Rural Health Clinics

Contrary to its original purpose, the rural health clinic program is generally not focused on serving Medicare and Medicaid populations having difficulty obtaining primary care in isolated rural areas. Rather, the additional Medicare and Medicaid payments--estimated at nearly $300 million for 1996--provided to the rural health clinics increasingly benefit well-staffed, financially viable clinics in suburban locales that already have extensive health care delivery systems. Most rural health clinics are conversions of physicians' existing 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 the care provided to underserved populations. Nevertheless, rural health clinic providers receive extraordinarily high reimbursement for each visit by a Medicare or Medicaid patient--as much as $214 for each visit at one clinic GAO surveyed compared with the average reimbursement of $37 received by providers on the Medicare fee schedule. Contributing to this problem are the program's broad eligibility criteria and the requirement that the Health Care Financing Administration reimburse all rural health clinics at cost, even if they are already financially viable. One hospital-owned clinic claimed overhead costs that were 120 percent of the direct costs of running the clinic, and an independent clinic claimed $270,000 in compensation for each of its four staff physicians.

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.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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