PPS Rate for FQHCs: Medicare, Medicaid, and Managed Care

The PPS rate for FQHCs is the single bundled per-visit amount that Medicare and Medicaid pay a Federally Qualified Health Center for a patient encounter, in place of billing separately for each service delivered during the visit. Under Medicare, the 2026 national base rate is $207.72 per visit before geographic adjustment. Under Medicaid, the rate is calculated separately for each health center based on its own historical costs, so the dollar amount varies from clinic to clinic.

What the Bundled Payment Covers

When a patient sees a provider at an FQHC, the center bills one payment code for the encounter. That single payment covers everything furnished during the visit: the physician exam, nurse screening, lab work, supplies. The health center cannot bill separately for the individual components. The payment does not change based on how many services the provider delivered, how long the visit ran, or which type of practitioner the patient saw.

The design gives health centers predictable reimbursement and simplifies claims processing. It also means a short, simple visit and a long, complex one draw the same base payment.

The Medicare PPS Rate in 2026

The national base PPS rate for calendar year 2026 is $207.72, a 2.5 percent increase over the 2025 rate of $202.65.¹ The 2025 rate itself was a 3.4 percent increase over the 2024 rate of $195.99.²

Medicare pays 80 percent of the lesser of the FQHC’s actual charges or the geographically adjusted PPS rate. The patient is responsible for the remaining 20 percent as coinsurance.

Geographic Adjustment

The national base rate is not paid uniformly across the country. CMS adjusts it for each FQHC’s location using a Geographic Adjustment Factor derived from the work and practice expense Geographic Practice Cost Indices used in the Medicare Physician Fee Schedule. The formula is GAF = 0.53149 × Work GPCI + 0.46851 × PE GPCI.³ A health center in a high-cost metropolitan area receives more than one in a lower-cost rural area.⁴

Enhanced Rate for New Patients and Wellness Visits

FQHCs receive 34.16 percent above the adjusted base rate for three categories of visits: new patients, Initial Preventive Physical Exams (the “Welcome to Medicare” visit), and Annual Wellness Visits.⁵ Based on the 2026 base rate, that comes to roughly $278.68 before geographic adjustment. These visits are billed under HCPCS code G0468. No coinsurance applies; the health center is reimbursed at 100 percent of the lesser of its charges or the adjusted rate.⁶

Medicare Billing Codes

Medicare FQHC visits use a specific set of payment codes:

G0466 — new patient visit
G0467 — established patient visit
G0468 — IPPE or Annual Wellness Visit
G0469 — mental health visit, new patient
G0470 — mental health visit, established patient

Care management services and telehealth are billed under separate codes at separate rates.

How the Annual Update Works

Each year, CMS updates the base rate by the percentage increase in the FQHC market basket, minus a productivity adjustment.⁷ The market basket is a fixed-weight price index tracking changes in the cost of a consistent mix of goods and services used by health centers, built from eight cost categories: practitioner compensation, other clinical compensation, non-health compensation, fringe benefits, pharmaceuticals, fixed capital, moveable capital, and a residual category for utilities, supplies, and miscellaneous expenses. Professional liability insurance is excluded because FQHCs are eligible for federal malpractice coverage.⁸

The productivity adjustment is the 10-year moving average of changes in economy-wide private nonfarm business total factor productivity, and it reduces the market basket update before it is applied to the base rate.⁹

The Medicaid PPS Rate

Medicaid’s PPS works differently. There is no single national number. Each FQHC’s Medicaid PPS rate was originally calculated by averaging the center’s reasonable costs per visit for fiscal years 1999 and 2000.¹⁰ Health centers that qualified after fiscal year 2001 had their rates based on the average of other clinics in the same or adjacent areas, or through cost reporting. States adjust these rates annually using the Medicare Economic Index for inflation and must adjust them again when the FQHC’s scope of services changes.¹¹

Because rates are center-specific, two health centers in the same city can have meaningfully different Medicaid PPS amounts depending on their cost profiles in the base years and any subsequent scope adjustments. NACHC has reported that Medicaid PPS rates cover roughly 80 percent of an FQHC’s actual costs of caring for Medicaid patients.¹² Other NACHC materials place the figure at 82 percent.¹³

Scope-of-Service Adjustments

Federal law requires states to adjust an FQHC’s rate when the center adds or drops services, but the process varies by state. Some states require the FQHC to notify the Medicaid agency before implementing new services in order to qualify for a rate increase. Others impose minimum cost-impact thresholds, such as requiring the change to cause at least a 3 percent net increase in average cost per visit. Some recognize only the addition of entirely new service types, excluding changes in intensity, duration, or volume of existing services. Many states lack a formal process altogether.¹¹

Managed Care and Wraparound Payments

Most Medicaid beneficiaries are enrolled in managed care plans rather than traditional fee-for-service Medicaid. When an FQHC treats a patient enrolled in a Managed Care Organization, the MCO pays a negotiated rate that is often lower than the state-established PPS rate. Federal law requires the state to make up the difference through a supplemental wraparound payment, so the FQHC ultimately receives at least the full PPS amount.¹⁰

Some states require MCOs to pay the full PPS rate directly, eliminating the need for a wraparound. Others reconcile payments quarterly, with the state paying the difference after the fact. As of 2016, 59.3 percent of FQHC Medicaid revenue came from managed care, and FQHCs received $2.4 billion in net Medicaid retroactive managed care supplemental payments that year.¹⁴

When a State Uses an Alternative Payment Methodology

States are not locked into the standard Medicaid PPS. Under Section 1902(bb)(6) of the Social Security Act, a state may adopt an Alternative Payment Methodology as long as each participating FQHC agrees and total payments equal at least what the center would have received under the PPS. As of 2020, 27 states used some form of APM.¹²

APMs vary. Some states simply rebase the per-visit rate to more recent cost data instead of costs from 1999–2000. Oregon implemented a per-member-per-month capitated model in 2013. Colorado ties a portion of payment to quality performance metrics. Washington uses a mix of capitated and quality-indicator models. In every case, the state must still compute a PPS amount for each FQHC annually and reconcile payments so the APM meets the statutory floor.¹¹

Telehealth Does Not Pay the Full PPS Rate

If you assumed a telehealth visit at an FQHC draws the full PPS rate, it does not, at least for non-behavioral care. Non-behavioral telehealth visits are billed under HCPCS code G2025 at $97.53 for 2026, less than half the standard PPS rate.¹⁵ FQHCs may serve as distant-site providers for non-behavioral telehealth through December 31, 2027, with audio-only delivery permitted through the same date.

For behavioral and mental health services, FQHCs may permanently serve as distant-site providers via telehealth, including audio-only, with no geographic restrictions on the patient’s location. The in-person visit requirement — a face-to-face encounter within six months of the initial telehealth mental health visit and annually thereafter — is waived through December 31, 2027. NACHC has argued that the current telehealth rate does not reflect the true cost of delivering care remotely and has pushed for virtual encounters to qualify as full medical visits under the PPS.¹⁶

1
CMS. Transmittal 13506, Change Request 14309
2
CMS. Transmittal 12951, Change Request 13867
3
CMS. PPS Design for FQHCs
4
HHS. MM14309: FQHC Payment Rates
5
CMS. FQHC PPS
6
NACHC. Reimbursement Tips: IPPE and AWV
7
MedPAC. Payment Basics: FQHCs
8
Feldesman Tucker Leifer Fidell LLP. Annual Reimbursement Adjustments: FQHC-Specific Market Basket
9
CMS. Medicare Program Rates and Statistics
10
MACPAC. Medicaid Payment Policy for FQHCs
11
NACHC. FQHC PPS Issue Brief
12
Coverage Toolkit. FQHCs: Medicaid and Medicare Reimbursement
13
NACHC. FQHC PPS Presentation
14
CHCF. How Health Centers Get Paid
15
HHS. Billing Medicare as a Safety Net Provider
16
NACHC. CY 2026 Medicare PFS Comment Letter