Rural Health Clinics:

Rising Program Expenditures Not Focused on Improving Care in Isolated Areas

HEHS-97-24: Published: Nov 22, 1996. Publicly Released: Dec 2, 1996.

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Pursuant to a congressional request, GAO reviewed the Rural Health Clinic (RHC) Program, focusing on: (1) whether the RHC program is serving a Medicare and Medicaid population that would otherwise have difficulty obtaining primary care; and (2) whether there are controls in place to ensure that costs claimed for reimbursement are reasonable and to target the cost-reimbursement benefit of the program to clinics needing it for financial viability.

GAO found that: (1) the RHC program is generally not focused on serving Medicare and Medicaid populations having difficulty obtaining primary care in isolated rural areas; (2) the additional Medicare and Medicaid payments provided to RHCs increasingly benefit well-staffed, financially viable clinics in suburban areas that already have extensive health care delivery systems in place; (3) most RHCs are conversions of existing physician practices that generally do not need or use the benefits under the program to enlarge the size of the practice or take other actions to expand care provided to underserved portions of the area's population; (4) contributing to this problem are the extraordinarily high reimbursements that RHC providers receive for each patient visit for Medicare and Medicaid services at many clinics, the program's broad eligibility criteria, and the requirement that the Health Care Financing Administration (HCFA) reimburse all RHCs at cost, even if they are already financially viable; (5) HCFA is not using its authority to set maximum payment limits for nearly half of the RHCs that are operated as a part of a hospital or other facility or implementing screens necessary to determine whether claimed costs at independent or facility-based RHCs are reasonable; and (6) once certified, RHCs remain eligible for cost reimbursement indefinitely, even if the area they serve no longer qualifies as rural or underserved.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Balanced Budget Act of 1997 (Public Law 105-33), enacted in August 1997, gives the Secretary authority to establish additional need-based program criteria for RHC. This step by the Congress meets the intent of the recommendation by allowing the agency the discretion to determine those situations where RHCs can best be used to alleviate medical underservice.

    Matter: To refocus the RHC program to meet its original purpose, Congress should amend the law to restrict the cost-based reimbursement benefit of the program to: (1) RHCs in areas with no other Medicare or Medicaid providers; or (2) RHCs that can demonstrate that existing providers will not accept new Medicare or Medicaid patients and that the funding will be used to expand access to them.

  2. Status: Closed - Implemented

    Comments: The Balanced Budget Act of 1997 (Public Law 105-33), enacted in August 1997, eliminated grandfather provisions for RHC that no longer meet eligibility criteria.

    Matter: To refocus the RHC program to meet its original purpose, Congress should amend the law to require periodic recertification to ensure that clinics continue to meet eligibility requirements for cost reimbursement.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Balanced Budget Act of 1997 (Public Law 105-33), enacted in August 1997, limits payment to facility based RHC as GAO recommended.

    Recommendation: For those RHCs that continue to be reimbursed on a cost-reimbursement basis, the Secretary of Health and Human Services should direct the Administrator, HCFA, to revise Medicare payment policy, which Medicaid generally follows, to hold facility-based RHCs to the same payment limits and cost-reporting requirements as independent RHCs.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: In November 1996 HCFA informed GAO that it was directing Medicare contractors to apply reasonable cost rules as GAO had recommended.

    Recommendation: For those RHCs that continue to be reimbursed on a cost-reimbursement basis, the Secretary of Health and Human Services should direct the Administrator, HCFA, to apply reasonable cost principles to such categories as salaries and overhead claimed for reimbursement by RHCs.

    Agency Affected: Department of Health and Human Services

 

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