A growing number of hospitals are outsourcing often unprofitable outpatient services to their poor patients by setting up independent, nonprofit organizations to provide primary care.
Medicare and Medicaid pay these clinics, known as federally qualified health center look-alikes, significantly more than they would if the sites were owned by hospitals.
Like about 1,400 federally qualified health centers — which also receive additional dollars — a clinic designated by the government as a “look-alike” is also eligible for federal programs that can help reduce costs and recruit providers. They allow clinics to get prescription drugs at deep discounts and attract doctors by qualifying them for a government program that helps them pay off their student loans if they work in an area with a shortage of medical providers.
But unlike community health centers, Look-Alikes do not receive annual federal grants to cover operational costs. Nor do look-alikes receive financial benefits where the federal government covers their malpractice risks.
Although they are not part of a hospital system, many with a hospital-based appearance have clinics on the hospital campus or within a short distance. As a result, clinics can help divert patients from expensive emergency rooms without urgent need.
This helps reduce harm, especially to uninsured patients who are using the ER for primary care. Converting clinics to look-alikes is also often a strategy for hospitals that have a high proportion of patients enrolled in Medicaid, which typically reimburses hospitals at lower rates than commercial health plans, said Jeffrey Allen, a partner at consulting firm Forvis. “It’s a trend that’s accelerating,” he said.
Hospitals are betting they will come out ahead by closing a money-losing service and providing grant funding to keep it solvent, he said. At the same time, hospitals expect many patients who need to be admitted for services or special care to be transported to the hospital from what appear to be similar clinics, he said.
According to a KHN analysis of federal data, at least eight hospital systems converted existing clinics or built new ones that received look-alike designations from 2019 to 2022. They include:
- Parkview Health, a large hospital system in Indiana and Ohio, is slated to open a look-alike Alliance Health Center in Fort Wayne, Indiana, in 2021. Hospital spokeswoman Tami Briegel said the look-alike status offered the system a better way to provide care to underserved individuals.
- Parrish Medical Center in Titusville, Florida, which helped open Space Coast Health Center in 2022, was designated as a look-alike in 2022. The parish spent $1.2 million to establish the clinic, which provides primary care and mental health care, a few blocks from the hospital. “Many of our patients have not had primary care for years and have multiple medical and behavioral needs,” Space Coast CEO Irvin Lewis said in a statement to KHN. “We are working to improve access to care.”
- Wabash General Hospital, which partners with the local health department at the Wabash Community Health Center, is a similar clinic near the hospital in Mount Carmel, Illinois. Daniel Stevens, the hospital’s executive vice president of business development, said the hospital has been treating some clinic patients in its emergency room, and the new facility offers mental health services and physical health in one place. “The goal is to expand services that are not currently offered to the community with increased reimbursement,” he said.
- Beverly Hospital in Montebello, a city in Los Angeles County, provided a $3 million loan and donated its women’s clinic to start a BeverlyCare look-alike, according to BeverlyCare executive director Coralie Nakamatsu. Leases office space from hospitals for adult and pediatric clinics. That clinic helps patients who need follow-up care after visiting a hospital emergency room. Clinics offer patients a lower-cost alternative to using the ER.
Brian Tabor, president of the Indiana Hospital Association, said hospitals are sometimes wary of creating a duplicate image because it means giving control to a new entity. But, he said, the transition could benefit both hospitals and patients: “Hospitals are exploring different payment models to support access to rural and underserved services, and look-alike status has emerged as a real important tool for some.”
Nationally, 108 face-to-face health centers are operating today, an increase from 87 in 2020, according to the federal Health Resources and Services Administration. Not initiated by most hospitals.
Look-alike health centers are overseen by a board of directors and at least 51% of the directors must be patients — just like full-fledged community health centers. Lookalike health centers treat patients on a sliding fee scale based on their income.
Organizations typically seek visa-like status from the federal government as a precursor to becoming a fully funded federally qualified health center.
In the Allentown, Pennsylvania, area, both major health systems – St. Luke’s University Health Network and Lehigh Valley Health Network – recently transformed the look of many of their primary care clinics. Neither hospital would provide a spokesperson to talk about the changes, but both responded to questions in writing.
St. Luke’s launched Star Community Health in 2018; It got its lookalike title in 2020 “Star has been able to treat a broader group of people who otherwise wouldn’t have access to care,” said Star CEO Mark Roberts, though he did not provide details on the expansion.
Lehigh Valley has transformed several of its primary care practices under the name Valley Health Partners Community Health Centers. Additional funding from Medicare and Medicaid has allowed the clinics to expand services for mental health and substance use, as well as support from financial counselors, social workers and clinical pharmacists, spokeswoman Jamie Stover said.
Lee Health, a hospital system based in Fort Myers, Florida, has converted more than two dozen of its outpatient clinics to similar conditions since 2014. Bob Johns, Lee Community Healthcare’s senior vice president, is the only full-time executive look-alike other staff still employed by the hospital system.
Higher Medicaid funding has helped pay for four new adult family practice clinics and a child mental health clinic, Johns said. And a mobile health clinic that goes to underserved areas is also partially funded by enhanced Medicaid reimbursements.
Johns said the look-alike clinic receives about $120 for a Medicaid primary care office visit, roughly double what Lee Health-owned clinics paid.
Johns Lee Health credits face-to-face clinics with reducing unnecessary ER visits by at least 20%. Many of those visits were to uninsured patients, he said.
Look-alikes also benefit from the federal 340B program, which allows them to purchase drugs at deeply discounted rates to sell to patients. Patients’ insurers typically pay the centers at a higher rate, and the clinics keep the difference. Clinics can lower out-of-pocket costs for patients but aren’t required to, though Johns said Lee Health lowers drug costs for patients who don’t have insurance or have low incomes.
Hospital systems like Lee Health that qualify for the 340B program can generally use it only for their admitted patients, Johns said.
The look-alike status allows clinics to participate in the National Health Service Corps, a federal program that pays off the student loans of clinicians who agree to work in an area with a shortage of health care providers, he said. “It’s a great way for us to hang on to providers,” John said.
Shifting look-alike care has helped Lee Health find new funding to expand care for the medically underserved, he said.
“It’s a great model and a very efficient way to use limited resources,” Johns said.
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