FQHCs & Safety Net Providers Struggling After 4/1 Policy Change

April 14, 2023

One casualty of a late budget (and a recent state policy change that carved out prescription drug coverage from Medicaid managed care) is the delay of critical stopgap funds for Health Centers after the April 1 carveout left Centers without a critical revenue source resulting from participation in the federal 340B program.  

Interestingly, in the article below, the Health Department makes a claim that it has the existing appropriation authority to provide stopgap funding for all of the impacted Centers prior to a new budget being enacted.  It appears that, to this point only the Ryan White Health Centers have received financial help as the budget delay continues.  

Here’s more on the initial impact on the state’s all-important FQHCs and other affected safety net providers, including many NYS Council members: 

Safety-net clinics scramble after pharmacy carveout cuts off major revenue stream


NEW YORK — Health centers that predominantly serve low-income and marginalized communities have frozen hiring and are studying possible service cuts after the state moved ahead with a controversial change to Medicaid pharmacy coverage that constricts a key revenue stream.

The policy, which went into effect April 1, carves prescription drug coverage out of Medicaid managed care plans and shifts it to a state-run pharmacy benefit program called NYRx. That means the state’s Medicaid program is paying pharmacy costs itself rather than paying insurance companies to administer the benefit. It also means that safety-net providers are earning less for the drugs they dispense.

Under Medicaid managed care, safety-net providers could purchase certain drugs at a discount thanks to the federal 340B program, giving them a wider margin. But the state’s NYRx program pays a drug’s acquisition cost plus a small dispensing fee.

Gov. Kathy Hochul pledged to pair the switch with funding for community health centers and other affected safety-net providers, but she has shown little urgency to finalize the already-overdue budget deal that would authorize that money.

The state Legislature approved a one-week budget extender Monday that quietly included $9 million for some providers losing revenue due to the carveout. But the funding is only for health centers in the federal Ryan White program, which provides medical care to low-income people living with HIV/AIDS.

“This is not how you do health policy,” Matthew Bernardo, executive director of Housing Works Community Healthcare, said in an interview.

Hochul spokesperson Aja Worthy-Davis said a state analysis indicated that Ryan White centers would face significant cash flow issues starting in May, while federally qualified health centers would only start experiencing cash flow issues in June — excluding any new funding in the enacted state budget.

The funding authorized in the budget extender was meant to be a stopgap measure to provide several months of runway to Ryan White centers, Worthy-Davis said. It includes initial six-month infrastructure grants and contracts for multi-year grants starting in October, according to the state Health Department.

“Funding for other safety net providers was not included because the Department has existing appropriation authority to provide funding if needed prior to the enactment of the budget,” Health Department spokesperson Cadence Acquaviva said.

Impact: Rose Duhan, president and CEO of the Community Health Care Association of New York State, said health centers are taking a more conservative approach to budgeting. Their 340B revenue is starting to dry up, and no one knows if and when providers will see Hochul’s promised $705 million infusion of funds.

“One of my health centers said, ‘We’re good for three weeks,’ which is a week from now,” she recounted. “The reassurance they want to see is that funding will be made available.”

Mike Lee, chief operating officer of Evergreen Health, said the organization responded to the carveout with an immediate hiring freeze and might have to halt free pharmacy delivery services if the state does not step in with a funding lifeline. Lee pegged the carveout’s impact to Evergreen at $1.2 million a month.

Evergreen, which is based in western New York and specializes in HIV prevention and treatment services, was party to a lawsuit aimed at halting the carveout.

Callen-Lorde, a health center focused on LGBTQ+ patients, stands to lose $10 million as a result of the carveout, according to interim executive director Jonathan Santos-Ramos. But he said the organization can absorb losses for now thanks to a good cash position.

A recent survey of 12 impacted providers by the coalition Save New York’s Safety Net found that more than half would close at least one site within the year and their capacity would be reduced by more than 16,000 patients in the long term due to the carveout. Providers also said they expected to cut supportive services, transportation and counseling in coming months.

Making the adjustment: Providers and patients are also dealing with the hiccups of adjusting to a new system. Prescriptions have been briefly delayed due to requests for prior authorizations. Some patients must switch to different versions of medications to align with the state’s drug formulary.

Santos-Ramos said Callen-Lorde had to beef up its support team to handle the prior authorization requests, which have overwhelmingly affected patients on HIV medications. One-fourth of the organization’s 18,000 annual patients are living with HIV.

“That caused us immediately to have to put more resources — people power — into the pharmacies, so somebody could be on the phone [for] 30 minutes to an hour with the state,” he said.

Acquaviva, the Health Department spokesperson, said the state has honored all managed care prior authorizations. In the case of HIV medications, prior authorization is triggered when medical claim information does not confirm that the patient has received required HIV testing, Acquaviva said.

The state has five call centers supporting the NYRx transition, although staffing varies based on call volume and day of the week, she said.

What’s next: Even if Hochul’s promised funding flows to providers, Duhan said it would not be enough to make them whole.

Fifteen organizations were left off the state’s list of federally qualified health centers that would receive a combined $250 million in state and federal Medicaid funding, she said. It is unclear whether they would be eligible.

The funding proposal would also require federal approval, which could take months or more, providers said.

And, first, the state needs to pass a budget.