What is a Federally Funded Health Care Program? Understanding FQHCs and the Health Center Program

Federally funded health care programs play a crucial role in the United States healthcare system, ensuring access to essential medical services for millions of Americans, particularly in underserved communities. Among these programs, the Health Center Program, primarily executed through Federally Qualified Health Centers (FQHCs), stands out as a cornerstone of primary care access. If you’re seeking information about what constitutes a federally funded health care program, understanding FQHCs and the Health Center Program is essential.

Federally Qualified Health Centers are community-based health care providers that receive federal funding to offer primary care services in underserved areas. These areas can be geographically isolated, like rural communities, or populations facing barriers to healthcare, such as those experiencing homelessness or agricultural workers. To find an FQHC in your area, especially in rural locations, you can utilize the Health Resources and Services Administration’s (HRSA) Find a Health Center tool, searching by address, state, county, or ZIP code.

The Role of Federally Qualified Health Centers (FQHCs) as Safety Net Providers

FQHCs are vital safety-net providers, especially in rural America. They operate as outpatient clinics and are specifically designated to qualify for enhanced reimbursement systems under Medicare and Medicaid. This designation includes Health Center Program award recipients, Health Center Program look-alikes, and certain outpatient clinics linked to tribal organizations.

According to the HRSA Bureau of Primary Health Care (BPHC), HRSA-funded health centers served over 9.7 million rural residents in 2023. The core principles of these health centers, further detailed in What is a Health Center?, are built around:

Comprehensive and High-Quality Care: Providing a wide range of primary care and preventive services, irrespective of a patient’s financial capacity.
Patient-Centered Approach: Utilizing interdisciplinary teams and patient-centric models to deliver holistic care.
Care Coordination and Accessibility: Offering care coordination and other support services to improve access to healthcare.
Community Collaboration: Working with other providers and community programs to enhance access to care and resources.
Community Governance: Being community-based and patient-directed, with a governing board that has a patient majority.

Further details about the operational and compliance requirements for these centers can be found in HRSA’s Health Center Program Compliance Manual.

Decoding Health Center Definitions: HRSA Program, FQHC, and Health Center

Navigating the terminology around health centers can be confusing due to overlapping terms. Here’s a breakdown to clarify the distinctions:

HRSA Health Center Program: This refers to the overarching federal program administered by HRSA.
- HRSA-Funded Health Center Program Award Recipient: These clinics receive direct grant funding from HRSA under Section 330 of the Public Health Service (PHS) Act. These funds support comprehensive primary care services for underserved communities and specific vulnerable populations like migrant workers, homeless individuals, and public housing residents.
- Health Center Program Look-Alike: These are clinics recognized by HRSA as meeting all Health Center Program requirements but typically do not receive direct grant funding. They operate under the same standards and often serve similar populations.
Federally Qualified Health Center (FQHC): This designation is granted by the Centers for Medicare & Medicaid Services (CMS) to both HRSA Health Center Program award recipients and look-alikes. FQHC status allows these centers to receive specific reimbursement from Medicare under the Prospective Payment System (PPS) and from Medicaid, either through PPS or state-approved Alternative Payment Methodologies (APMs). Tribal health organizations’ outpatient clinics can also qualify as FQHCs, although specific rules may apply.
Health Center: This is a general term that doesn’t specify the exact federal designation. It could refer to an HRSA-funded Health Center Program award recipient, a health center look-alike, or an FQHC.

Throughout this discussion, “health centers” will be used broadly to encompass HRSA-funded Health Center Program award recipients, look-alikes, and FQHCs, unless specified otherwise for clarity.

For those interested in establishing a health center, resources like Become a Health Center, So You Want to Start a Health Center?, and the Health Center 101 Learning Bundle offer valuable guidance. The Health Center Resource Clearinghouse also provides free resources and technical assistance for health center operations.

Frequently Asked Questions about Federally Funded Health Care Programs (FQHCs)

To further clarify what a federally funded health care program entails in the context of FQHCs, let’s address some common questions:

What are the Benefits of FQHC Status?

Certification as an FQHC by CMS unlocks several significant benefits for health centers, enhancing their financial stability and service capacity. These benefits are crucial for sustaining operations and expanding services in underserved areas, making them a vital component of federally funded health care program advantages.

What is the Health Center Program?

The Health Center Program, as defined by Section 330 of the Public Health Service (PHS) Act, is a federal initiative providing funding opportunities for organizations dedicated to delivering healthcare services to underserved populations. This program is the backbone of federally funded health care programs aimed at primary care. For details on the advantages of participating in this program, see What are the benefits of being a Health Center Program award recipient or look-alike?.

The HRSA Bureau of Primary Health Care actively supports the Health Center Program by offering both new and continued funding opportunities. These opportunities are open to public and private nonprofit organizations that meet the stringent Health Center Program Requirements. Award recipients commit to serving the general community within their designated service area and/or specific underserved groups mandated by Section 330, such as agricultural workers, individuals experiencing homelessness, and public housing residents, regardless of their ability to pay.

For a comprehensive understanding of Section 330 of the Public Health Service Act, refer to the full text at 42 U.S.C § 254b.

Detailed information about the Health Center Program Look-Alike designation, including requirements and application procedures, is available in HRSA’s What is a Health Center Program Look-Alike?. HRSA also provides Look-Alike Initial Designation Technical Assistance with application instructions and support resources.

What are the Benefits of Being a Health Center Program Award Recipient or Look-Alike?

Participating in the Health Center Program, either as an award recipient or a look-alike, provides numerous benefits that bolster the operational and financial capacity of health centers. These advantages are central to understanding the value proposition of federally funded health care programs for participating organizations.

Health Center Program award recipients and look-alikes are eligible for:

FQHC Prospective Payment System (PPS) Reimbursement: Access to the FQHC PPS for services provided to Medicare and Medicaid beneficiaries, enhancing revenue streams.
340B Drug Pricing Program Eligibility: The ability to purchase prescription and non-prescription medications at significantly reduced costs through the 340B Drug Pricing Program, allowing for more affordable patient care.
Vaccines for Children Program Access: Participation in the Vaccines for Children Program, ensuring access to essential vaccines for children at no cost to eligible families.
Automatic Health Professional Shortage Area (HPSA) Designation: Automatic designation as a HPSA, facilitating eligibility for National Health Service Corps (NHSC) personnel and J-1 Visa physician placement. Health centers must still finalize the NHSC site agreement. More details on auto-approved NHSC site status are available here.
HRSA-Supported Training and Technical Assistance: Access to training and technical assistance resources provided by HRSA to improve operations and service delivery.

Award recipients of the Health Center Program also receive additional benefits:

Federal Grant Funding: Direct financial support through Section 330 of the Public Health Service (PHS) Act grants.
Federal Tort Claims Act (FTCA) Medical Malpractice Coverage: Potential medical malpractice coverage for the health center, its employees, and eligible contractors under the Federal Tort Claims Act (FTCA). Award recipients must apply and meet HRSA requirements for deemed status to receive this coverage. Further information is available at HRSA’s Health Center Program Federal Tort Claims Act resource. Note that FTCA coverage is exclusive to Health Center Program award recipients and not extended to look-alikes.
Loan Guarantees for Capital Improvements: Eligibility for loan guarantees to support capital projects and infrastructure development.

The following table summarizes the benefits for both Health Program Award Recipients and Look-Alikes:

Benefit	Health Center Program Awardee	Health Center Look-Alike
HRSA Health Center Program Grant Funding	Yes	No
FTCA Medical Malpractice Coverage	Yes	No
Loan Guarantee Program	Yes	No
FQHC Prospective Payment System Reimbursement	Yes	Yes
340B Drug Pricing Program Eligibility	Yes	Yes
Access to the Vaccines for Children Program	Yes	Yes
Recruitment and Retention Assistance for Primary Care through the National Health Service Corps (NHSC)	Yes	Yes
HRSA-supported Training and Technical Assistance	Yes	Yes
Source: About the Health Center Program

Alt Text: Comparison table of benefits for Health Center Program Awardees and Health Center Look-Alikes, detailing access to grant funding, malpractice coverage, loan guarantees, payment systems, drug pricing programs, vaccine programs, NHSC recruitment, and HRSA training.

How Does a Health Center Become Certified as an FQHC?

To achieve FQHC certification, organizations must first be recognized as either a Health Center Program award recipient or a Health Center Program look-alike. After obtaining HRSA funding or look-alike designation, health centers can then apply to CMS for Medicare FQHC certification and to their respective state Medicaid offices for Medicaid FQHC certification. Tribal organizations have a streamlined process and can apply directly to CMS for FQHC certification without needing to be a Health Center Program participant first. Each health center site is required to enroll separately to receive FQHC certification and Medicare reimbursement. Prospective enrollees can consult Information on Medicare Participation, Federally Qualified Health Center for detailed guidance.

Further information on certification is available in the State Operations Manual Chapter 2, section 2826. For specific details on Medicare enrollment for FQHCs, refer to Medicare Program Integrity Manual Chapter 10, section 10.2.1.4 – Federally Qualified Health Centers.

Where Can I Find Statistics on Health Centers?

HRSA-supported health centers are mandated to annually report data on a comprehensive set of measures through the Uniform Data System (UDS). This data includes patient demographics, services provided, patient utilization, clinical outcomes, staffing, and financial status. Publicly accessible UDS data is available on data.HRSA.gov.

The data.HRSA.gov site offers a wealth of resources for data analysis and reporting on health centers.

The National Association of Community Health Centers also provides data resources, offering another avenue for statistical information.

Additionally, the resources section on Federally Qualified Health Centers (FQHCs) can be filtered by “Statistics and Data” to find relevant data from various organizations.

How Do I Apply for a Health Center Program Grant?

Applying for Health Center Program funding is a detailed process that demands considerable planning and grant writing expertise. Breaking down the development process into manageable steps is advisable. Key aspects of developing a grant proposal for a Section 330 PHS Act Health Center Program are outlined in So You Want to Start a Health Center? and include:

Compliance Readiness: Ensuring the organization can meet all compliance requirements within the stipulated timeframe for new grantees. Refer to the Health Center Program Compliance Manual.
Service Area Eligibility: Confirming that the intended service location or population qualifies as a Medically Underserved Area (MUA) or Medically Underserved Population (MUP). The MUA Find tool can assist in this determination.
Needs Assessment: Evaluating the necessity for health services in the proposed service area. Section 3 of So You Want to Start a Health Center? offers guidance on conducting a needs assessment (page 11).
Community Support: Establishing and maintaining community support by involving local members, healthcare providers, and stakeholders in the planning and implementation phases.
Location Suitability: Identifying an appropriate location for the health center. Section 4 of So You Want to Start a Health Center? addresses physical space considerations (page 15).
Governing Board Establishment: Forming and engaging a patient-majority governing board that adheres to federal requirements, as detailed in the Health Center Program Compliance Manual.
Staffing and Employment Policies: Defining staffing needs and establishing employment practices, including strategies for provider recruitment and retention.
Business Plan Development: Creating a comprehensive business plan that outlines the target population, organizational structure, projected service demand, and anticipated revenues and expenses.
Sliding Fee Discount Program: Developing a Sliding Fee Discount Program and other mechanisms to ensure services are accessible regardless of ability to pay.

Engaging with your regional or state Primary Care Association (PCA) for technical assistance is highly recommended. State PCAs, funded by HRSA, offer training and support to health centers and can aid in health center development within their respective areas.

Specific details on Section 330 award application procedures can be found on technical assistance sites for New Access Points or Service Area Competition.

Note that applications for New Access Points or Service Area Competition (Section 330 federal awards) are only accepted when HRSA announces funding availability. However, Health Center Program Look-Alike Initial Designation applications are accepted on a continuous basis.

Are Health Center Program Awards Granted on a Competitive Basis?

Yes, Health Center Program awards are competitive. HRSA announces funding opportunities for New Access Points (NAPs) based on federal appropriations. NAPs can support new sites as satellites of existing Section 330 health centers or as entirely new health center organizations, including look-alikes. Additionally, every three years, existing Health Center Program award recipients must re-apply for funding in a Service Area Competition (SAC). While incumbents can re-apply, other organizations can also compete for the Health Center Program award in that service area, making SAC a competitive funding opportunity.

Which Special Populations Can Be Served by Healthcare Organizations Applying for Funding Through Section 330 of the Public Health Service Act?

Section 330 of the Public Health Service Act allows healthcare organizations to apply for funding specifically to serve statutorily defined special populations:

Migratory and Seasonal Agricultural Worker Health Centers: These centers provide comprehensive and culturally sensitive primary health services to migratory and seasonal agricultural workers and their families, including disease prevention and occupational health and safety programs.
Healthcare for the Homeless Program: This program targets individuals at risk of or currently experiencing homelessness, including those in shelters or temporary housing. Services include comprehensive healthcare, substance abuse treatment, and mental health services.
Public Housing Primary Care Health Centers: These centers offer comprehensive primary care to residents of public housing and those in immediately accessible areas, often providing services directly on public housing premises or nearby.

What are School-Based Health Centers and How Would I Set One Up?

School-based health centers (SBHCs), also known as School-Based Service Sites (SBSS), deliver primary care and other health services in or near schools. They are designed to overcome scheduling and transportation barriers for students, particularly in communities with high rates of free or reduced-price lunches. SBHCs offer a range of services including behavioral, oral, mental, and reproductive healthcare, vision services, nutrition education, and health promotion, as detailed in Twenty Years of School-Based Health Care Growth and Expansion.

Staffing typically includes at least a primary care provider and often a behavioral health professional. Many SBHCs also employ dental providers, health educators, dietitians, outreach coordinators, and vision care providers, according to the Findings from the 2022 National Census of School-Based Health Centers.

It is important to note that SBHCs are distinct from the Health Center Program, although there is significant overlap. A 2022 HRSA resource indicates that 42% of health centers provided school-based services in 2021, and Findings from the 2022 National Census of School-Based Health Centers reports that 63% of surveyed SBHCs in 2022 were sponsored by an FQHC. SBHCs can also be sponsored by local health departments, hospitals, or school systems. Telehealth is increasingly integrated, with about 90% of SBHCs offering some telehealth services in 2021-2022, a significant increase from 19% in 2016-2017. Approximately 73% offered primary care via both in-person and telehealth in 2021-2022. Research also suggests SBHCs are effective in reaching American Indian and Alaskan Native communities (The Evidence on School-Based Health Centers: A Review).

Setting up an SBHC involves several key steps, for which various organizations offer planning guides and tools. General tips include:

Community Involvement: Engage the community in planning, possibly through a School Health Advisory Committee comprising school leaders, nurses, students, and parents.
Needs Assessment: Conduct a thorough needs assessment to identify the target audience and their unmet health needs.
Organizational Structure: Define the SBHC’s organizational framework, including services, location, staffing, and integration with the school. School-Based Health Centers: A Funder’s View of Effective Grant Making recommends at least a primary care provider and front office staff, with space for waiting, exam rooms, and an office.
Funding Plan: Develop a funding strategy, considering foundation grants for start-up costs, Medicaid/CHIP billing for ongoing expenses, and potentially Section 330 funding, Title X, or state funding. Secure parent/guardian consent for student enrollment.

Helpful resources for starting an SBHC include:

For further information, see How do school-based health centers and community schools impact population health in rural areas? in the Rural Schools and Health topic guide, which also discusses SBHC collaboration with school nurses.

Can a For-Profit Clinic Be a Health Center?

No, health centers must be either public entities or private nonprofit organizations. For-profit clinics do not qualify as health centers under the Health Center Program.

Is a Board of Directors Required?

Yes, a governing board is mandatory for health centers. This board ensures community-based governance and responsiveness to local healthcare needs. A majority (at least 51%) of board members must be health center patients and demographically representative of the served population. Remaining members should represent the community and bring relevant expertise. Health centers managed by American Indian tribes or tribal organizations are exempt from specific board composition requirements. Chapter 20 of the Health Center Program Compliance Manual, Board Composition, provides detailed information. The Health Center Resource Clearinghouse also offers governance-related resources.

Are There Location Requirements for Health Centers?

Health centers receiving Health Center Program award funding must adhere to service area location requirements specified in the funding opportunity notice. They must be located in or serve a designated Medically Underserved Area (MUA) or Population (MUP). Exceptions exist for Migrant and Seasonal Agricultural Worker Health Centers, Healthcare for the Homeless programs, and Public Housing Primary Care Programs, which are not subject to the MUA/MUP restriction. Health centers can be situated in both rural and urban settings.

Are There Specific Staffing Requirements for Health Centers?

No, there are no prescribed staffing mixes for health centers. However, centers must maintain a core staff capable of delivering required and additional health services, tailored to community needs. Chapter 5 of the Health Center Program Compliance Manual, Clinical Staffing, offers further details on clinical staffing and compliance.

What Types of Services Do Health Centers Provide?

Health centers are mandated to offer comprehensive primary care and preventive health services across all age groups. Essential enabling services, such as case management and transportation, must also be provided. Examples of required clinical and enabling services, delivered directly or via formal agreements, include:

Preventive dental services
Screenings
Immunizations
Well-child visits
Obstetrics
Pharmaceutical services
Translation services for limited English-speaking patients
Health education

For a comprehensive list, consult HRSA’s Health Center Program Compliance Manual.

Are There Minimum Hours That a Health Center Must Be Open?

There are no set minimum operating hours for health centers. However, on an organizational level, health centers must ensure service availability at times and locations that meet the needs of their patient population and must document their hours in their project scope (Form 5B).

Certain benefits or funding opportunities may have specific hour requirements. For example, FTCA coverage for licensed healthcare providers necessitates being open 32.5 hours per week. State Medicaid agencies, CMS, and private insurers may also have their own policies regarding operational hours. Health centers are responsible for complying with all requirements of programs they participate in.

Is a Sliding Fee Scale Required?

Yes, health centers must implement a sliding fee discount program. They can offer full discounts or nominal charges for individuals and families at or below 100% of the Federal Poverty Guidelines (FPG). Partial discounts are required for those between 100% and 200% FPG, based on family size and income. No discounts are mandated for incomes above 200% FPG. Chapter 9 of the Health Center Program Compliance Manual, Sliding Fee Discount Program, provides detailed guidance.

Must Health Centers Accept All Patients, Regardless of Their Ability to Pay?

Yes. This is a fundamental requirement of the Health Center Program. Health centers serve as safety nets, ensuring access to care for all, regardless of financial status.

Are There Special Programs to Assist Health Centers in Attracting and Retaining Healthcare Providers to Their Organization?

Yes, several federal programs support health centers in recruiting and retaining healthcare professionals, including the National Health Service Corps (NHSC) and loan repayment programs. These initiatives are crucial for maintaining adequate staffing in underserved areas.

Can FQHCs Be Reimbursed by Medicare for Telehealth Services?

Historically, FQHCs and Rural Health Clinics (RHCs) could only bill Medicare for telehealth as originating sites—locations where patients receive telehealth services from providers at a distant site.

However, the COVID-19 pandemic spurred changes. The CARES Act of March 2020 temporarily allowed FQHCs and RHCs to serve as distant telehealth sites for Medicare patients at any location, including their homes. The CY 2022 Medicare Physician Fee Schedule Final Rule made permanent the Medicare reimbursement for mental health telehealth visits using real-time audio-visual and audio-only technology. Since January 1, 2022, RHCs and FQHCs are reimbursed for these services at rates equivalent to in-person mental health services. The American Relief Act, 2025 extended distant site telehealth services for non-behavioral health visits through March 31, 2025. The CY 2025 Medicare Physician Fee Schedule Final Rule permanently redefined “interactive telecommunication system” to include audio-only services for all telehealth visits, provided the practitioner’s site can support both audio and video but the patient cannot or declines to use video.

Federally Qualified Health Centers Financial and Operational Performance Analysis 2019-2022 indicates that rural FQHCs conducted 4 million telehealth visits in 2022, representing 10% of all patient visits at these facilities.

For more information on FQHC telehealth billing and payment, see telehealth.HHS.gov’s Billing Medicare as a Safety-Net Provider and CMS Medicare Learning Network resources, Federally Qualified Health Center and Telehealth Services.

What Strategies Have Rural Health Centers Used to Provide Behavioral Health and Dental Health Services to Meet the Needs of Their Patient Population?

Rural health centers employ diverse strategies to deliver behavioral and dental health services, including integrated care models, mobile dental units, telehealth for behavioral health, and partnerships with local organizations. These approaches aim to overcome geographical and resource barriers.

For additional resources, the Health Center Resource Clearinghouse offers a priority topic section on Behavioral Health.

What Do We Know About the Financial and Operational Performance of Health Centers?

The 2024 report, Federally Qualified Health Centers Financial and Operational Performance Analysis 2019-2022, by Capital Link, a HRSA National Training and Technical Assistance Partner (NTTAP), analyzes the financial and operational performance of both urban and rural FQHCs. It examines patient and payer mixes, revenue streams, financial performance, and quality of care. The report highlights a decline in operating margins for both rural and urban FQHCs between 2021 and 2022, following increases from 2019 to 2021 due to COVID-19 relief funding. However, rural FQHCs consistently maintained higher margins than urban facilities during this period. In 2022, median personnel expenses accounted for 66.8% of operating budgets at rural health centers, compared to 69.1% at urban centers. Rural health centers also receive a lower median percentage of patient revenue from Medicaid (46% vs. 70% for urban centers) but a higher percentage from uninsured patients, Medicare, and private insurance.

The COVID-19 pandemic significantly impacted rural FQHC finances. Financial Impact of COVID-19 on Rural Federally Qualified Health Centers estimates $1.4 billion in COVID-19 related expenses and $1.7 billion in lost revenue for rural FQHCs between April 2020 and June 2021. Despite reduced patient service revenues, rural FQHCs saw increased operating revenue from grants and contracts (from 5% in 2019 to 27% in 2021), which helped stabilize operations, as noted in Federally Qualified Health Centers Financial and Operational Performance Analysis 2019-2022.

What are the Medicare Administrative Contractors (MACs), and What is Their Role in Administering Medicare Part A and Part B for Health Centers?

Medicare Administrative Contractors (MACs), selected by CMS, process Medicare Part A and Part B claims. They are the primary liaison between the Medicare Fee-For-Service program and Medicare-enrolled healthcare providers, including FQHC affiliates. MACs support FQHCs through provider enrollment, Medicare billing education, reimbursement processing, cost report auditing, initial claims appeals management, and establishing local coverage determinations (LCDs). Organizations can enroll as FQHCs in Medicare via the online Provider Enrollment, Chain and Ownership System (PECOS). For more information, see the CMS overview of Medicare Administrative Contractors. To find your state’s MAC, visit MAC Websites, Secure Internet Portals, & Electronic Mailing Lists.

Can Another Healthcare Organization, Such as a Critical Access Hospital, Operate an FQHC?

Generally, no. However, a city or county-owned public hospital or a 501(c)(3) Critical Access Hospital (CAH) might operate an FQHC if its governing body meets Health Center Program requirements, all other eligibility criteria are met, and a successful program application is made.

What is the Difference Between a Federally Qualified Health Center (FQHC) and a Rural Health Clinic (RHC)?

While both FQHCs and RHCs serve underserved populations with primary care, key differences exist. RHCs have specific staffing requirements, are not mandated to use a sliding fee scale unless NHSC-approved, and receive an all-inclusive rate (AIR) payment per visit. For a detailed comparison, see Module 1 – An Introduction to the Rural Health Clinic Program from the National Organization of State Offices of Rural Health.

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