Federally Qualified Health Centers in Virginia Sue State for Low Medicaid Reimbursements

Fifteen Virginia health centers on Tuesday announced they are suing the state government, claiming it has violated state and federal law through underpayments on Medicaid reimbursements.

The collection of medical providers is designated as Federally Qualified Health Centers (FQHCs), a type of nonprofit health clinic that is federally funded. They provide primary care services regardless of people’s ability to pay, and paid services are offered on a sliding scale.

FQHCs are a go-to health care source for people insured through Medicaid, and FQHCs are reimbursed through the state-federal joint program for certain expenditures.

In a suit filed in federal court, the plaintiffs allege that the Virginia Department of Medical Assistance Services (DMAS) has violated state and federal law through years of under-reimbursement. The suit alleges that for 25 years, DMAS has paid less than the average cost per visit for services the health centers provide to Medicaid patients, which has eaten into the FQHCs’ other sources of funding.

Brian Harris, CEO of the Greater Prince William Community Health Center, said that the coalition has spent the past four years attempting to resolve the matter with state policy makers out of court. The Northern Virginia FQHC is among the 15 from around the state involved in the filing.

“We’ve exhausted every other option before coming to this point,” he said. “Legal action is now necessary to protect the long term viability of FQHCs in Virginia and the patients who rely on us.”

In their suit, the plaintiffs argue that DMAS has set arbitrary payments when calculating the prospective payment system (PPS). This is when Medicaid pays health care providers a predetermined amount for services, rather than an itemized amount based on individual services provided.

The suit claims that DMAS has “systematically understated the statutorily mandated PPS rate.”

Virginia’s group of FQHCs isn’t the first cohort of centers to sue their state government over the matter — Connecticut health centers did the same earlier this year. A similar 2023 case in Florida saw the court side with the FQHCs.

Harris and other CEOs of fellow health centers in Virginia’s suit said in a press call Tuesday that FQHCs are “safety net” providers that often operate in areas where they are either the only affordable or only local health care option.

As the centers become financially strained, patients can face longer waitlists for appointments, reduced clinic hours or types of services, or risk of closure to some clinics. Harris also emphasized that local clinics offer not only health care but are also employers, so loss of services or clinics overall is an effect on local jobs and economies, too.

Virginia hospitals, clinics brace for federal health care changes

Ted Waters, who is providing legal counsel on the suit, noted that it comes at a time when providers are already bracing for financial losses as thousands of Virginians are at risk of losing Medicaid coverage.

A reconciliation bill that Congress passed last summer entails forthcoming changes to Medicaid eligibility that are projected to make thousands of Virginians and millions nationwide vulnerable to losing health insurance. President Donald Trump backed the measure.

FQHCs and free clinics are bracing for a surge of uninsured patients flocking to them for more free or reduced-cost care.

Since some uninsured people are more likely to put off preventative care until crises arise, hospitals suspect their emergency departments could also see surges — a probability that may  cause hospitals to experience losses that are likely to be passed onto consumers more broadly as hospitals negotiate with private insurers.

“What is already a crisis is going to be exacerbated,” Waters said.

With their suit filed, he added that the groups hope their case can “fix the issue (of low reimbursement rates) going forward.”