CLIENT ALERT: New Budget Law Includes Medicare Advances for FQHCs

By | Published On: January 4, 2023

On December 29, 2022, President Biden signed into law, Consolidated Appropriations Act, 2023 (CAA 2023), H.R. 2617, a comprehensive law funding government operations. For Federally qualified health centers (FQHCs), the law contains several significant Medicare changes that will either remove longstanding coverage restrictions or further extend flexibilities that were introduced during the COVID-19 public health emergency. These are welcome changes that will enable health centers to provide more comprehensive mental health services and technology-based services to Medicare beneficiaries.

The changes will also help to reduce the discrepancies between Medicare’s coverage of mental health and telehealth services in FQHCs with some State Medicaid programs’ broader coverage in these areas.

The main changes in CAA 2023 that will benefit FQHCs in Medicare include the following.

Addition of the Services of Mental Health Counselors (MHC) and Marriage and Family Therapists (MFT) to the FQHC and RHC Medicare and Medicaid Benefits

CAA 2023, Div. FF, Title IV, Subtitle C, contains numerous provisions to expand the coverage of mental health services in Medicare. Most importantly for FQHCs, Section 4121 recognizes, for the first time, “marriage and family therapist services” and “mental health counselor services” as covered Medicare services. In addition to recognizing the services under Medicare Part B Physician Fee Schedule, the provision also modifies the “rural health clinic services” and “Federally qualified health center services” definitions in the Medicare statute to include the services of MHCs and MFTs. This represents the first time since the Medicare FQHC benefit was defined (in 1990 legislation) that the list of “core” providers of Medicare FQHC services has been expanded.

Additionally, because the “Federally qualified health center services” benefit in Medicaid is defined by reference to the Medicare statute, the change in the law also results in the mandatory inclusion of MHCs’ and MFTs’ services in the Medicaid FQHC benefit. The Medicaid FQHC benefit contains two components: the “core” practitioners’ services, which are identical to those included in the Medicare FQHC benefit; and “other ambulatory services” included in the Medicaid State plan and furnished by the FQHC. While some States recognize MHCs’ and MFTs’ services via the “other ambulatory” component of the FQHC benefit, coverage of these clinicians’ services in FQHCs is not mandatory as of this time. Due to the recent legislation, State Medicaid programs will be required to recognize MHCs’/MFTs’ services as part of “FQHC services.”

While the provision does not explicitly require the Secretary of HHS to modify the definition of a billable “visit” in the Medicare FQHC regulations to include encounters provided by MHCs and MFTs, it appears likely that HHS would follow that course.

Section 4121 takes effect for services rendered on or after January 1, 2024. This means that for the next calendar year, MHCs’/MFTs’ services still will not qualify as “FQHC services” for Medicare purposes and encounters they furnish do not count as FQHC billable visits.

Extension of Medicare Telehealth Flexibilities

In the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, Pub. L. No. 116-136, Congress required FQHCs and RHCs to be recognized on a temporary basis as Medicare telehealth “distant site providers” during the COVID-19 public health emergency (PHE). Additionally, HHS exercised its waiver authority under Section 1135 of the Social Security Act to relax many Medicare telehealth requirements during the PHE, making it easier for providers to reach patients via telehealth during the emergency. In Consolidated Appropriations Act 2022 (CAA 2022), which was enacted in March 2022, Congress extended many of these flexibilities during a 151-day period after the end of the PHE. Many of the telehealth flexibilities that were extended in CAA 2022 have been extended further until December 31, 2024 through the CAA 2023 legislation, as follows.

  • FQHCs as Distant Site Providers: In CARES Act § 3704, Congress authorized FQHCs and RHCs to bill Medicare for distant site telehealth services furnished through the end of PHE, and be paid for under a national average of the Physician Fee Schedule rates for telehealth services. This provision was extended until 151 days post-PHE in CAA 2022. CAA 2023, Div. FF, Title IV, Section 4113(c) authorized the additional extension of the provision through December 31, 2024.
  • Originating Site Requirements: As background, per Section 1834(m) of the Social Security Act, the originating site (where the beneficiary is located) for telehealth services must be in a qualifying “facility” as established in the law, provided that the facility is located in a geographically remote area. Prior to the PHE, the beneficiary’s home was in most circumstances not considered a valid originating site. During the PHE, CMS issued Section 1135 waivers of the originating site requirements so that Medicare patients could access telehealth services while in their homes or in facilities that did not meet the geographical remoteness criteria. This flexibility was extended until 151 days post-PHE in CAA 2022, and CAA 2023 Div. FF, Section 4113(a) authorized the additional extension of the provision through December 31, 2024.
  • Distant Site Practitioners: By statute, Medicare telehealth services may be furnished only by certain “physicians and practitioners,” listed in the Medicare statute, as distant site providers. CMS issued Section 1135 waivers to allow, additionally, qualified occupational therapists, qualified physical therapists, qualified speech-language pathologists, and qualified audiologists to bill Medicare for telehealth services during the PHE. This provision was extended until 151 days post-PHE in CAA 2022, and CAA 2023, Div. FF, Section 4113(b) authorized the additional extension of the provision through December 31, 2024.
  • Mental Health Telehealth Services Furnished To Patients in Their Homes: Per the Consolidated Appropriations Act of 2021, Congress removed the originating site geographic requirements and allowed for the home to be a qualifying originating site, for mental health services (absent a co-occurring SUD diagnosis) furnished after the termination of the PHE. This was a permanent (not COVID-19 PHE) change. As a precondition for providing mental health telehealth services to patients in their homes, however, the eligible beneficiary must have had an in-person appointment with the physician or practitioner within the prior six (6) months. In the CAA 2022, Congress amended the law to delay the implementation of the in-person visit prerequisite until 151 days after the end of the PHE. In CAA 2023, Div. FF, Section 4113(d)(1), the implementation of the in-person visit requirement is further delayed until December 31, 2024.
  • Technology Requirements: Prior to the PHE, Medicare telehealth visits were required via regulation to be furnished by an interactive telecommunications system, which includes audio and video equipment that provides two-way, real-time interactive communication. CMS issued Section 1135 waivers to allow audio-only telehealth services and included telephonic evaluation and management (E/M) services (CPT 99441-99443) for the duration of the PHE. Per CAA 2022, Div. H, Sec. 305, CMS was required to continue to recognize telehealth services that CMS covered via audio-only communication as of the date of enactment of CAA 2022 (includes telephonic evaluation and management codes) for a 151-day period post-PHE. Under CAA 2023, Div. FF, Section 4113(e), CMS will continue to be obligated to cover those services as furnished using audio-only technology through December 31, 2024.

Clarification of Requirements for FQHC Mental Health Visits via Telecommunications

CAA 2023 has also made a clarification concerning FQHC mental health visits that are furnished via telecommunications. Before January 1, 2022, the Medicare FQHC regulations required that FQHC “visits” be furnished in a “face-to-face” format, with that term interpreted by CMS to mean “in person.” In a rulemaking effective January 1, 2022, CMS amended the definition of the FQHC “mental health visit,” at 42 C.F.R. § 405.2463, to include visits furnished via telecommunications. Notably, these FQHC virtual mental health visits are not classified as “telehealth services,” but instead as FQHC visits, and accordingly, FQHCs receive payment for these visits under the FQHC prospective payment system (PPS) methodology.

Per the regulation, if not provided in person, the FQHC mental health visit must be furnished via interactive, real-time, audio and video telecommunications technology, or by audio-only interactions, in cases where the patient is not capable of, or does not consent to, the use of video technology for the purposes of diagnosis, evaluation, or treatment of a mental health disorder. Additionally, CMS specified in the regulation that to be eligible for mental health visits that would be paid to FQHCs under PPS, the beneficiary must have received a mental health visit within 6 months prior to the furnishing of the mental health visit via telecommunications, and that (with some exceptions) an in-person mental health service must be provided at least every 12 months while the beneficiary is receiving services via telehealth for diagnosis, evaluation, or treatment of mental health disorders. The regulatory change, along with the in-person prerequisite for FQHC mental health visits, took effect on January 1, 2022.

CAA 2022 postponed the application of the in-person mental health visit prerequisite for FQHC telecommunications-based mental health visits until 151 days after the conclusion of the PHE. This means that FQHCs may provide mental health visits via telecommunications, until the extended deadline, without conditioning that service on the patient having had an in-person mental health visit in the prior six months. CAA 2023, Div. FF, Section 4113(d)(2) will further delay the implementation of the in-person visit prerequisite for FQHC telecommunications-based visits until January 1, 2025.

Intensive Outpatient Services

CAA 2023, Div. FF, Section 4124 creates a less intensive version of a current Medicare service, “partial hospitalization,” which currently only Medicare community mental health centers and hospital outpatient departments may provide. This less intensive service will be called “intensive outpatient services.” FQHCs and RHCs (in addition to Medicare CMHCs) will be entitled to provide this benefit under Medicare, under certain conditions.

Medicare partial hospitalization is an intensive mental health service comprised of a group of discrete services including, among others, individual and group therapy, occupational therapy, drugs and biologicals for therapeutic purposes, individualized activity therapies, family counseling, patient training and education, and diagnostic services. Provision of the services is conditioned upon a determination that the beneficiary would require inpatient mental health services in the absence of partial hospitalization.

Section 4124(b) will create a new Medicare service, “intensive outpatient services,” which contains the same bundled services as partial hospitalization, but is intended for patients with less acute needs and requires fewer weekly hours of service. FQHCs and RHCs, in addition to CMHCs and hospital outpatient departments, will be authorized to provide this Medicare service. While for partial hospitalization, it is required that a physician determine the patient needs 20 hours of care per week, the eligibility standard for intensive outpatient services will be 9 hours per week. Further, while partial hospitalization requires a finding that the individual have an inpatient level of care, no such requirement will be applied for intensive outpatient services.

“Intensive outpatient services” will be added to the list of “FQHC services” in the Medicare statute. Nonetheless, payment for the service will not be included in the FQHC prospective payment system (PPS). Section 1834(o) of the Act, which describes the FQHC PPS, will be amended to state that the costs associated with the provision of intensive outpatient services for an FQHC will be carved out of the PPS allowable costs for purposes of the PPS and paid for as if furnished by a hospital outpatient department (OPD). (Hospital OPDs are paid under a separate PPS methodology under Medicare.) Hence, this service will be considered an FQHC service “in name only,” but paid for under a separate methodology.

Section 4124, which creates the intensive outpatient services benefit, will take effect with respect to services provided on or after January 1, 2024.

If you have any questions about the Medicare changes included in Consolidated Appropriations Act 2023, please contact Susannah Vance Gopalan (

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