The 1,400 federally qualified health centers across the U.S. are an essential source of primary-care services for approximately 24.3 million low-income individuals. Yet they are limited by a volume-based reimbursement model that prevents them from participating in outcomes-based care approaches.

Medicaid pays the centers a flat rate. Called the prospective payment system, the model ensures these centers are paid a fixed amount for each patient visit. The system was enacted in 2000 to help federally qualified health centers struggling to stay afloat with mediocre Medicaid payments.

But this model is anchored by in-person visits—even for minor ailments such as blood pressure checks—raking up Medicaid spending, limiting services and draining the providers who work at the safety-net centers.

These shortcomings have encouraged a growing number of states to consider establishing alternative payment models that enable such centers to expand services paid for by Medicaid. Federal law allows states to establish alternative payment models for its qualified health centers as long as the revenue is equal to the prospective payment model. About six states—California, Colorado, Minnesota, New York, Oregon and Washington—have created reimbursement models that pay centers for value-based services such as at-home visits, transportation services and telehealth.

But shifting to a new payer model comes with challenges that include financial risks and difficulty accessing appropriate resources, especially necessary data. It can also be difficult to adapt to a new way of doing business.

“If you are on a visit-based model for decades and you change to another model that’s hard,” said Craig Hostetler, executive director of the Oregon Primary Care Association. “Change doesn’t happen overnight so a big part of our work is supporting each other.”

The Oregon Primary Care Association works with federally qualified health centers and the state to roll out and oversee the program, called the Alternative Payment and Advanced Care Model.

Of the six states, Oregon is the farthest along in its push to value-based care for the centers. It began a pilot program with three centers in 2013. Washington plans to begin its pilot initiative July 1. The other states are still in the planning and implementation phases.

The push for states to engage in these value-based payment models has been partly influenced by Medicaid expansion under the Affordable Care Act, argues Sara Rosenbaum, a professor of health policy at George Washington University in Washington, D.C. States that expanded Medicaid saw a large increase in the number of beneficiaries seeking care at federally qualified health centers. In 2015, 55% of qualified health center patients in expansion states were Medicaid beneficiaries, compared with 34% of health center patients in states that didn’t expand the program.

“The weaknesses of (the volume-based) model are magnified in Medicaid expansion,” Rosenbaum said. “There is a lot of pent-up demand for newly insured people who were getting limited care before.”

All six of the states looking to reform their health centers with new value-based payment models expanded Medicaid.

This heightened demand for services pressures providers who already experience burnout at these community centers, Rosenbaum said. Because the health center reimbursement model is visit-based, providers must see an exorbitant number of patients per day, even for minor conditions that can be treated over the phone or through telehealth.

“Like any encounter-based model, it can be subject to over-utilization,” Rosenbaum added.

For Oregon, the visit-based model was no longer sustainable. Of the 400,000 people treated at the state’s 200 qualified health centers, about 60% are insured by Medicaid. A federal match program that allowed the centers to engage in transitional-care services such as partnerships with community organizations ran out at the end of 2013. This forced the centers to cope with a strictly fee-for-service model that strained doctors and drained funds.

“The big motivation was to get these FQHCs financially viable,” said Jamal Furqan, program manager for federally qualified health centers at the Oregon Health Authority.

The new model allows participating centers to engage in value-based payments without losing out on reimbursement dollars. The model uses a capitated per member, per month payment system. The centers generate a list of patients who have had a visit in the last 18 months and determine the fixed rate for that patient’s care based on their usage history. This allows the center to provide services that were previously nonbillable in the prospective payment system without losing out on revenue.

The Oregon Primary Care Association has worked with the 13 centers participating in the program and the state to determine what the previously nonbillable services should be. They’ve gone through several modifications but can include offering cooking classes, transportation services and appointments via telephone.

“Addressing social determinants of health is a big piece of this,” said Hostetler at the Oregon Primary Care Association. “We have built a learning community that includes collecting data and testing interventions.”

Data collection has been a challenge, however, Hostetler said. “Capturing the work the centers do under the capitated system is difficult.”

The state has been working with the electronic health record vendor Ochin and the centers to integrate various other value-based approaches with patient data. This will allow the centers to not only easily track their previously nonbillable services but also whether or not the interventions are working.

Because of the analytics-focused approach of the model, the centers must use EHRs in order to participate. They also must have stable finances. There are budgetary safeguards a center has to make about a year before it switches to the APM model to account for any losses.

“They need to not be risk-averse,” Furqan said.

The centers also need to be eager to innovate. The model requires them to think about innovative ways to engage their patient populations and to reduce costs, Furqan added.

Cost savings from the new model have already been reported. A 2016 study from researchers at Portland State University found the program saved the Oregon health system $240 million over two years.

“We are seeing that FQHCs are able to address the needs of the communities,” Furqan said.