COVID-19 Prompts Expanded Telehealth Reimbursement for FQHCs and RHCs

COVID-19 Update

As the COVID-19 pandemic continues to create barriers to in-person care, there has been increased focus on enabling the delivery of healthcare services through telehealth. Congress, the Centers for Medicare and Medicaid Services (CMS), and state Medicaid programs have identified reimbursement for telehealth and telephonic services provided by federally qualified health centers (FQHCs) and rural health clinics (RHCs) as a high priority, recognizing that FQHCs and RHCs are critical providers for vulnerable populations.1 As a result, since March, there has been substantial new flexibility in Medicare and state Medicaid policy related to telehealth and telephonic services at FQHCs and RHCs, promoting continued access to an important source of care during the COVID-19 Public Health Emergency (PHE). Concurrently, increased access to telehealth and telephonic services among Medicare and Medicaid beneficiaries has provided critical reimbursement to FQHCs and RHCs during the pandemic, helping them remain sustainable as in-person visits have been curtailed.


Three major changes in Medicare policy have expanded telehealth options for FQHCs and RHCs in recent months. First, Congress temporarily eliminated a long-standing federal statutory prohibition on FQHCs and RHCs acting as telehealth distant sites2 for Medicare beneficiaries.3 Previously, an FQHC or RHC could not bill if it provided services to a patient who was not physically present at the facility. With this temporary change, codified in Section 3704 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, FQHCs and RHCs can serve as distant sites for the duration of the PHE, meaning that they can bill for telehealth services—provided through two-way, real-time video communications—permitted under the Medicare Physician Fee Schedule.

Second, under Section 1135 authority,4 CMS has temporarily permitted a broad range of providers, including FQHCs and RHCs, to obtain Medicare reimbursement for certain services described under the Medicare Physician Fee Schedule that are delivered telephonically (i.e., not delivered by two-way, real-time video communications).5 Previously, FQHCs and RHCs could not bill for telephonic visits and could only obtain Medicare reimbursement for virtual communication services, defined as “brief discussions with the RHC or FQHC practitioner to determine if a visit is necessary”—services that would not take the place of a regular, in-person visit.6

Finally, CMS provided new guidance on how FQHCs and RHCs will be paid for telehealth, telephonic and virtual communication services during the PHE.

  • Telehealth services. For face-to-face visits, Medicare fee-for-service typically pays the prospective payment system (PPS) rate to FQHCs and the all-inclusive rate (AIR) to RHCs, which are bundled encounter rates adjusted for geographic location. For telehealth visits, the CARES Act and subsequent guidance provide that Medicare will pay FQHCs and RHCs $92.03 per visit for services approved under the Medicare Physician Fee Schedule. This amount equals the weighted average for all telehealth services on the Medicare Physician Fee Schedule, adjusted for utilization.7
  • Telephonic services. For permitted telephonic services, CMS is paying at parity with telehealth services.
  • Virtual communication services. CMS has increased the rate for virtual communication services from $13.53 to $24.76.


In contrast to Medicare policy, state Medicaid programs have historically had flexibility as to whether to permit FQHCs and RHCs to act as telehealth distant sites, and a number of states did so prior to COVID-19. However, growing interest in increasing access to telehealth services at FQHCs and RHCs related to COVID-19 prompted CMS to offer clarifying guidance on payment. In responses to frequently asked questions, CMS clarified that states must pay FQHCs and RHCs using the Medicaid PPS methodology or an equivalent alternative payment methodology (APM) when they provide a service via telehealth that is within the FQHC or RHC benefit. If a state uses an APM, payments must be at least the amount of the PPS rate.8

CMS is not requiring states to pay the PPS rate for telephonic services, and as a result, states vary in whether they have payment parity for telehealth and telephonic services. Based on a scan of state guidance released to date around FQHC and RHC billing for telehealth and telephonic services, Manatt found that as of May 27, 27 states explicitly permit billing at the PPS rate or the equivalent for telephonic services,9 and seven states plus the District of Columbia do not permit billing at the PPS rate or the equivalent for telephonic services. The other 16 states have not released clear guidance on whether they permit FQHCs and RHCs to bill for telephonic services at the PPS rate or the equivalent.

Moving Forward

Since the start of the COVID-19 pandemic, there have been rapid expansions in access to telehealth and telephonic services provided by FQHCs and RHCs. Stakeholders will be watching the extent to which new flexibilities effectuated during the PHE continue after the emergency period expires. In Medicare, Congress would need to pass legislation for FQHCs and RHCs to continue to act as telehealth distant sites and receive reimbursement for telephonic services. For Medicaid, states will face decisions on whether they want to make recent expansions in reimbursement for telehealth and telephonic services permanent. We expect that in both Medicare and Medicaid, coverage will ultimately be more expansive than it was pre-pandemic, but less generous than it is today.

50-State Plus DC Findings on Medicaid Billing Rate for Telephonic Services at FQHCs and RHCs

State Released Guidance on FQHCs and RHCs Billing Medicaid for Telehealth/Telephonic Services During COVID-19 Pandemic? Allow Billing PPS Rate (or Equivalent APM) for Telephonic Services?
Total “Yes” 47 27
Total “No” 4 8
Total “N/A” --- 16

N/A = specific guidance is not available or is unclear

Note: In some cases, states are only permitting telephonic services at the PPS rate if delivery via telehealth (audio/visual) is not available or feasible.

Complete state-by-state details are available on Manatt’s subscription service, Insights@ManattHealth. For more information, please contact Barret Jefferds at

1 Throughout this article, the term “telehealth” is defined as “audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site.” 42 CFR 410.78(a)(3). Services delivered by telephone are separately referred to as “telephonic services.”

2 “Distant site” is defined by the Social Security Act (SSA) as “the site at which the physician or practitioner is located at the time the service is provided via a telecommunications system.” SSA 1834(m)(4)(A).

3 SSA 1834(m).

4 Section 1135 of the SSA gives the Department of Health and Human Services the power to waive or modify certain federal healthcare requirements during a federally declared emergency to ensure, first, that individuals enrolled in Medicare, Medicaid and CHIP have “sufficient” access to healthcare services; and second, that healthcare providers operating in good faith may receive reimbursement and be protected against sanctions, notwithstanding noncompliance with certain federal rules.

5 CMS waived requirements under SSA 1834(m)(1) and 42 CFR 410.78(a)(3).

6 During the PHE, CMS has also expanded permitted virtual communication services to include digital assessment services, “non-face-to-face, patient-initiated, digital communications using a secure online patient portal.”

7 In 2020, the national PPS base payment rate for FQHCs prior to adjustment is $173.50. The 2020 payment limit for the RHC AIR is $86.31.

8 Unlike in Medicare, for Medicaid, the PPS rate is separately calculated for each FQHC or RHC.

9 In some cases, states are only permitting telephonic services at the PPS rate if delivery via telehealth (audio/visual) is not available or feasible.



pursuant to New York DR 2-101(f)

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