Community Health Centers:

Challenges in Transitioning to Prepaid Managed Care

T-HEHS-95-143: Published: May 4, 1995. Publicly Released: May 4, 1995.

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GAO discussed its report on the impact of managed care on federally supported community health centers, focusing on the centers' transition to prepaid managed care arrangements. GAO noted that: (1) in 1993, almost 450,000 community health center patients were enrolled in prepaid Medicaid managed care programs; (2) all of the 10 centers surveyed increased their spending on enabling services and the number of patient visits since entering into managed care arrangements; (3) 7 centers also increased their spending for uncompensated care; (4) the centers reviewed improved their financial position, mainly due to increased revenues from a variety of sources; (5) in 1994, 6 centers had prepaid managed care earnings of less than $100,000, while 3 centers had prepaid managed care losses of up to $124,000; (6) some centers, particularly those heavily dependent on prepaid managed care payments, were financially vulnerable, had little cash on hand to cover unexpected expenses, responsibile for more than primary care services, and had inadequate capitation rates; (7) lessons learned from the centers' prepaid managed care arrangements include potential patient losses if centers do not participate, and the need for adequate capitation rates and financial risk limitations; and (8) the Bureau of Primary Health Care has supported the centers' transition to managed care by offering training, technical assistance, managed care contract reviews, and grants to help centers plan and develop integrated delivery systems with other providers.

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