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MPCA outlines phased Medicaid alternative payment methodology for Michigan health centers
Summary
The Michigan Primary Care Association told the House Appropriations Subcommittee that a planned alternative payment methodology would shift some Medicaid reimbursement for federally qualified health centers from per‑visit rates to predictable monthly payments for assigned patients, enabling team‑based care while including performance guardrails.
The Michigan Primary Care Association told the House Appropriations Subcommittee on Medicaid and Behavioral Health it is designing an alternative payment methodology (APM) for federally qualified health centers (FQHCs) that would change how Medicaid reimburses community health centers, enabling more team‑based and population‑focused care.
Philip Bergquist, CEO of the Michigan Primary Care Association (MPCA), said the APM work responds to limits in the current prospective payment system (PPS), which he said was established in federal law and adopted by Michigan in 2001 and now often fails to match the current cost and team‑based delivery of care. Bergquist said health centers save the Medicaid program money—citing a Michigan State University analysis that health centers save about $612 per Medicaid member annually and that statewide savings total roughly $170 million per year compared with other Medicaid providers.
What the APM would do: Bergquist described converting part of per‑visit Medicaid payments into a predictable monthly (partial capitation) payment for patients assigned to a health center, allowing centers greater flexibility to deploy nurses, community health workers, nutritionists and others as part of a care team. He said the model is designed with guardrails: health centers must not receive less total Medicaid reimbursement under the APM than under the traditional PPS, and the APM includes performance measures, monitoring of assignment and corrective‑action steps if centers do not meet outreach or utilization metrics.
Funding and timetable: testimony said the fiscal‑year 2024 Michigan budget authorized the APM design and provided $6 million in one‑time funding to start implementation planning—about $2 million to the Department of Health and Human Services (DHHS) to adapt state systems and about $4 million to the first health centers that will test the model. MPCA plans a phased rollout beginning in 2026 with an initial cohort of about five implementing health centers and five additional centers in 2027. The association requested additional one‑time funds to scale the transition to about 75% of Michigan health centers (MPCA estimated this phased scale would cost roughly $18 million; bringing all centers on board was estimated at about $25 million based on MPCA analysis).
Policy tradeoffs and oversight: Bergquist emphasized the APM is about “how” health centers are paid, not a direct increase in Medicaid rates; he said a prior budget action closed roughly one‑third of an estimated per‑visit funding gap, but the APM design itself does not increase the overall Medicaid payment envelope. Committee members asked about assignment rules and payment when assigned patients do not appear for visits; Bergquist said health centers would receive the partial capitation for assigned patients, but assignment comes with outreach responsibilities and performance measures such as an annual visit rate. He said corrective actions and the ability to exit the APM and revert to traditional PPS exist if a health center fails to meet expectations.
Operational requirements: MPCA and Bergquist described transition costs for participating centers including training staff, redesigning care processes and updating electronic health records and practice management systems. Bergquist said health centers estimate technology and redesign costs could be about one‑quarter of the per‑center transition budget and that the $6 million start‑up funds will primarily support initial implementers and DHHS readiness. He said the MPCA’s appropriations request for scale‑up would likewise be one‑time funding to support transition work rather than a recurring Medicaid rate increase.
Scope: Bergquist noted that not all services would move to the APM; school‑based services, dental care and many urgent‑care services that serve people who are not assigned to a health center would likely remain under encounter‑based reimbursement.
Ending: The committee followed with questions about monitoring, assignment accuracy, how outreach is conducted and whether mental‑health services in schools would be affected; Bergquist said assignment, performance metrics and corrective steps are central to preventing payment for unmanaged populations and that the design aims to be budget‑neutral to Medicaid while offering flexibility to improve care and reduce inpatient and ED utilization.
