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FQHCs and Hospitals Part II: Follow the Money

Posted Aug 26 2008 4:08pm
I have previously pondered why federally qualified health centers (FQHC), designed to provide low-cost high-quality care to underserved individuals and rural areas, don't work with community hospitals more often. I thought their missions would mesh and their natural interests would be aligned. I was wrong.

I recently has some insight into the situation in rural communities. There exists a federal designation known as the critical acces hospital (CAH) for small communities without another hospital center within 25 miles. There are multiple other criteria to be a CAH, but this is probably the most important. Such hospitals exist in a competitive vaccuum and they exist in a commnities where health would suffer significantly due to the lack of access associated with living in a rural agrariran community. We already know that farmers and farmowrkers are the most dangerous occupations in the US. If the hospital were to go under, the communities would face significant hardship.

CAHs are allowed to charge medicare their cost, whatever it may be, plus a reasonable margin. Cost plus reimbursement is a rarity in the US today, and leads to escalating charges for the most basic procedures. Mammographies and colonoscopies are charged at three times the rate the local FQHC can do it.

If the FQHC delivers cost-efficient health care, patients would chose not to go to the local CAH. This jeopardizes the CAH's existence, which in turn is a liability for the FQHC, since physicians would be unable to hospitalize their own patients in their own community.

Partnerships are difficult to establish when the regulatory landscape produces a disincentive to competition and innovation.
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