit.

    (a) Visit. (1) A visit is a face-to-face encounter between a clinic 
or center patient and a physician, physician assistant, nurse 
practitioner, nurse-midwife, or visiting nurse.
    (2) For FQHCs, a visit also means a face-to-face encounter between 
a patient and a qualified clinical psychologist or clinical social 
worker.
    (3) Encounters with more than one health professional and multiple 
encounters with the same health professional that take place on the 
same day and at a single location constitute a single visit, except 
when one of the following conditions exist:
    (i) After the first encounter, the patient suffers illness or 
injury requiring additional diagnosis or treatment.
    (ii) For FQHCs, the patient has a medical visit and an other health 
visit, as defined in paragraphs (b) and (c) of this section.
    (4) Payment. (i) Medicare pays for two visits per day when the 
conditions in paragraph (a)(3) of this section are met.
    (ii) In all other cases, payment is limited to one visit per day.
    (b) Medical visit. For purposes of paragraph (a)(3) of this 
section, a medical visit is a face-to-face encounter between an FQHC 
patient and a physician, physician assistant, nurse practitioner, 
nurse-midwife, or visiting nurse.
    (c) Other health visit. For purposes of paragraph (a)(3) of this 
section, an other health visit is a face-to-face encounter between an 
FQHC patient and a clinical psychologist, clinical social worker, or 
other health professional for mental health services.
    8. Section 405.2466 is amended by adding a new paragraph (b)(1)(iv) 
to read as follows:


Sec. 405.2466  Annual reconciliation.

* * * * *
    (b) * * *
    (1) * * *
    (iv) For rural health clinics and FQHCs, payment for pneumococcal 
and influenza vaccine and their administration is 100 percent of 
Medicare reasonable cost.
* * * * *
    9. Section 405.2468 is amended by revising paragraphs (b)(1) and 
(b)(3), and (d)(2) to read as follows:


Sec. 405.2468  Allowable costs.

* * * * *

[[Page 14658]]

    (b) * * *
    (1) Compensation for the services of a physician, physician 
assistant, nurse practitioner, nurse-midwife, visiting nurse, qualified 
clinical psychologist, and clinical social worker who owns, is employed 
by, or furnishes services under contract to an FQHC. (RHCs are not paid 
for services furnished by contracted individuals other than 
physicians.)
* * * * *
    (3) Costs of services and supplies incident to the services of a 
physician, physician assistant, nurse practitioner, nurse-midwife, 
qualified clinical psychologist, or clinical social worker.
* * * * *
    (d) * * *
    (2) Screening guidelines are used to assess the costs of services, 
including the following:
    (i) Compensation for the professional and supervisory services of 
physicians and for the services of physician assistants, nurse 
practitioners, and nurse-midwives.
    (ii) Services of physicians, physician assistants, nurse 
practitioners, nurse-midwives, visiting nurses, qualified clinical 
psychologists, and clinical social workers.
    (iii) The level of administrative and general expenses.
    (iv) Staffing (for example, the ratio of other clinic or center 
personnel to physicians, physician assistants, and nurse 
practitioners).
    (v) The reasonableness of payments for services purchased by the 
clinic or center, subject to the limitation that the costs of physician 
services purchased by the clinic or center may not exceed amounts 
determined under the applicable provisions of subpart E of part 405 or 
part 415 of this chapter.
* * * * *
    B. Part 491 is amended as follows:

PART 491--CERTIFICATION OF CERTAIN HEALTH FACILITIES

    1. The authority citation for part 491 continues to read as 
follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 1302) 
and sec 353 of the Public Health Services Act (42 U.S.C. 263a).

    2. In part 491, the term, ``Federally qualified health center'' is 
changed to ``FQHC'' wherever the term appears.
    3. Section 491.5 is amended by revising paragraphs (a) and (b)(1), 
and adding new paragraphs (e) and (f) to read as follows:


Sec. 491.5  Location of clinic or center.

    (a) Basic requirements. (1) An RHC is located in a rural area that 
is designated as a shortage area.
    (2) An FQHC is located in a rural or urban area that is designated 
as either a shortage area or an area that has a medically underserved 
population.
    (3) Both the RHC and the FQHC may be permanent or mobile units.
    (i) Permanent unit. The objects, equipment, and supplies necessary 
for the provision of the services furnished directly by the clinic or 
center are housed in a permanent structure.
    (ii) Mobile unit. The objects, equipment, and supplies necessary 
for the provision of the services furnished directly by the clinic or 
center are housed in a mobile structure, which has fixed, scheduled 
location(s).
    (iii) Permanent unit in more than one location. If clinic or center 
services are furnished at permanent units in more than one location, 
each unit is independently considered for approval as a rural health 
clinic or for approval as an FQHC.
    (b) Exceptions. (1) HCFA does not disqualify an RHC approved under 
this subpart if the area in which it is located subsequently fails to 
meet the definition of a rural, shortage area.
* * * * *
    (e) Medically underserved population. A medically underserved 
population includes the following:
    (1) A population of an urban or rural area that is designated by 
PHS as having a shortage of personal health services.
    (2) A population group that is designated by PHS as having a 
shortage of personal health services.
    (f) Requirements specific to FQHCs. An FQHC approved for 
participation in Medicare must meet one of the following criteria:
    (1) Furnish services to a medically underserved population.
    (2) Be located in a medically underserved area, as demonstrated by 
an application approved by PHS.
    4. Section 491.8 is amended by revising paragraphs (a)(3), (a)(6) 
and (b)(1)(i) to read as follows:


Sec. 491.8  Staffing and staff responsibilities.

    (a) Staffing. * * *
    (3) The physician assistant, nurse practitioner, nurse-midwife, 
clinical social worker, or clinical psychologist member of the staff 
may be the owner or an employee of the clinic or center, or may furnish 
services under contract to the center.
* * * * *
    (6) A physician, nurse practitioner, physician assistant, nurse-
midwife, clinical social worker, or clinical psychologist is available 
to furnish patient care services at all times the clinic or center 
operates. In addition, for rural health clinics, a nurse practitioner 
or a physician assistant is available to furnish patient care services 
at least 60 percent of the time the clinic operates.
    (b) Physician responsibilities. (1) The physician--
    (i) Except for services furnished by a clinical psychologist in an 
FQHC, which State law permits to be provided without physician 
supervision, provides medical direction for the clinic's or center's 
health care activities and consultation for, and medical supervision 
of, the health care staff.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: October 6, 1995.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: March 18, 1996.
Donna E. Shalala,
Secretary.
[FR Doc. 96-7787 Filed 4-2-96; 8:45 am]
BILLING CODE 4120-01-P