CALIFORNIA Health Care Almanac R E G I O N A L M A R K E T S S E R I E S • C R O S S - S I T E A N A LY S I S JUNE 2021 The Changing Landscape of California's Federally Qualified Health Centers Executive Summary Federally Qualified Health Centers (FQHCs) are public or ▶ Growth has occurred both through acquisitions of exist- nonprofit clinics that care for patients regardless of insur- ing private medical practices and clinics and also through ance status or ability to pay. FQHCs are as diverse as they construction of new facilities. are widespread and are integral to the state's safety-net pro- ▶ Expansion of FQHCs has been accompanied by some vider landscape. Many FQHCs experienced rapid growth in growing pains, including occasional conflicts with exist- the period immediately following the implementation of the ing private practices and other providers as well as federal Affordable Care Act (ACA) in 2014. In the post-ACA difficulties with recruiting enough qualified staff. period, FQHCs have continued to add patients and clinic sites at a rapid pace in regions throughout the state, and ▶ FQHCs have become increasingly large and sophisticated; many health centers have increased offerings of specialty FQHCs in nearly all regions can join a clinic consortia or services and care for elderly patients. association, many clinics are part of large and growing This report, part of the California Health Care Foundation's clinic networks, and service offerings are increasing. Regional Markets Study series, examines the changing FQHC ▶ FQHCs are increasingly participating in independent landscape, focusing on emerging trends and regional differ- practice associations (IPAs) and exploring ways con- ences in FQHCs across the state. Some of the key findings tinue to serve patients as they age by adding Medicare include these: Advantage and Programs of All-Inclusive Care for the ▶ Across the state, FQHCs have continued robust growth Elderly (PACE).1 and expansion in the post-ACA period; some regions ▶ The COVID-19 pandemic had a significant impact on experienced a tripling of patient visits over the 2014– FQHCs, causing severe financial hardships for many 2019 period, while regions with more established FQHCs health centers while hitting FQHC patients harder than saw continued, if more modest, growth. many other groups in the state; the financial disloca- ▶ Data suggest more room for expansion, particularly in tion, however, has caused some to look at value-based regions where the number of FQHC visits per person is payment methodologies in a new light. lower. This paper is part of CHCF's 2020 Regional Markets Study. Visit our website for the entire Almanac Regional Markets Series. ▶ Looking ahead, questions have emerged about whether increasingly large organizations will lose their community focus and whether the highly regulated environment sur- rounding FQHCs limits their ability to be innovative and respond to community needs. FQHCs have been a key component of the state's Introduction safety net for years. However, in the period following FQHCs are an integral component of the state's safety-net provider landscape. These public or nonprofit health centers the implementation of the federal Affordable Care provide care to patients regardless of insurance status or Act, FQHCs experienced significant growth as more ability to pay. Operating in every region of the state, FQHCs are as diverse as the populations they serve. From small Californians gained health insurance under the clinics to multisite networks, FQHCs provide a wide and increasing array of services and have grown in scope, capac- state's expanded Medi-Cal program. ity, and sophistication in recent years. FQHCs Have Grown – and Changed – in the Post-ACA Period FIGURE 1. Growth in Federally Qualified Health Centers Statewide, 2013–19 FQHCs have been a key component of the state's safety net for years. However, in the period following the implementa- ■ Patients (in millions) Organizations tion of the federal Affordable Care Act, FQHCs experienced 180 176 176 177 177 significant growth as more Californians gained health insur- ance under the state's expanded Medi-Cal program. As shown 151 5.3 5.0 in Figure 1, FQHCs have experienced significant growth 4.7 4.4 statewide since 2014, with the number of patients increas- 4.1 ing every year, from 3.7 million in 2014 to 5.3 million in 2019. 3.7 And, while the number of organizations (i.e., clinic networks) has largely leveled off, the number of clinic sites has steadily increased each year as existing FQHCs expanded. In 2014, excluding county-run clinic networks,2 FQHC organizations operated 776 sites across the state. Over the following five years, 157 new sites opened, an increase of more than 20%. 2014 2015 2016 2017 2018 2019 Source: "California Health Center Data," Health Resources and Services Administration, accessed Regional Differences in FQHC Growth February 1, 2021. While FQHCs have grown across the state, the overall results mask some important differences. Indeed, FQHCs vary tre- mendously in size, extent of service offerings, and areas of focus. As one respondent in Los Angeles said, if "you've seen one FQHC, you've seen one FQHC."3 California Health Care Foundation www.chcf.org 2 As shown in Figure 2, FQHCs in every region increased FIGURE 2. Change in Federally Qualified Health Center Encounters, by Region, 2014–19 patient visits between 2014 (immediately following imple- mentation of the ACA) and 2019; however, the extent of that Humboldt/ growth varied widely across the state.4 Del Norte 17% For example, the number of FQHC patient visits in the Bay Area 26% Inland Empire has grown at a pace much faster than in the state as a whole. As new clinic sites opened in the region, Los Angeles 38% the number of FQHC patient visits tripled, from just under San Diego 49% 500,000 in 2014 to more than 1.5 million in 2019. The number of patient encounters also increased at a fast pace in the San San Joaquin 76% Joaquin Valley and Sacramento regions, while the trend in the San Diego region more closely mirrored overall state growth. Sacramento 79% In other regions of the state, a more stable FQHC land- Inland Empire 206% scape continued to show growth, but at a slower pace. In the Humboldt and Del Norte region, the region's largest FQHC, • CALIFORNIA AVERAGE: 45% Open Door Community Health Centers, has expanded to Notes: Excludes patient encounters at county-run clinics. Includes encounters at FQHC Look-Alikes, community health centers that meet the requirements of the Health Resources and Services fill a gap created as some private practices closed. Having Administration Health Center Program but do not receive Health Center Program funding. Source: "Primary Care Clinic Annual Utilization Data," California Office of Statewide Health Planning and started as a single clinic in 1971, Open Door now has 12 Development, accessed February 1, 2021. sites across Humboldt and Del Norte Counties, offering primary care, dental care, and behavioral health care. An FQHC since 1999, Open Door also operates three mobile Similarly, in the five San Francisco Bay Area counties, clinics (two providing dental care). As the number of phy- between 2014 and 2019, the number of FQHC patient visits sicians in independent practice continues to decline, Open grew by 26%, and the number of clinic sites increased by Door has become the main provider of primary care services 14% - from 98 to 112 sites. A similar pattern was observed in the area. "[Open Door's] population has been redefined in Los Angeles County, where a well-established network of from the core disenfranchised population to almost every- FQHCs plays an essential safety-net role but exhibited much one in our area," according to a respondent.5 Open Door has slower growth during this period compared with the FQHC grown from 200 employees and a $14 million budget in 2004 networks in the Inland Empire and other regions. Between to more than 700 employees and an $80 million budget in 2014 and 2019, the number of FQHC sites in Los Angeles 2020. Open Door serves more than 60,000 patients annually, increased by 20% - to 233 - while the number of patient about a third of the area's total population. In spite of the encounters rose by 38%. This growth was on a much larger scope of Open Door's presence, the overall increase in FQHC base yet nevertheless reflects a slower pace than the tripling patient visits there during the recent past lagged the overall of patient visits seen in the Inland Empire. Indeed, it is a tes- statewide growth, with visits increasing by just 17% com- tament to the tremendous growth in FQHCs across the state pared with statewide growth of 45% - reflecting the fact that growth of "only" 38% over five years (as was observed in that Open Door had already established a strong position in Los Angeles) counts as slow. the region prior to 2014. California Health Care Foundation www.chcf.org 3 FQHCs Provide an Increasing Share of Care, but Still Have FIGURE 3. S hare of Medi-Cal Enrollees Receiving Care at Federally Qualified Health Centers, 2014–19 Room to Grow The rapid increase in FQHC visits shown in Figure 2 presents 27% just one part of the FQHC expansion story. Another important 25% and related topic is the extent of FQHC penetration, or the 23% 21% share of patients who use FQHCs. One important measure of 19% penetration is the share of a region's Medi-Cal enrollees who 18% are receiving care at FQHCs. As shown in Figure 3, across the state, the share of Medi-Cal enrollees visiting an FQHC has increased steadily from just 18% in 2014 to more than 27% in 2019.6 Increasing along with the share of Medi-Cal enrollees vis- iting an FQHC has been the share of all Californians doing 2014 2015 2016 2017 2018 2019 so. Between 2014 and 2019, the share of Californians visit- Notes: To determine the share of Medi-Cal enrollees each year who visited an FQHC, the number of ing an FQHC increased from 9.6% in 2014 to 13.5% in 2019. Medi-Cal patients visiting an FQHC, as determined by the Health Resources and Services Administration (HRSA) data, was divided by the total number of Medi-Cal enrollees, as provided by the California As shown in Figure 4, the number of FQHC encounters per Department of Health Care Services (DHCS). This estimated measure may somewhat understate the role that FQHCs play in the provision of care for Medi-Cal enrollees, as in any given year not all Medi-Cal enrollees will visit a health care provider. However, because FQHC patients may be counted more than capita varied from a low of just 0.3 in the Inland Empire to a once if they visit multiple health centers, the data may overstate the fraction of Medi-Cal enrollees that utilized FQHCs. high of 1.8 in the Humboldt and Del Norte region - a more Source: "California Health Center Data," Health Resources and Services Administration, accessed February 1, 2021; "Month of Eligibility, Dual Status, by County, Medi-Cal Certified Eligibility," California than five-fold difference. These data help to explain in part Department of Health Care Services, accessed January 1, 2021. the differences in FQHC growth presented in Figure 2, which showed that the Humboldt and Del Norte regionDelhad the FIGURE 4. E ncounters per Capita at Federally Qualified Health Centers, Norte Siskiyou by Region, Modoc 2019 slowest growth in FQHC encounters of any region, whereas the Inland Empire had the highest. That is, in the Humboldt ◾ 1.8 Shasta Lassen ◾ ◾ ◾1.81.3 1.3 and Del Norte region, an established FQHC network already Trinity ◾◾0.9 0.9 Humboldt provides a substantial amount of care, whereas in the Inland ◾ ◾◾0.50.4 0.5 Tehama Empire, in spite of a tripling of encounters over the 2014– Plumas ◾ ◾0.3 0.4 Mendocino Glenn Butte Sierra ◾ 0.3 2019 period, the number of encounters per capita remains Nevada Yuba Placer relatively small. Lake Colusa Sutter Yolo El Dorado These data present a story of robust growth as well as con- Sonoma Napa Sacra- Alpine mento Amador tinued potential for expansion, with most Californians and Solano Calaveras Marin San Tuolumne Contra Mono most Medi-Cal enrollees still receiving care elsewhere. While Costa Joaquin San Francisco Alameda Stanislaus Mariposa the factors governing a patient's decision about whether and San Mateo Santa Merced how to access care are complex and include factors such as Clara Santa Cruz Madera the availability and quality of alternative providers, available Fresno San Inyo Benito data on FQHC penetration and interviews with FQHC leaders Tulare Monterey Kings Notes: Excludes patient encounters at county-run clinics. suggest there is room for continued growth in the future. Includes encounters at FQHC Look-Alikes, community health centers that meet the requirements of the Health Resources and Services Administration Health Center Program but do not receive Health Center San Luis Program funding. Counties shown in white are not included in the Regional Markets Study analysis. Source: "Primary Care Clinic Annual Utilization Data,"Kern Obispo California Office of Statewide Health Planning and Development, accessed February 1, 2021. Santa Barbara San Bernardino Ventura Los Angeles California Health Care Foundation www.chcf.org 4 Riverside Changes in Financial Performance FIGURE 5. O perating Margins at Federally Qualified Health Centers, 2014–19 In recent years, as FQHCs have increased their scope, reach, 2014 and patient volume, they have also experienced changes in 0.1% ■ 25th percentile their financial condition. The operating margin measures the 3.0% ■ Median 10.0% ■ 75th percentile difference between revenues and expenses for FQHCs. After 2015 initially rising in the period immediately following imple- 1.6% mentation of the ACA, FQHC operating margins have steadily 5.6% 12.0% declined since 2016. As shown in Figure 5, the median health 2016 center operating margin reached a high of 6.5% in 2016 and 1.6% then declined to just 2.5% in 2019. 6.5% Margins for both the highest and lowest performing 13.4% 2017 FQHCs followed a similar pattern. Margins for the clinics in 1.0% the 75th percentile increased to a high of 13.4% in the years 5.1% following ACA implementation before falling to 6.6% in 2019. 11.5% Meanwhile, margins for clinics in the 25th percentile climbed 2018 –0.2% to a high of 1.6% in 2016. By 2019 - in the period leading up 3.6% to the COVID-19 pandemic - clinics in the 25th percentile 9.1% were operating at a net loss of –1.1%. 2019 –1.1% Several factors may help to explain the change in margins. 2.5% As shown in Figure 6, the increase in FQHC sites, patients, 6.6% and encounters over the period from 2014 to 2019 has been Source: California Federally Qualified Health Centers: Financial and Operational Performance Analysis, (2016–2019) (PDF), Capital Link. associated with a significant change in the payer mix (i.e., the share of revenue from different entities responsible for FIGURE 6. Payer Mix at Federally Qualified Health Centers, 2014–19 paying for care, such as health insurance companies and Medi-Cal managed care plans). Prior to the implementation ■ Uninsured ■ Medi-Cal ■ Medicare ■ Other Third Party of the ACA, nearly 20% of FQHC patients were uninsured. 8.3% 8.9% 8.3% 8.3% 8.5% 8.8% By 2019, the fraction of patients without insurance had 5.9% 6.1% 6.3% 6.3% 6.6% 7.0% declined to less than 10%. Most of the change in payer mix 58.3% 62.7% 64.5% 65.9% 65.9% 65.1% was a result of the increase in Medi-Cal coverage stemming from the ACA's coverage expansion. The fraction of FQHC patients with Medi-Cal increased from about 58% in 2014 to more than 65% by 2019. Moreover, as shown in Table 1, the net patient revenues for each Medi-Cal managed care visit 27.5% increased dramatically in the period following ACA expan- 22.4% 20.9% 19.6% 18.9% 19.1% sion, rising by more than 30% over this period (see page 6). 2014 2015 2016 2017 2018 2019 Note: Segments may not sum 100% due to rounding. Source: "California Health Center Data," Health Resources and Services Administration, accessed February 1, 2021 California Health Care Foundation www.chcf.org 5 TABLE 1. Net Patient Revenues and Share of Encounters, by Selected Payers TABLE 2. Change in Revenues and Expenses per Encounter, 2014–19 NET PATIENT REVENUES Change SHARE OF ALL 2014 2019 (2014–19) Per Encounter Growth ENCOUNTERS 2019 2014–19 2019 Total revenue $204 $254 24.2% Medi-Cal $230 17.7% 22.2% ▶ Net patient revenues $63 $69 9.6% Medi-Cal managed care $207 30.6% 45.7% ▶ Other revenues $141 $185 30.7% Medicare $201 47.8% 6.7% Total expenses $198 $249 25.9% Medicare managed care $140 3.3% 2.0% ▶ Personnel-related expenses $137 $175 28.5% Private insurance $118 4.9% 6.3% ▶ Other expenses* $61 $74 20.1% Self-pay / sliding / free $56 16.1% 9.3% Average operating margin 3.1% 1.7% –1.4% Notes: Excludes net patient revenues from other public payers. Includes net patient revenues at FQHC *Other expenses comprise supplies, rent, utilities, information technology, and all other non- Look-Alikes, community health centers that meet the requirements of the Health Resources and personnel-related expense types. Services Administration Health Center Program but do not receive Health Center Program funding. Notes: Includes net patient revenues at FQHC Look-Alikes, community health centers that meet the Per-encounter payment includes any "reconciliation payments" reported by the clinic, including those requirements of the Health Resources and Services Administration Health Center Program but do not received under the prospective payment system (PPS). receive Health Center Program funding. Source: "Primary Care Clinic Annual Utilization Data," California Office of Statewide Health Planning Source: "Primary Care Clinic Annual Utilization Data," California Office of Statewide Health Planning and Development, accessed February 1, 2021. and Development, accessed February 1, 2021. Coincident with this growth in net patient revenue, A similar result can be observed in the Humboldt and however, was more sluggish growth in nonpatient revenue Del Norte region. Following ACA coverage expansions, the from federal grants and other sources, as shown in Table 2. proportion of Open Door's uninsured patients dropped During the 2014 to 2019 period, federal grants declined from significantly, contributing to a positive bottom line. Open 14% of FQHC revenue to just 11%, as net patient revenue Door's payer mix has shifted in recent years as the health increased from 71% to 75%. As a result of these changes, center gained more privately insured patients - a mixed between 2014 and 2019, while net patient revenues grew blessing because, in contrast to cost-based Medi-Cal reim- nearly 31%, total revenue growth was considerably lower, bursement, commercial reimbursement reportedly does not at just 24%. At the same time that total revenue growth cover operational costs. was slowing, expenses were increasing, largely driven by Financial performance in the Inland Empire also followed increases in staffing costs. Between 2014 and 2019, FQHC the statewide trend, with margins falling over the 2014 to personnel-related costs rose from $125 per patient visit to 2019 period. However, average margins for Inland Empire $175 - a 41% increase. As a result, expense growth over this clinics remained consistently negative during this period, period, at 26%, outpaced total revenue growth, leading to averaging –5.7% in 2014 and falling to –7.9% by 2019. This lower overall operating margins. decrease occurred despite the region's clinics enjoying a Examining operating margins on a regional basis reveals large increase in Medi-Cal coverage and decline in the share that most regions followed these statewide trends. In the of patients without insurance. In 2014, FQHC patients receiv- Central Valley, for example, average FQHC operating margins ing care free or on a sliding fee basis accounted for 16.4% decreased between 2014 and 2019, from 5.2% to 3.8%. About of all encounters. By 2019, these groups accounted for just this decline, a clinic leader observed that revenues and oper- 5.7% of all encounters. In spite of the reduction in care for the ating margin increases in 2014 immediately after the ACA uninsured, expenses per encounter increased more rapidly expansion were unprecedented, but then operating margins than net patient revenues during this period, leaving operat- declined in subsequent years as clinics' expenses rose, largely ing margins further weakened from 2014.7 as a result of expansion and staffing costs. California Health Care Foundation www.chcf.org 6 Margins in two regions defied the statewide trend, quality measures and hospital and emergency department increasing between 2014 and 2019. In the San Diego region, (ED) utilization metrics as well as encounter data standards. average margins increased from 5.6% in 2014 to 7.1% in Because CHCN takes professional risk, the IPA operates its 2019. Sacramento also saw an increase over this period, from own P4P program, which also focuses on quality measures 5.4% in 2014 to 15.4% in 2019, although the results were very and hospital utilization.8 volatile, with a single health center accounting for much of In Los Angeles County, many FQHCs participate in Health the change in 2019. Care LA, a nonprofit IPA that contracts with health plans and manages the network for physician professional services - Innovations: How FQHCs Have Responded to a specialist as well as primary care. Most of the 300,000 lives Changing Landscape under contract at Health Care LA are Medi-Cal enrollees, As FQHCs across the state have grown in size, many have but the IPA also holds contracts in other lines of business: become large and sophisticated organizations, increasing Medicare Advantage, Cal MediConnect, Covered California, the range of services they provide and adding programs to and commercial HMOs. Health Care LA, in turn, delegates serve elderly patients. Most FQHCs participate in local asso- responsibility for Medi-Cal (and other) enrollees to FQHCs ciations or consortia to advocate for policies of common and pays them a capitated rate, generally for primary care interest, collaborate on recruitment strategies, and negotiate services. (The FQHCs reconcile with the Department of and manage contracts with health insurers and managed Health Care Services at year-end to ensure they receive the care plans. Each of these innovations and tools has helped reimbursement they are entitled to under the prospective FQHCs to thrive and cement their place in the safety net in payment system.) the communities the FQHCs serve. The regional clinic consortium for the rural northwest, North Coast Clinics Network (NCCN), serves Open Door, Many FQHCs Have Joined Forces to Share Information and Redwoods Rural Health Center in Humboldt, and Southern Collaborate on Ways to Improve Patient Care Trinity Health Services in neighboring Trinity County. NCCN Throughout the state, FQHCs have increasingly banded joined forces with the Health Alliance of Northern California together, joining consortia or clinic associations. In some (HANC) - the regional clinic consortium for many other rural regions these affiliations are simply tools for sharing infor- northern counties, including Siskiyou, Modoc, Shasta, Lassen, mation resources and advocating for policies of common Shasta, Mendocino, and Plumas Counties - on an initia- interest. In others, clinics participate in independent practice tive to support health centers in identifying and addressing associations (IPAs) to manage health plan contracting, pay- quality gaps through data analysis and quality improvement for-performance programs, and access to specialists. (QI) activities. NCCN and HANC have collaborated on a toolkit In Alameda County, most of the community-based to help build FQHC capacity for data analysis and QI and to FQHCs participate in the Alameda Health Consortium. The support a population health approach. The QI collaboration consortium also operates an IPA, Community Health Center helps close gaps in patient care, generates health center Network (CHCN), which contracts with health plans and revenue in the form of performance incentives, and focuses takes professional risk for 155,000 managed care enrollees attention on improving quality scores. on behalf of member FQHCs. CHCN also participates in the In San Diego, Integrated Health Partners (IHP) - a sub- Medi-Cal pay-for-performance (P4P) program, which ties sidiary of Health Center Partners of Southern California, a enhanced payments to performance on a combination of consortium of 17 FQHCs and Planned Parenthood health California Health Care Foundation www.chcf.org 7 centers across San Diego, Riverside, and San Bernardino patients with complex needs, FQHCs play an instrumen- Counties - contracts with health plans for 250,000 managed tal role in addressing the myriad needs of persons who are care enrollees in San Diego and Riverside Counties through unhoused. The upcoming reprocurement of managed care IHP's clinically integrated network, capable of taking full plans for Sacramento County's Geographic Managed Care professional and facility financial risk. IHP's nine members (GMC) Model has rallied FQHCs to coalesce around influenc- include a mix of large and small FQHCs in the region, ing how the model evolves. A respondent observed that although the largest, Family Health Centers of San Diego FQHCs have relationships with each of the participating (FHCSD), is not a member.9 IHP, which functions similarly to plans and their provider networks and therefore have a stake an IPA, contracts with health plans in San Diego on behalf of in how plans prepare for the reprocurement.12 member FQHCs, including the two largest Medi-Cal health plans - Community Health Group and Molina Healthcare FQHC Networks Expanding of California - as well as Blue Shield Promise.10 IHP also Beyond collaborating with other FQHCs, many individual contracts with health plans for Covered California, Medicare systems are increasing in size, through either organic growth Advantage, and dual-eligible products and recently launched or acquisitions. The number of networks operating statewide a new data platform, Arcadia, to provide population health has increased just 2.3% since 2015. Yet the number of clinic management tools to member FQHCs.11 sites (excluding those belonging to county-run clinics)13 has In other parts of the state, FQHC collaboration has devel- increased 9.1%. oped only more recently. In the Inland Empire, FQHCs can One example of consolidation occurred in 2020 in the participate in the Community Health Association Inland San Francisco Bay Area, where the largest private FQHC in Southern Region, founded in 2009. The association, the state's Santa Clara County, Foothill Community Health Center, newest regional area consortium, provides advocacy, techni- with 13 sites, was acquired by Tri-City Health Center, which cal assistance, workforce development, education, quality serves patients in southern Alameda County. Following the improvement, and networking opportunities for members, merger, the combined organization was renamed Bay Area but the association does not offer more coordinated finan- Community Health. Also in 2020, Ravenswood Family Health cial functions as associations in other regions do. In the Network in San Mateo acquired MayView Community Health Sacramento region, numerous respondents remarked that Center, an FQHC Look-Alike. FQHCs, which have historically been somewhat competitive, In the Inland Empire, much of the growth has been driven are slowly working toward more collaborative relationships. by the expansion of FQHCs from neighboring counties, such Some are participating in the Central Valley Health Network as San Diego–based Borrego Health, which now has 17 (CVHN), a membership organization of FQHCs that provides health center locations across Riverside and San Bernardino technical assistance and learning networks. The CVHN con- Counties and accounts for roughly half of all non-county- venes regular calls for FQHC chief operating officers, chief run FQHC patient visits. Neighborhood Healthcare, which medical officers, and human resource directors to share best started in Escondido, now has four Inland Empire locations practices and discuss common issues. and accounts for 6% of all non-county FQHC visits. In addition, FQHCs in the Sacramento area are working Another important source of growth, both in the Inland together with the county and hospitals on initiatives target- Empire and across the state, has been the acquisition of inde- ing mental health and homelessness. As primary care homes pendent private physicians' practices. Many of these practices offering integrated behavioral health and other services for have struggled financially; some have viewed selling a California Health Care Foundation www.chcf.org 8 practice to an FQHC as a way to manage the retirement of among the largest teaching health centers in the country. an aging physician population. Regardless of the cause, such With a half dozen locations across the Inland Empire (as well as acquisitions have been an important source of clinic system mobile health and dental units), SAC Health System accounts expansion. As one observer in the Inland Empire noted, for nearly 10% of all non-county FQHC encounters in the FQHCs are "hoovering up private practices" across the region. region and boasts more than 35 unique specialties. Riverside In other cases, growth has been driven by existing clinics University Health System, which includes the county hospital that changed and broadened their focus to become FQHCs. for Riverside County, also operates 12 integrated FQHCs. For example, in Sacramento County, a previously existing Alameda Health System (AHS) operates an FQHC with clinic focusing on care for those with HIV/AIDS - Cares four sites, including one located at Highland Hospital. In Community Health - became an FQHC with a broader the Sacramento region, UC Davis Medical Group physicians, mission to serve everyone in need of care. Now known as mostly primary care, staff the Sacramento County FQHC, One Community Health, the FQHC has expanded its previ- which also serves as a physician residency teaching site. ous single-site clinic into a broader campus with a range of In the San Joaquin Valley, respondents noted that several services including preventive care and screening, nutrition hospitals collaborate with FQHCs to provide outpatient counseling and weight loss management, podiatry, labora- services and referrals to inpatient care. In Madera County, tory, and pediatric services including a teen clinic. Camarena Health, the county's sole FQHC, is a referral source One respondent observed that as FQHCs face the future, for Valley Children's Hospital and Madera Community Hospital. they face another challenge: balancing the two distinct and In Fresno, Family HealthCare Network (FHCN) took over two sometimes contrary organizational objectives of remain- outpatient clinics on the campus of the Community Regional ing community-based systems where patients feel "known" Medical Center (CRMC), operating the clinics and billing Medi- while also becoming sophisticated organizations that work Cal for services through the FQHC, which receives enhanced across multiple sites with multiple lines of service. The same payments. FHCN contracts with the Central California Faculty respondent proposed that FQHCs might consider mergers Medical Group to provide some physician services at FHCN or shared administrative infrastructure to reap economies of sites, again allowing the FQHC to receive enhanced Medi-Cal scale and scope but, in the same breath, lamented the pros- payments. Regional experts believe this relationship serves pect of losing organizational identity and personality that both CRMC and FHCN. CRMC benefits by having outpatient allows for a personal touch with patients. While increased services available on its campus at no financial risk while scale offers many advantages, including a better ability to also relieving ED crowding and having outpatient services manage patient data and improve outcomes, the lack of a available for patients after discharge. Before developing the more intimate connection to patient populations remains an relationship with FHCN, CRMC reportedly struggled to make important concern for expanding clinics. its outpatient clinics financially viable. Additionally, the clinics provide physician residency training locations. FHCN bene- Hospital Partnerships fits by increasing patient access to physicians and residents FQHCs are increasingly integrated into their local health care across a broad scope of specialty services and improving landscapes, often through partnerships with local hospitals. continuity of care for patients discharged from the hospital. For example, in the Inland Empire, Loma Linda University The relationship also allows FCHN an opportunity to recruit Medical Center, provides financial support to SAC Health physicians to stay in the area after completing residency System, an FQHC that runs clinics in six locations and is training.14 California Health Care Foundation www.chcf.org 9 Expanding Services and Specialties Other clinic encounter data suggest an expansion in As FQHCs have grown and become more sophisticated, specialty services beyond specialty medicine and dentistry. many have expanded the scope of services they provide. In 2019, for example, 1.5% of all encounters were coded as Many FQHCs now provide behavioral health, dental, and belonging to various specialties-such as anesthesia, radiol- vision services and even podiatry and chiropractic services. ogy, and cardiovascular and respiratory services-that clinics Some FQHCs operate mobile clinics, provide laboratory and had not even tracked for reporting purposes in 2014. pharmacy services, and even hire hospitalists to follow and manage patients admitted to the hospital. Behavioral Health Integration Table 3 highlights two encounter categories experi- One of the most significant developments across the FQHC encing particularly rapid growth. The provision of services landscape has been the increasing move to provide - and included within the "Medicine - Special Services" encounter integrate - behavioral health services. According to a recent category (as reported by clinics to the Office of Statewide survey of FQHCs, all respondent clinic networks reported Health Planning and Development) more than doubled, far offering mental health services (up from 84% in 2016).15 In outpacing growth in overall encounters statewide. In both expanding behavioral health services, many FQHCs now con- Sacramento and San Diego, increases were especially pro- tract with Medi-Cal managed care plans' provider networks nounced. Similarly, dental visits now compose more than for less severe mental health conditions (also referred to as 17% of all encounters statewide; in the Inland Empire, there "mild-to-moderate" conditions), while a few FQHCs provide were more than six times the number of dental visits in 2019 specialty mental health and substance use disorder services than in 2014. under contract with county behavioral health departments. Between 2014 and 2019, visits to FQHCs related to behav- TABLE 3. S pecialty Services and Dental Encounters, by Region, 2014–19 ioral health increased by 62.5% across the state, outpacing SPECIALTY SERVICES DENTAL the 44% increase in encounters overall during this period. ENCOUNTERS ENCOUNTERS Like the growth in total number of clinic visits, growth in the Growth Share of Total Growth Share of Total 2014–19 2019 2014–19 2019 number of behavioral health visits to FQHCs varied signifi- Bay Area 51.3% 9.0% 28.2% 16.5% cantly across regions (see Table 4 on page 11). In the Inland San Joaquin Valley 236.1% 4.7% 65.4% 16.1% Empire, this number nearly quadrupled, outpacing the tri- Inland Empire 238.7% 5.3% 564.5% 42.9% Los Angeles 119.9% 5.2% 116.5% 11.1% pling in FQHC visits overall. In the Bay Area, where behavioral Humboldt / Del Norte 36.3% 4.1% –9.5% 14.2% health services were more frequently offered in 2014, growth Sacramento 299.9% 9.1% 51.8% 19.0% over the period lagged slightly behind the growth in the San Diego 210.3% 11.6% 106.0% 20.7% total number of encounters regionwide. California 128.9% 8.1% 79.7% 17.1% Notes: Includes encounters at FQHC Look-Alikes, community health centers that meet the requirements of the Health Resources and Services Administration Health Center Program but do not receive Health Center Program funding. One of the most significant developments across Source: "Primary Care Clinic Annual Utilization Data," California Office of Statewide Health Planning and Development, accessed February 1, 2021. the FQHC landscape has been the increasing move to provide - and integrate - behavioral health services. California Health Care Foundation www.chcf.org 10 TABLE 4. B ehavioral Health Encounters at Federally Qualified Health of the largest SUD and medication-assisted treatment (MAT) Centers, 2014–19 contractors for Sacramento County, while CommuniCare Growth in Number SHARE OF ALL of Behavioral Health FQHC ENCOUNTERS Health Centers contracts with Yolo County to provide both Encounters 2014–19 2014 2019 specialty mental health and SUD services. In Placer County, Bay Area 20.6% 7.6% 7.2% Chapa-De Indian Health has a contract with the county San Joaquin Valley 113.2% 4.0% 4.9% to provide specialty mental health services. El Dorado Inland Empire 279.3% 5.6% 6.9% Community Health Centers (EDCHC) has 10.5 full-time Los Angeles 43.4% 5.8% 6.0% equivalent (FTE) employees dedicated to MAT, has another Humboldt / Del Norte 48.7% 10.5% 13.4% Sacramento 87.9% 12.7% 13.4% seven FTEs for counseling services, and offers psychiatry ser- San Diego 106.4% 7.3% 10.1% vices 30 hours per week. EDCHC also has a relationship with California 62.5% 7.0% 7.8% Marshall Medical Center, which has a CA Bridge program Notes: Behavioral health encounters are here classified as encounters with patients diagnosed with and also collaborates with Barton Memorial Hospital for "mental, behavioral, and neurodevelopment disorders." Includes encounters at FQHC Look-Alikes, community health centers that meet the requirements of the Health Resources and Services MAT and coordinates with the county for patients needing Administration Health Center Program but do not receive Health Center Program funding. Source: "Primary Care Clinic Annual Utilization Data," California Office of Statewide Health Planning specialty mental health services. In the Central Valley, both and Development, accessed February 1, 2021. Camarena Health and FHCN provide services on site and also use mobile vans to provide mental health services to hard- Across the regions covered by this report, several clinics to-reach populations. added or expanded behavioral health services. For example, In Los Angeles, several former substance use disorder HealthRIGHT 360 contracts with San Francisco County to clinics have obtained FQHC status, increasing the scope of deliver specialty mental health and substance use disorder services offered and enhancing the integration of behav- (SUD) services. In Santa Clara, the county has integrated ioral health and physical health services. In San Diego, some behavioral and physical health care in county FQHCs by FQHCs have integrated behavioral health with physical health having psychiatrists and licensed clinical social workers care - for example, by having a mental health therapist or on-site to provide behavioral health services.16 Zuckerberg SUD counselor on-site who can assist with warm handoffs or San Francisco General Hospital also has integrated behav- direct referrals from primary care physicians to psychiatrists or ioral health into the primary care clinics on the hospital's state-certified SUD counselors as appropriate. FQHCs in the campus. Alameda County provides psychiatric consultation region also contract with San Diego County to provide spe- services to primary care and behavioral health providers at cialty mental health services. These FQHCs include FHCSD, private FQHCs. which reportedly employs the majority of Medi-Cal partici- In the Sacramento region, many of the larger FQHCs pating psychiatrists in the region as well as more than 100 focus on providing integrated physical and behavioral health licensed therapists. In recent years, however, FHCSD decided care and have invested in care management staff, quality to curtail some work with San Diego County because of sig- improvement, and information technology infrastructure to nificant administrative contractual requirements. San Ysidro improve care coordination. One FQHC leader said that 70% Health also provides mild-to-moderate services to patients of the FQHC's more than 40,000 patients need some type of and has two sites that contract with San Diego County to behavioral health service. These services range from mild- serve the specialty mental health population. In addition to to-moderate mental health counseling to specialty mental working with the county, FHCSD has partnered with local health treatment and SUD services. WellSpace Health is one health plans and hospitals (e.g., Scripps Mercy Hospital) to California Health Care Foundation www.chcf.org 11 address the behavioral health needs of people who access provide these mild-to-moderate services even without reim- care through hospital EDs. This effort includes placing social bursement from plans because the FQHC may not be part workers and SUD counselors in EDs to assist with diver- of health plans' behavioral health networks. FQHCs in the sions to community resources or to mental health care as region typically do not provide specialty mental health or appropriate. SUD services under contract with county behavioral health departments. Like many FQHCs across the state, El Dorado Same-Day Billing Limitations Hinder Behavioral Health County's EDCHC has opted to provide behavioral health ser- Integration vices without managed care or county contracts and instead While FQHCs have moved to provide an increasing number rely on encounters and grants funded through the prospec- and variety of behavioral health services, constraints on tive payment system (PPS). FQHCs' ability to obtain payment for these services can make such service delivery challenging. First, clinics cannot bill for Aging Population Stimulates Move to Keep Serving two distinct services on the same day. As a result, clinics gen- Patients as They Grow Older erally cannot bill for both a physical health and mental health As FQHCs become larger and increase their reach, many have visit on the same day. Second, only certain types of clinicians expanded beyond the traditional population of uninsured can bill Medi-Cal (e.g., physicians, psychiatrists, licensed and Medi-Cal enrollees. In order to keep serving patients clinical social workers, and clinical psychologists). Finally, as they age, some FQHCs have participated in Medicare FQHCs seeking to provide certain Medi-Cal reimbursable Advantage and PACE. PACE serves people ages 55 and older SUD or specialty mental services must negotiate a contract who are certified to need nursing home care but can safely with the local county behavioral health department and remain in the community with supportive services. Most must generally maintain a separate billing infrastructure for PACE enrollees are eligible for both Medicare and Med-Cal, these services (which are financed with a separate Medi-Cal with enrollees eligible only for Medicare paying a premium revenue stream managed by counties rather than managed for the long-term care portion of the PACE benefit. care plans). FQHCs that wish to provide mild-to-moderate San Francisco's North East Medical Services (NEMS) illus- mental health services must first negotiate contracts with trates this move toward more programs for elderly patients. the local Medi-Cal managed care plan or a mental health NEMS is the largest community-based FQHC in San Francisco, benefit manager if the plan has subcontracted this function, with 10 sites in the county and satellite clinics in other coun- even if the FQHC already has a contract with the managed ties (including Santa Clara County). In 2019, NEMS partnered care plan to provide physical health services. with Health Net to offer a Medicare Advantage health plan, These limitations on billing have led some FQHCs to as part of a larger strategy to retain patients as they age into simply provide behavioral health services without reim- Medicare. In 2021, NEMS launched a PACE program. bursement or to seek alternative funding sources to pay for AltaMed, the largest FQHC in Los Angeles County, now these services. The situation in the Central Valley is typical cares for about 300,000 patients in Los Angeles and Orange of many FQHCs across the state. In the Central Valley, as Counties. While the majority of its patients are Medi-Cal elsewhere, some FQHCs are part of managed care plans' enrollees, AltaMed participates in other lines of business, "mild-to-moderate" provider networks and are considered including Medicare Advantage. PACE has played a key role essential providers of mental health treatment. In other in AltaMed's growth and development, both as a train- cases, however, FQHC respondents noted that they will often ing ground for caring for people with complex needs and California Health Care Foundation www.chcf.org 12 as a major revenue source. While PACE enrollees are a small Impact of COVID-19 minority of AltaMed's patients, the program accounts for COVID-19 has had a significant impact on FQHCs across the a substantial share of AltaMed's revenue. Started in 1996, state. During the pandemic, the volume of visits in most AltaMed's program grew to 1,600 enrollees in 2014 and 2,800 clinics (and for health care providers generally) declined in 2020 - making it the largest PACE in California and the substantially as many patients stayed home. This decline in second-largest in the US. AltaMed takes global risk for PACE visits was accompanied by a steep decline in clinic revenues, enrollees, and required services include adult day care, inpa- which are generally tied to the number of in-person clinic tient services, prescription drugs, home health, and nursing visits. These financial challenges compounded the difficulty home care in addition to routine medical services. Taking many FQHCs faced in addressing their patient' health needs financial responsibility for this population requires active - particularly in light of the pandemic and economic hard- management of inpatient care, and AltaMed hires hospital- ships faced by many of their patients. As one respondent in ists who track every PACE enrollee admitted to the hospital Los Angeles said, "if you overlay a map of clinics and a map of and coordinate with the enrollee's outpatient providers. COVID inequities, they line up - and the economy will make In January 2020, building on experience with PACE and it worse," highlighting the important role that FQHCs played following an extended planning period, AltaMed entered during the pandemic. into a full-risk contract with L.A. Care Health Plan for about While emergency federal financial support began 52,000 Medi-Cal enrollees. The FQHC holds a restricted flowing to FQHCs at the time this study was conducted, the Knox-Keene license permitting assumption of global risk for financial pressures resulting from the pandemic have unde- Medi-Cal; AltaMed reportedly plans to expand to additional niably caused significant challenges for FQHCs across the Medi-Cal enrollees. state. These pressures have also driven clinics to be more In San Diego, with the aging of the population in the innovative as they seek to adapt to a changing landscape. region, the FQHCs are reportedly beginning to develop strat- For example, more clinics are reportedly considering alterna- egies to retain their members as they age into Medicare rather tive value-based payment methodologies. than lose them to other Medicare providers or Medicare Advantage health plans. For example, San Ysidro Health and Telehealth Adoption and Scale FHCSD are PACE providers. The San Ysidro program, which One of the biggest changes to occur as a result of the pan- launched in 2015, currently serves 1,250 individuals at two demic has been an acceleration in the use (and acceptance) sites, with plans to expand to five sites. FHCSD's program of telehealth. Across much of the state, FQHCs had already launched in 2020, making it the fourth PACE in the region. embraced this technology. The reduction in in-person visits, however, drove a renewed interest in and willingness to use this technology on behalf of providers and patients alike.17 According to one FQHC leader, "patients adapted to tele- health, and for the most part really liked it." In the Humboldt and Del Norte region, Open Door actively embraced telehealth, starting with grant-funded efforts to connect local patients with specialists in remote locations on a small scale and expanding to additional providers and California Health Care Foundation www.chcf.org 13 specialties over time. Specialty services available through FQHC leaders remarked that they expect telehealth, and telehealth include dermatology, gastroenterology, pulmon- particularly telephonic visits, to continue after the pandemic ology, and psychiatry. About 40% of specialist referrals take recedes - assuming billing restrictions on nonoffice visits place through electronic consultation (eConsult), provided temporarily lifted during the pandemic remain in effect. with the support of the region's Medi-Cal managed care plan, Indeed, this access-enabling technology has become widely Partnership HealthPlan of California. Open Door's extensive embraced by providers and patients alike. experience with telehealth enabled its health centers to quickly ramp up remote care during the pandemic. Adapting to a Changing Landscape Given the chronic and often acute behavioral health In response to the COVID-19 pandemic, many FQHCs have workforce shortages in the San Joaquin Valley, regional had to change their business models and care delivery experts there noted that telepsychiatry is heavily utilized mechanisms in order to survive. Respondents noted the by hospitals and outpatient sites alike to address psychi- essential role played by state flexibility, including allowing atric needs. Central Valley FQHCs in particular already had FQHCs to count telehealth interactions as billable visits and significant experience with telepsychiatry, which facilitated allowing providers to operate clinics outdoors in parking the expansion of telehealth resulting from the COVD-19 pan- lots for services such as COVID-19 testing and vaccinations. demic. One behavioral health leader interviewed remarked Concern is widespread, however, about whether that flex- that telehealth was a "game changer," and its expanded use ibility will remain in place. In addition to the loss of revenue helps mental health plans meet network adequacy require- from direct patient visits, quality of care metrics in 2020 are ments. FQHC leadership reported that the pandemic more expected to fall well short of expectations based on stan- than doubled behavioral health services delivered by tele- dard metrics given the dramatic decline in face-to-face visits health, an innovation that has reduced patient no-show required for key measures, such as preventive screenings and and cancellation rates. In addition, FQHCs reported that care immunizations. The Medi-Cal pay-for-performance dollars at coordination for these patients has improved as telehealth stake are significant, and quality measures also factor into offers faster referrals, more patient contact, and improved federal FQHC grants. communication among providers. In Los Angeles, St. John's Well Child and Family Center, In Los Angeles, as elsewhere in the state, telehealth has an FQHC that served more than 100,000 patients in 2019, been a silver lining of a pandemic that hit FQHC patients has focused on COVID-19 testing and contact tracing. In harder than many other communities and increased finan- response to a lack of available testing in late March, St. John's cial pressure on clinics. FQHCs in the region rapidly pivoted secured test swabs, identified a small private lab, and set to phone and video visits as face-to-face visits dropped pre- up 28 testing tents across South Los Angeles, reportedly cipitously. An unanticipated benefit has been reduction in reaching 50,000 people by October 2020, with test posi- no-show rates, which have fallen as low as 1% for behavioral tivity rates peaking at 30% during the summer months. St. health phone visits. Similar reductions in no-show rates for Johns also established a contact tracing program. Through telehealth behavioral health visits were observed elsewhere a partnership with California Hospital Medical Center, St. in the state. For example, an FQHC leader in the Inland Empire John's monitors positive cases by calling patients who tested noted that "no-show rates are now as low as 3% where we positive each day to check on symptoms; if the individual formerly saw rates more like 30%." worsens, an ambulance is sent for immediate hospital trans- port. St. John's also participates in COVID-19 research efforts: California Health Care Foundation www.chcf.org 14 in September 2020, St. John's began to track individuals who respondents were interested in pursuing payment reform, a tested positive for COVID-19 to study long-term impacts and significant increase from prior surveys. planned to test a new treatment for COVID-19 in collabora- This renewed interest in payment reform likely reflects tion with the University of California, Los Angeles (UCLA) and the fact that, across the state, FQHCs struggled financially the University of Southern California (USC). during the pandemic, as the volume of patient encounters Venice Family Clinic (VFC), an FQHC based in West Los suddenly declined. In contrast, many private providers that Angeles that served 28,000 patients in 2019, has expanded relied to a greater extent on capitated payments from health services for homeless people since the pandemic began, plans were better able to weather the loss in patient volume. with regular visits to multiple Project Roomkey sites and As one San Joaquin Valley respondent noted, the pandemic encampments where people live. In addition to street medi- highlighted the potential benefits to FQHCs of receiving cap- cine teams, VFC offers mobile clinics that provide privacy itated payments, which provide a constant revenue stream for services such as breast and pelvic exams. Food insecu- even when services and PPS payments decline. Relying on rity spiked during the pandemic as well, and VFC launched PPS payments (analogous to traditional fee-for-service pay- pop-up free food markets in response. Initially 200–300 ments) linked to visits, most FQHCs experienced significant people were reached each week; a partnership with UCLA declines in revenues. On the other hand, one health plan has enabled expansion to 2,000 meals a week. UCLA is con- executive observed, medical groups and IPAs that take tributing the labor, keeping food service workers employed capitated payments saw a financial "windfall" in 2020 as a while the campus is closed, and donors cover food costs; VFC result of reduced utilization by patients afraid of contracting handles distribution. COVID-19 in the clinics and offices. For the FQHCs, the finan- cial impacts demonstrated the need for payment reform to Limited Steps Toward Payment Reform move from PPS to value-based payment. Under the traditional payment model, FQHCs are paid for each patient encounter. This system offers little flexibility Growing Pains and constrains clinics' abilities to innovate, increase value As FQHCs have increased in size, scope, and sophistication, or efficiency, or improve patient outcomes. And the current some clinics have experienced growing pains. The issues prospective payment system (PPS) does not offer clinics an confronted by FQHCs include limited access to specialty care easy way to address complex patient needs that are beyond providers, limited staffing resources, and in some cases con- the reach of traditional health care, such as hunger or home- flicts with competing providers. lessness, which can worsen physical health outcomes. Moving to a value-based payment system has long been Limited Access to Specialty Care a topic of discussion among clinic leaders and policymakers For many FQHCs, ensuring adequate access to specialty care alike, but to date there has been little progress in shifting the for patients is a significant challenge. For example, respon- way clinics are compensated. The onset of the COVID-19 pan- dents in Los Angeles noted that many specialists will not demic, however, may have provided an additional impetus accept Medi-Cal patients, while others will treat Medi-Cal for clinics to once again look at payment reform alterna- patients but not at the Medi-Cal rate. "Medi-Cal rates are low, tives. A 2020 survey of FQHCs conducted by the California bureaucracy is high," noted one respondent. For participating Primary Care Association found that more than two-thirds of FQHCs, Health Care LA is responsible for recruiting specialists California Health Care Foundation www.chcf.org 15 and paying for specialty care, in partnership with L.A. Care with sites in Eureka (Humboldt County) and Crescent City and Health Net, which are ultimately responsible, under con- (Del Norte County). Sutter Coast Hospital in Crescent City has tract with the Department of Health Care Services (DHCS), emerged as a partner in this program, as well as in the RN-to- to ensure availability of specialty care. Los Angeles County BSN program; St. Joseph Hospital contributed $2 million to Department of Health Services (LACDHS) specialists care for Humboldt State University to help launch the RN-to-BSN county-assigned Medi-Cal enrollees and uninsured patients program. but not for Medi-Cal enrollees assigned to other networks, San Diego FQHCs have a long-standing focus on address- so Health Care LA recruits private specialists - with mixed ing workforce challenges, including operating physician success. Moreover, higher rates paid to specialists to ensure residency training programs. San Ysidro Health's family access and referrals to out-of-network specialists can create medicine residency program trains eight residents each financial challenges for the IPA. year. Given a shortage of geriatricians, the health center has To facilitate access to specialists, FQHCs rely on virtual partnered with Missouri-based A.T. Still University's Kirksville consultations with specialists to alleviate some demand. College of Osteopathic Medicine in a program to train stu- Respondents reported strategies ranging from hiring special- dents interested in geriatrics. In the program, 12 second-, ists to relying on a network of private specialists willing to see third-, and fourth-year medical students complete their Medi-Cal patients for free "as long as they don't have to deal community-based rotation at San Ysidro. San Ysidro also has with billing Medi-Cal." started a new internal medicine residency program, which is a three-year program with six students per year. Residents Staffing Challenges complete their hospital rotations at Scripps Mercy Hospital. Hiring enough qualified staff is one of the most commonly FHCSD also operates a family medicine residency program raised challenges associated with FQHC growth. Often for six physicians a year, partnering with Scripps Mercy, Rady salaries are lower than those paid by competing providers, Children's Hospital–San Diego, and UC San Diego Health for making retention an especially important issue. In response, hospital-based rotations. Between 40% and 50% of residents FQHCs have adopted various approaches. stay with FHCSD after completing training. In the Humboldt and Del Norte region, Open Door In the San Joaquin Valley, CalViva Health further supports started a family nurse practitioner (NP) residency program FQHC primary care recruitment efforts with grants to help in 2016 in collaboration with Community Health Center, Inc., repay physicians' student loans, helping to add 70 primary an FQHC system in Connecticut. The program, which has care providers in recent years. A similar program in the trained three to four NPs in each of the most recent cohorts Inland Empire run by the Inland Empire Health Plan has been of the 12-month program, is an outgrowth of Open Door's used by FQHCs to pay part of the salary for newly recruited participation in a nationwide best practices collaborative. physicians. Humboldt State University is reopening a program to enable FQHC staffing challenges are so severe that one leader registered nurses (RNs) to obtain a bachelor of science described the situation as a "workforce crisis," driven not only degree in nursing (BSN) - known as an RN-to-BSN program by FQHC growth but also by increasing competition with - with the first cohort of 25 students slated to begin the non-FQHC providers. These providers, including hospital two-year program in fall 2020. College of the Redwoods, the systems and larger health systems such as Kaiser, can report- local community college, offers a program for paramedics edly pay higher salaries. and licensed vocational nurses to become registered nurses, California Health Care Foundation www.chcf.org 16 Erosion of Independent Practices example, in 2020, Open Door worked to integrate two prac- As FQHCs have increased their presence in communities tices, one obstetrics and one obstetrics/gynecology; keeping throughout the state, many networks have absorbed inde- these clinicians in the community was viewed as essential to pendent physician practices. In many cases, these moves maintaining on-call capacity for obstetrics. have been welcomed by providers seeking a way to both While much of the expansion in FQHCs and accompany- maintain employment and provide care for their patients. ing decline in private practice Medi-Cal providers has been However, in at least some cases, the acceleration in FQHC welcomed, not all FQHC expansions have been viewed posi- growth has been perceived as coming at the expense of tively within local provider communities across the state. private practices. For example, in the Inland Empire, many physicians practice In many cases, FQHC expansion has been in response to a independently in solo or small practices. With a relative lack lack of interest or willingness on the part of private practices of FQHCs at the time of the ACA expansion, these practices to see Medi-Cal patients. In the Sacramento region, particu- provided the bulk of care to Medi-Cal patients. However, as larly in Sacramento County, for instance, FQHCs have taken the number of FQHCs expanded, these new health centers on a growing role in providing care for Medi-Cal patients increasingly competed with established independent phy- and uninsured people. For example, in 2017, Anthem Blue sician practices. One small medical group manager noted Cross shifted 10,000 Medi-Cal enrollees from Sutter Health having "to scrape and fight to stay in business" amid the to Sacramento Native American Health Center and other financial pressures and competition from FQHCs, which he FQHCs for primary care. In late 2018, UC Davis Medical Center viewed as accelerating the decline of independent practices. (UCDMC) was entangled in United HealthCare's withdrawal from participation as a Medi-Cal managed care plan, and Conflicts and Competition with Other Clinics some 4,000 Medi-Cal enrollees lost UC Davis as their primary As FQHCs have grown over the past several years, some care provider with many shifting to FQHCs. And in early 2019, competition with existing clinics has resulted in competitive Anthem Blue Cross ended its contracts with Sutter Health tensions in some areas. For example, in the San Joaquin Valley, for Medi-Cal and Medicare Advantage over payment issues, some tensions have emerged between local FQHCs and forcing some 12,000 enrollees to find new primary care pro- competing Rural Health Clinics (RHCs). RHCs are regulated viders; many of these patients landed with FQHCs as their by the Centers for Medicare & Medicaid Services and, unlike medical homes. FQHCs, are not required to treat uninsured patients. RHCs In the Humboldt and Del Norte region, where the erosion must be located in a Census-defined "non-urbanized area" as of physicians in independent practice has characterized the well as in a Health Resources and Services Administration– market for primary and specialty care, many factors have determined Health Professional Shortage Area (HPSA) or contributed: the retirement of a generation of local doctors; medically underserved area. higher costs of running a practice, such as the expense of elec- While only FQHCs receive supplemental federal grants tronic health records (EHRs); increased complexity of coding, to serve the uninsured, both FQHCs and RHCs receive cost- billing, and regulatory requirements; and low payment based reimbursements payments for Medi-Cal and Medicare rates. As local rural health clinics and private physician prac- patients. This rate-setting process can lead to highly diver- tices closed, Open Door has absorbed many clinicians who gent PPS rates among provider sites in the same counties. As were struggling to survive financially in private practice. For of 2018, in four of the five counties in the region, the typical California Health Care Foundation www.chcf.org 17 RHC was paid more per visit than the average FQHC, and the that is already well served by an existing FQHC in order to most highly compensated clinic in many counties - often continue to fuel expansion and revenue growth rather than by a substantial margin - is typically an RHC. merely to expand access to care. Interviewees stated that many hospitals in the region have acquired smaller local clinics and physician practices Issues to Track to incorporate into existing or new RHCs in order to expand ▶ Will FQHC expansion continue and improve access to their market reach and outpatient footprint. (This strategy care for lower-income people and those with Medi-Cal also reportedly supports hospitals' ability to integrate ser- coverage? vices along a continuum of care from inpatient to outpatient ▶ Will telehealth play a larger role going forward in expand- services and helps to expand access to care.) ing access to specialty care, especially in the more rural, According to some respondents interviewed for this less affluent areas of the state? study, hospital-affiliated RHCs may receive higher reimburse- ment because their payment rates incorporate the higher ▶ What are the next organizational developments for operating costs of the parent hospital. Indeed, DHCS data FQHCs as they assume more responsibility for Medi-Cal show that hospital-affiliated RHCs tend to receive higher enrollees? Will FQHCs increase collaboration? Can they rates than both other RHCs and FQHCs.18 A clinic respondent retain their community-based roots and close connec- noted that several RHCs use their higher PPS rates to contract tions with patients as the FQHCs grow and develop more with specialist physicians to provide services to Medi-Cal sophisticated capabilities? patients, because non-PPS rates were insufficient to attract ▶ Will FQHCs continue to grow as rapidly? As they become specialists to see Medi-Cal patients. more clinically integrated and offer more services, will Nevertheless, some FQHC respondents view RHCs as FQHCs increase health plan participation beyond Medi- direct competitors for Medi-Cal patients and lament RHCs' Cal? Will more FQHCs launch PACE models? "encroachment" into FQHCs' service areas. Some respon- dents noted that RHCs are "popping up close to FQHCs" in ▶ Will the movement toward behavioral health integration areas that are not very rural. Since Medi-Cal managed care continue? plans and their affiliated IPAs include both RHCs and FQHCs ▶ How will competitive tensions over patients and resources in their provider networks, Medi-Cal enrollees can select between FQHCs and RHCs be resolved? either as their primary care home or for specialty care, con- tributing to competitive tensions between FQHCs and RHCs. ▶ Will FQHCs move away from reliance on their traditional Furthermore, hospitals influence where patients seek follow- PPS payment model to more value-based payment up care upon discharge and often refer patients to their methodologies? affiliated RHCs, even if the patients' primary care home is at another FQHC or physician's office. Not only have conflicts emerged between FQHCs and RHCs, but some FQHC leaders have also noted the increasing competition among FQHCs in the same region. According to one observer, some FQHCs have expanded into territory California Health Care Foundation www.chcf.org 18 ENDNOTES 1. IPAs or Independent Practice Associations are also sometimes known 13. See note 1. as Independent Physician or Independent Provider Associations. 14. For more information about FQHCs in the San Joaquin Valley, please 2. The California Office of Statewide Health Planning and Development see Len Finocchio and James Paci, San Joaquin Valley: Despite releases FQHC data at the site level annually, but these datasets Poverty and Capacity Constraints, Health Care Access Improves, exclude clinic networks operated by county governments. As a CHCF, December 2020. result, the total growth in the number of clinic sites (i.e., including 15. California Primary Care Association (CPCA), "2020 Behavioral Health county-operated sites) cannot be determined, though county clinic Services Survey," CPCA (2020). networks have also expanded over this period. 16."Integrated Behavioral Health Division," County of Santa Clara 3. For more information about FQHCs in Los Angeles, please see Jill Behavioral Health Services, accessed January 4, 2021. Yegian and Katrina Connolly, Los Angeles: Vast and Varied Health Care Market Inches Toward Consolidation, California Health Care 17.Jen Joynt, Rebecca Catterson, Lucy Rabinowitz, Listening to Foundation (CHCF), January 2021. Californians with Low Incomes, CHCF, October 2020. 4.Throughout this report, the terms "patient visits" and "patient 18. FQHC and RHC Current Rates (PDF), DHCS, accessed August 1, 2020. encounters" are used interchangeably. 5.For more information about FQHCs in Humboldt and Del Norte Counties, please see Jill Yegian and Katrina Connolly, Humboldt and Del Norte Counties: Community Collaboration in the Face of Health Adversity, CHCF, October 2020. 6. Note that patients who visit more than one FQHC network may be double-counted in the data shown. In addition, between 7% and 11% of Medi-Cal patients did not receive any health care, according to the California Health Interview Survey. 7. For more information about FQHCs in the Inland Empire, please see Matthew Newman and James Paci, Inland Empire: Increasing Medi- Cal Coverage Spurs Safety-Net Growth, CHCF, December 2020. 8. For more information about FQHCs in the San Francisco Bay Area, please see Caroline Davis and Katrina Connolly, San Francisco Bay Area: Regional Health Systems Vie for Market Share, CHCF, April 2021. 9. FHCSD also is not a member of Health Partners of Southern California. 10.Integrated Health Partners also holds contracts with both Medi- Cal health plans in Riverside County (Molina Healthcare and Inland Empire Health Plan). 11. For more information about FQHCs in San Diego, please see Caroline Davis and Katrina Connolly, San Diego: Competing, Collaborating, and Forging Ahead with Population Health, CHCF, February 2021. 12. For more information about FQHCs in Sacramento, please see Len Finocchio and James Paci, Sacramento Area: Large Health Systems Grow in a Pricey and Tumultuous Market, CHCF, February 2021. California Health Care Foundation www.chcf.org 19 Background on Regional Markets Study During 2020 and the spring of 2021, researchers from Blue Sky Humboldt/Del Norte Consulting Group conducted interviews with health care leaders in seven regional health care markets across the state to study each market's local health care system. The purpose of the studies is to gain key insights into the organization, financing, and delivery of care in communities across California and over time. This is the fourth round of Sacramento Area these studies; the first set of regional reports was released in 2009. The seven markets included in the 2020 project - Humboldt/Del Norte, Inland Bay Area Empire, Los Angeles, Sacramento Area, San Diego, San Francisco Bay Area, and San Joaquin Valley - reflect a range of economic, demographic, care delivery, San Joaquin Valley and financing conditions in California. Blue Sky Consulting Group interviewed nearly 200 respondents for these studies. Respondents included executives from hospitals, physician organizations, community health centers, Medi-Cal managed Los Inland Empire Angeles care plans, and other local health care leaders. Interviews with commercial health plan executives and other respondents at the state level also informed this report. The onset of Orange San Diego the COVID-19 pandemic occurred as the research and data collection for the regional market study reports were already underway. While the authors sought to incorporate information about the early stages of the pandemic into the findings, the focus of the reports remains the structure and characteristics of the health care landscape in each of the studied regions. ▶ V ISIT OUR WEBSITE FOR THE ENTIRE ALMANAC REGIONAL MARKETS SERIES. ABOUT THE AUTHORS ABOUT THE FOUNDATION Matthew Newman, MPP, is principal and co-founder of Blue Sky The California Health Care Foundation is dedicated to advancing Consulting Group. James Paci, JD, MPP, is a policy analyst with Blue meaningful, measurable improvements in the way the health care Sky Consulting Group. Caroline Davis, MPP, is president of Davis Health delivery system provides care to the people of California, particularly Strategies LLC and a Blue Sky Consulting Group affiliate. Len Finocchio, those with low incomes and those whose needs are not well served by DrPH, is principal consultant at the Blue Sky Consulting Group. Jill Yegian, the status quo. We work to ensure that people have access to the care PhD, is principal of Yegian Health Insights and a Blue Sky Consulting they need, when they need it, at a price they can afford. CHCF informs Group affiliate. Katrina Connolly, PhD, is a senior consultant with Blue policymakers and industry leaders, invests in ideas and innovations, Sky Consulting Group. The Blue Sky Consulting Group helps government and connects with changemakers to create a more responsive, patient- agencies, nonprofit organizations, foundations, and private-sector clients centered health care system. tackle complex policy issues with nonpartisan analytical tools and California Health Care Almanac is an online clearinghouse for key data methods. and analysis examining the state's health care system. ACKNOWLEDGMENTS The authors wish to thank all of the respondents who graciously shared their time and expertise to help us understand key aspects of the health care markets in each region and the role that FQHCs play across the state.