Unit 3: Finances
Unit 5. Finances

Section 1. Financial Viability

Patient-Care Revenue

Patient-care revenue, while generally paid on a fee-for-service basis, also may be paid on a fee-per-visit (encounter rate) or fee-per-covered member (capitation) basis. Regardless of how payment is made, most patient-care revenue for safety net dental clinics tend to come from the following sources.

Public Programs

Medicaid is the joint federal-state program established in 1965 to provide health insurance to populations with low incomes. Medicaid programs may be operated as traditional fee-for-service, capitation, or a combination of the two. Although Medicaid program design and fee levels vary from state to state, Medicaid generally is viewed differently by private dental offices than by safety net dental clinics. Relative to their alternatives of full-fee patients and indemnity insurance patients, most private dentists do not consider Medicaid reimbursement desirable. Consequently, most private dentists do not choose to participate in Medicaid. On the other hand, safety net dental clinics often find Medicaid to be their prime source of reimbursement compared with sliding-fee-schedule and nominal-pay patients, who do not cover overhead cost.

In 2001, Congress established the Medicaid prospective payment system (PPS) for Federally Qualified Health Centers (FQHCs), which differs from the earlier Medicaid cost system. If they choose, states may reimburse health centers using PPS, continue to reimburse health centers on a reasonable cost methodology, or select some other payment methodology. However, these mechanisms must produce payments that are not less than what the center would receive under PPS. Any alternative payment mechanism that the state uses must be agreed to between the state and the health center.

Health professionals can learn about their state's Medicaid program and the Children’s Health Insurance Program (CHIP) and identify contact persons at the state or fiscal agent level who may provide additional information. State websites vary in sophistication and depth, but all have contact information for health professionals interested in participating in the program or for beneficiaries seeking information about benefits, eligibility, and applications.

Learn more about the Medicaid payment system.

States pay for oral health care provided at safety net dental clinics in a variety of state-specific ways. It is imperative when you are planning for your clinic that you check directly with your state Medicaid office for state-specific information about Medicaid payments for oral health care in your state. For health professionals, many state Medicaid websites have special sections that may include handbooks, enrollment applications, bulletins, and information about billing methods. The federal Centers for Medicare and Medicaid Services' website has state-by-state Medicaid statistics and links to state agencies. 

Children's Health Insurance Program
CHIP, created in the Balanced Budget Act of 1997, was designed to help states cover more uninsured children. States could extend coverage to uninsured children under age 19 if they did not qualify for Medicaid and their family income was below 200 percent of the federal poverty level (FPL) or 50 percentage points higher than the existing Medicaid eligibility level if it exceeded 150 percent of FPL. Some states expanded their existing Medicaid programs, and some created new CHIP programs outside of Medicaid.

CHIP was funded through 2017; however, Congress allowed funding to expire on September 30, 2017. A bill passed by Congress December 21, 2017, provided funding for CHIP for six months, back-dated to October 1, so it will run out at the end of March 2018. Without reauthorization, states may cap eligibility for CHIP. In addition, the future of the Medicaid expansion and other Affordable Care Act (ACA)–related provisions, as well as the funding mechanisms of the Medicaid program in general, are currently being debated. Incentives to provide adult oral health benefits and requirements for pediatric oral health benefits may change at the federal level, depending on the legislative outcomes of various health care proposals.

Affordable Care Act
 ACA, 42 U.S.C. § 18001 et seq. (2010), expanded access to oral health insurance coverage in a few ways. First, it provided the option for states to expand Medicaid coverage for all adults with incomes under 133 percent of FPL. In effect, this legislation shifted the payer mix within a health center in states that opted in, decreasing the number of self-pay (uninsured) and increasing the number of Medicaid-covered patients. An interactive map, Current Status of State Medicaid Expansion Decisions, showing states that opted in is available on the Henry J. Kaiser Family Foundation’s website. For adults with low incomes in many of these states, access to oral health coverage was a part of this Medicaid expansion.

In addition, pediatric oral health is one of the 10 essential health benefits provided for by the ACA, so all insurance plans offered under the ACA must include the option of a pediatric oral health benefit. Changes to the federal law might affect whether pediatric oral health benefits are covered.

Public and Private Nonprofit Program Contracts
Safety net dental clinics may enter into contracts to provide clinical services to specific groups that are otherwise served by public or private nonprofit agencies (like correctional institutions, employment services agencies, and Head Start programs). Payment is made to the clinic according to the terms of the contract. Read more about contracts later in this section.


Commercial Insurance

Indemnity represents commercial (private) insurance that generally comes through an individual's employer. Dentists are reimbursed on a fee-for-service basis. Depending on the terms of the plan, patients may be responsible for a deductible and co-payments.

Managed Care
Preferred provider organizations (PPOs) typically involve contracts between insurers and a number of dentists who agree to provide care on a fee-for-service basis where the fees are lower than the prevailing fees in the area. Dentists may enter into contracts under which they agree to provide care for members of an insured group for a set fee that is paid per plan member per month rather than per service provided. Capitation plans are frequently associated with health maintenance organizations.

Self-Pay Patients

Full-Pay Patients
Although they represent a small percentage of safety net dental clinic patients, some individuals who do not meet financial eligibility requirements and do not have dental insurance may choose to pay full clinic fees for their oral health care. In many instances, such patients would opt for care in a private dental office, if one is nearby.

Sliding Fee Schedule or Other Reduced-Fee Arrangements
Safety net dental clinics, whose missions include serving uninsured patients, generally offer reduced-fee care through a formal sliding fee schedule or an informal arrangement in accordance with a patient's ability to pay. The extent to which care is discounted varies from clinic to clinic.

Nominal-Fee Patients
Nominal fees should be a flat fee per visit, and the level of this fee should not be a barrier to care for individuals with the lowest incomes. Nominal fees are permitted, if desired by a health center board, for patients with incomes under 100 percent FPL. Nominal fees are not minimum fees, minimum charges, co-pays, or a payment threshold for the patient to receive care. The Health Resources and Services Administration’s FQHC compliance manual states that nominal fees must be nominal from the perspective of the patient, and may be “based on input from patient board members, patient surveys, advisory committees, or a review of co-pay amount(s) associated with Medicare and Medicaid for patients with comparable incomes.” Nominal fees do not reflect the actual cost of care received.