What is a Rural Health Clinic (RHC)?

According to the Centers for Medicare and Medicaid Services (CMS), RHCs are clinics that are located in areas designated by the Bureau of the Census as rural and by the Secretary of the Department of Health and Human Services (DHHS) or the State as medically underserved.  Federally certified Rural health Clinics must furnish those diagnostic and therapeutic services and supplies that are commonly furnished in a physician’s office or entry point into the healthcare delivery system.  These include medical history, physical examination, assessment of health status and treatment for a variety of medical conditions.  In an RHC, a nurse practitioner, physician’s assistant, certified nurse midwife, clinical psychology or clinical social worker may also provide services.

Who administers the National Rural Health Clinics program?

The Centers for Medic are and Medicaid Services administers the national Rural Health Clinics Program and the Facilities Division of the Colorado Department of Public Health and Environment is responsible for the enforcement of federal regulations for RHCs certified in the State of Colorado.  Novitas Solutions is the fiscal intermediary responsible for all cost reporting and reimbursement functions for RHCs certified in the State of Colorado.

What are the organizational characteristics of federally certified RHCs?

A Rural Health Clinic may be a public or private, for-profit or not-for-profit entity.  An RHC can be housed in a permanent structure or a mobile clinic.  RHCs are certified as provider-based or independent, free-standing.  Provider-based RHCs are affiliated with a parent entity which is typically a rural hospital or hospital system.  To qualify as a provider-based RHC an established relationship must exist between the RHC and the affiliated provider.


Are there staffing requirements for RHCs?

Yes, RHCs must be staffed by at least one nurse practitioner (NP) or physician assistant (PA) or certified nurse midwife (CNM).  The NP, PA or CN< must be on-site to see patients at least 50 percent of the time the clinic is open.  A physician (MD or DO) must supervise the midlevel practitioner in a manner consistent with state and federal law.

How are federally certified RHCs reimbursed?

The greatest benefit of the program is cost-based (enhanced) reimbursement from Medicare and Medicaid.  RHCs are paid on the basis of an encounter which is defined as a “medically necessary, face-to-face visit between the patient and a physician, physician assistant, nurse practitioner, nurse midwife, specialized nurse practitioner, visiting nurse, clinic psychologist or clinical social worker during which an RHC service is rendered.

RHCs are reimbursed the lower of the national capped amount or the clinic-specific cost per encounter.  The national capped amount is indexed for inflation and can increase each year.  RHC payment is subject to the Part B cash deductible.  This amount is subject to regulatory change.  After the deductible has been satisfied, RHCs are reimbursed 80 percent of the all-inclusive reimbursement rate.  The patient is responsible for a coinsurance amount equal to 20 percent of the billed amount.

For newly certified RHCs, the reimbursement rate will be automatically established at 75 percent of the national capped amount.  This rate will remain in effect until the provider submits financial data or until the cost report is submitted.  Provider-based RHCs affiliated with a hospital under 50 beds are not subject to the cap.

What are covered and reimbursable services under the RHC benefit?

The services offered in a Rural Health Clinic (RHC) are the type of services that patients receive in a doctor’s office, an outpatient clinic or emergency room.  Such services are physician’s diagnostic, treatment or consultation services.  In an RHC, a nurse practitioner, physician’s assistant, certified nurse midwife, clinical psychologist or clinical social worker may also provide the services.  Services are covered in an RHC if the following apply:

They are medically reasonable and necessary;

They are provided by a physician, nurse practitioner, physician assistant, certified nurse midwife, clinical social worker or clinical psychologist who is employed by or receives compensation from the clinic;

If not provided by a physician, the service is provided under the general supervision of the physician;

They are provided in accordance with the clinic’s policies, protocols, standing orders or any physician’s medical orders for patient care and treatment;

If not provided by a physician, state law permits the nurse practitioner, physician assistant, certified nurse midwife, clinical psychologist or clinical social worker to provide the service;

Services not provided by a physician are covered if Medicare would cover the service when performed by a physician.

Services and supplies that are “incident to” the services of the provider are also covered in the RHC.  This would include services of other clinic employees including registered nurses, licensed vocational nurses, technicians or aides.  This also includes supplies such as casts, bandages and splints that are used for these services.  Only drugs and biologicals that cannot be self-administered are covered int he RHC.

What services are not covered under the RHC benefit?

Services not covered in an RHC as clinic services, but may be covered under Medicare benefits, include:

Durable medical equipment (DME), whether rented or sold, including iron lungs, hospital beds used in the patient’s home, wheelchairs, etc.;

Ambulance services;

Prosthetic devices, which replace all or part of an internal body organ, including colostomy bags, and supplies directly related to the colostomy care, and the replacement of such devices;

Leg, arm, back and neck braces and artificial legs, arms and eyes, including replacements required because of a change in the patient’s physical condition;

Physical, speech or occupational therapy with a therapist not employed by the RHC;

Technical components of diagnostic tests.

Contracted non-physical diagnostic or therapeutic services are also excluded from RHC coverage.

What is the RHC cost report?

All federally, certified Rural health Clinics must submit an annual cost report.  For certified Rural health Clinics the cost report is the means by which Medicare determines how much reimbursement is due to the provider, or due back from the provider, for RHC services rendered to Medicare beneficiaries during the cost reporting period.  The Rural Health Clinic cost report incorporates calculations and accounting applications that include a clinic’s allowable cost and the number of RHC visits to determine the clinic’s reimbursement rate (up to the national capped amount for independent, free-standing clinics).  A certified Rural Health Clinic’s Cost Per Visit Rate = Allowable RHC Costs/Visits.  Allowable costs are costs actually incurred by the clinic which are reasonable in amount, necessary and proper to the delivery of RHC services.  The total number of RHC visits is aligned with the RHC encounter definition.

For cost reporting purposes, the Medicare program requires each provider of services to submit periodic reports of its operations that generally cover a consecutive 12-month period of the provider’s operations.  Amended cost reports to revise cost report information that has been previously submitted by a provider may be permitted or required as determined by CMS.  A clinic’s cost report is due on or before the last day of the fifth month following the close of the period covered by the report.  For cost reports ending on a day other than the last day of the month, cost reports are due 150 days after the last day of the cost reporting period Extensions of the due date for filing a cost report may be granted by the intermediary only when a provider’s operations are significantly adversely affected due to extraordinary circumstances over which the provider has no control, such as flood or fire.

How are RHCs reimbursed under Medicaid?

Rural Health Clinics are paid an encounter fee based upon Medicare rates established for the clinic.  Medicare crossover claims are paid based on whichever of the following two calculations results in a lesser amount:

The Colorado Medical Assistance Program pays the sum of the reported Medicare coinsurance and deductible;

The Colorado Medical Assistance Program allowed benefit minus the Medicare payment.

Does RHC certification guarantee a better financial return?

Whereas RHC revenues can rely heavily on reimbursement for services provided to Medicare and Medicaid beneficiaries, to be economically viable an RHC must have a diverse payer mix that includes the privately insured.  Maximizing financial return is vital to ensure the clinic’s sustainability.  Ideally Medicare should consist of approximately 20 percent of total visits, Medicaid about 30 percent and “other” including private pay, 50 percent.

What is the difference between an RHC and Federally Qualified Health Center (FQHC)?

Primary care & preventive services

RHCs must provide:

Basic outpatient primary care;

Emergency care for life-threatening conditions, regardless of cost;

Basic lab services;

All RHCs must have:

  • Written guidelines and protocols for medical management;
  • Annual evaluation and planning process
  • Multiple written policies and procedures, such as referral and tracking of patients, risk management, and patient grievances
  • A quality improvement/assurance plan

In addition to the RHC requirements, FQHCs must provide, directly or by formal arrangement, more comprehensive services, including:

Diagnostic lab and radiology services;

Pharmaceutical services;

Behavioral and oral healthcare services;

Hospital and specialty care arrangements;

After-hours care;

Case management;

Transportation; and

Interpretive services

Population served


Serve a significant proportion of Medicare patients (up to 40 percent) due to the aging population in rural communities.


In 2011, 40 percent of FQHC patients were uninsured, and 40 percent were on Medicaid.

HPSA or MUA designation

All RHCs

Must be located in a Health Professional Shortage Area (HPSA) or Medically Underserved Area (MUA); designations are assessed and updated every three years;

Must be located in a non-urbanized area.


Must be located in a community designated an MUA or MUP;

Receive automatic HPSA facility designations, but must also serve geographic or population HPSAs, which are updated every three years;

Are located in rural or urban communities.



A non-physician provider must be on-site at least 50 percent of the clinic’s open hours;

A physician must be on-site once every two weeks to serve as medical director and review patient charts.


No requirement to employ non-physician providers; however, FQHCs employ physicians and non-physician providers along with clinical support staff.



RHCs may be public, for-profit, or nonprofit and do not have a specific requirement for governance by a Board of Directors.


Must be nonprofit or public entities governed by a board composed of a majority of active, registered patients of the center.



RHCs receive no federal funding;

Although RHCs care for the uninsured and publicly insured, the Amendment 35 Primary Care Fund program requirements make it difficult to acquire such funding; therefore, RHCs rely on sound business practice, with Medicare, Medicaid, private insurance, and minimal grant funding as their principle revenue sources;

RHCs must submit an annual cost report to CMS, which determines a clinic’s per visit reimbursement rate each year.


May receive federal funding for start-up and expansion; funding subsidizes some of the cost of serving the uninsured;

Are automatically eligible for Amendment 35 Primary Care Fund dollars, and received funding through the American Recovery and Reinvestment Act (ARRA) for capital expansion;

Submit an annual audit, regular financial reports, and an in-depth annual report called the Uniform Data Set (UDS);

Are required to submit in-depth quarterly reports as part of receiving ARRA funds.

Malpractice Insurance


RHCs must provide services to anyone and/or provide services on which results in a significant financial burden.


FQHCs are eligible for coverage under the Federal Tort Claims Act, which provides free coverage for most services.

Cost for services


Most RHCs provide services to anyone and/or provide services on a sliding fee scale, though they are not require to.


FQHCs are required to serve all residents of their service area on a sliding fee scale based upon the family size and income.

Survey and inspection


RHCs are subject to on-site survey and inspection in order to maintain their RHC certification by CMS;

Some RHCs are licensed as Community CLinics, and surveyed to maintain this designation.


FQHCs are subject to a Federal Objective Review at least every five years;

All Colorado FQHCs are licensed as Community Clinics, and are surveyed by the state to maintain their designation.



RHCs receive an all-inclusive, per visit Medicare reimbursement for outpatient primary care services provided;

Independent, free-standing RHCs are reimbursed by Medicare up to the federally-established cap; however, no all of them are reimbursed up to the cap;

There is no per visit Medicare reimbursement cap for provider-based RHCs affiliated with a hospital under 50 beds;

Medicaid reimburses all RHCs at a cost-based rate which varies between clinics.


FQHCs receive enhanced reimbursement from Medicare and Medicaid;

The Medicare Reimbursement Rate Cap for FQHCs is higher than in RHCs;

Medicaid rates are set for each individual FQHC and are annually reviewed.


Commingling is the sharing of RHC space, staff (employees or contractors), supplies, records, and other resources with an onsite Medicare Part B or Medicaid fee-for-service practice operated by the same RHC practitioners (physician and non-physician).  Commingling is prohibited when it results in duplicate Medicare or Medicaid reimbursement, either due to the inability of the RHC to distinguish its actual costs from those that are reimbursed on a fee-for-service basis, or for any other reasons.  Commingling is prohibited when the RHC and a Medicare fee-for-service practice operate simultaneously to select patient encounters for enhanced reimbursement.

Are RHCs subject to the Red Flags Rule?

Yes, RHCs are subject to the Red Flags Rule.

How do RHCs claim Medicare bad debt?

Medicare will reimburse the RHC for all uncollected Medicare deductibles and coinsurance, if considered to be “allowable” bad debts.  The amount of the allowable Medicare bad debts is added to the RHC cost report settlement so long as:

Debt is related to covered services and derived from deductible and co-insurance;

Provider demonstrates that reasonable collection efforts were made;

Debt is actually uncollectable when claimed as worthless;

Sound business judgment establishes that there was no likelihood of recovery at any time in the future;

Similar to effort for non-Medicare patients are utilized;

Issuance of bill to responsible party has occurred; this may include subsequent statement, collection letters, and telephone calls;

Referral to collection agency is used for non-Medicare patients of “like amounts.”

If after reasonable and customary attempts to collect a bill, the debt remains unpaid more than 120 days from the date of the first bill is mailed to the beneficiary, the debt may be deemed uncollectable:

Clinics can claim bad debt without waiting the 120-day collection period;

Determination of indigence must be documented in the patient’s file;

Beneficiary considered indigent if eligible for Medicaid;

Provider must determine that no other source is legally responsible for payment.

Document require with cost report:

Beneficiary name and HIC number;

Date(s) of service;

Date of first bill sent to patient;

Medicare paid date (R/A);

Write-off date;

Separation of deductible and coinsurance amounts;

Medicaid payment and paid date (if any).