Financing by Setting

Key considerations for financing IBH in CHCs and RHCs compared to other primary care settings include:

• Federal Benefits: CHCs and RHCs receive enhanced Medicare and Medicaid reimbursement and are eligible for Teaching Health Center Graduate Medical Education funds.^10–13 CHCs are also eligible to receive training, technical assistance, and financial assistance to gain and retain patient-centered medical home recognition.¹⁴ Additionally, FQHCs receive grant funding under Section 330 of the Public Health Service Act, graduate medical malpractice liability protection under the Federal Tort Claims Act, and access to federal loan guarantees for capital improvements. These federal benefits can support IBH staffing, training, and infrastructure. Learn more about HRSA Health Center Program benefits, Teaching Health Center Graduate Medical Education funds, and the HRSA Accreditation and Patient-Centered Medical Home Recognition Initiative.
• Reporting Requirements: CHCs must submit annual Uniform Data System reports to HRSA, which include behavioral health metrics such as depression screening, substance use disorder treatment, and visits with licensed behavioral health providers. RHCs do not have a federal reporting system.¹⁵ Learn more about FQHC federal reporting requirements.
• Payment Provisions: CHCs are required to offer a sliding fee scale to ensure services are affordable for low-income patients. Any behavioral health services included in a CHC’s sliding fee scale must be within the HRSA-approved scope of the project.¹⁶ Learn more about the FQHC Sliding Fee Discount Program.
• Medicare: Medicare pays a Prospective Payment System (PPS) per-visit national rate for covered behavioral health services provided by CHCs and a facility-specific, all-inclusive, per-visit rate (AIR) for covered services provided by RHCs. The PPS and AIR rates are updated annually. Medicare offers CHCs and RHCs fee-for-service (FFS) payments, in addition to PPS and AIR payments, for certain care management services, including behavioral health integration, the psychiatric collaborative care model, and advanced primary care management.^22,23 Because these services are billed using individual billing codes rather than being bundled into the PPS or AIR payments, they can provide an additional revenue stream to fund the clinical staff time required for integration. Learn more about the Medicare PPS payment model for CHCs and RHCs (PDF – 2 MB), and find the current Medicare CHC PPS payment rate and current Medicare RHC AIR payment rate. Learn more about Medicare PPS payment rules for CHCs (PDF – 3 MB) and Medicare AIR payment rules for RHCs (PDF – 2 MB).
• Medicaid and Children's Health Insurance Program (CHIP): State Medicaid agencies must reimburse CHCs and RHCs for covered behavioral health services. Usually, state Medicaid agencies pay through a PPS, which pays a fixed, per-visit bundled rate for qualified services delivered to Medicaid and CHIP patients. CHCs and RHCs can agree to an alternative payment model, but the reimbursement rate must be at least as much as would be paid under the PPS model.¹⁷ Learn more about Medicaid PPS and alternative payment models for CHCs and RHCs. Find current PPS payment rates for CHCs and RHCs on your state’s Medicaid website.
• Private Payers: CHCs and RHCs both negotiate fee-for-service rates for behavioral health services with private payers for commercial insurance plans, Medicare Advantage plans, and Medicaid managed care plans. CHCs, however, also receive supplemental wraparound payments from Medicare or state Medicaid agencies to make up the difference between the PPS rates and what the Medicare Advantage or Medicaid managed care plans pay, if the latter are lower.^18,19 Learn more about private payer payments for CHCs (PDF – 958 KB).
• Telehealth and Telemedicine: CHCs and RHCs may permanently serve as Medicare distant site providers for behavioral health services provided using telehealth (telebehavioral health), including audio-only visits, with no geographic limits. While federal rules no longer restrict where the patient is located, provider licensure remains state-governed. Clinicians must be licensed in the state where the patient is physically located at the time of the visit, unless specific state reciprocity or compact agreements are in place.²⁰ The requirement for CHCs and RHCs to conduct an in-person visit within six months prior to an initial home-based telebehavioral health service—and every 12 months after—has been waived through December 31, 2027.²¹ Learn more about RHC Medicare billing for telebehavioral health (PDF – 2 MB) and CHC Medicare billing for telebehavioral (PDF – 3 MB). Find your state’s telehealth policies for CHCs. 

Key considerations for financing IBH in ACOs compared to other primary care settings include:

• Contracting Environment: ACOs enter into shared savings/risk contracts with Medicare, Medicaid, and private payers. Most CMS ACOs now operate under two-sided risk arrangements (sharing in both savings and losses) with five-year agreements, while commercial ACOs often use one-sided risk models that let organizations gain experience with population health without downside risk.²⁹ Learn more about Medicare ACOs, Medicaid ACOs, and private payer (commercial) ACOs.
• Federal Benefits: MSSP ACOs can earn shared savings from CMS by meeting cost and quality benchmarks, which include behavioral health measures (e.g., depression screening, follow-up after hospitalization for mental illness). CMS provides up-front and quarterly payments through Advance Investment Payments in the MSSP to eligible ACOs that can be used to build IBH infrastructure, such as staffing, electronic health record upgrades, and care coordination.²⁹ Learn more about the ACO Investment Model.
• Reporting Requirements: ACOs must track and report cost and quality measures related to IBH financing and outcomes, such as depression screening and follow-up, hospital readmissions, and patient experience. These requirements drive investment in data sharing, registries, and other population health information technology (health IT) that also enable IBH sustainability.^24,30 Learn more about MSSP quality reporting, ACO REACH quality reporting, and state Medicaid ACO program quality reporting.
• Medicaid and Children's Health Insurance Program (CHIP): State Medicaid agencies vary widely in their ACO models. Some contract directly with providers, while others require managed care organizations (MCOs) to form ACO contracts. Several states use Coordinated Care Organizations that integrate physical, behavioral, and sometimes oral health under global budgets with quality incentives.²⁶ Learn more about Medicaid ACOs. Find out if your state has an ACO program on your state’s Medicaid website.
• Private Payers: Commercial insurers may form ACO-like contracts for employer-sponsored populations, Medicare Advantage enrollees, and the individual market. In some states, Medicaid agencies require MCOs to implement ACO or value-based arrangements with provider groups.²⁷ These models increasingly include behavioral health cost and quality benchmarks. Learn more about commercial ACOs and other value-based arrangements.
• Telehealth and Telemedicine: Certain ACOs have expanded telehealth and telemedicine flexibilities. The Bipartisan Budget Act of 2018 created special telehealth coverage for ACOs in two-sided risk arrangements, including the ability to waive geographic restrictions and allow patients to receive telebehavioral health services at home from a provider licensed in their home state.³¹ While federal law allows these flexibilities, providers must still be licensed in the state where the patient is located at the time of the visit, unless specific state reciprocity or compact agreements are in place.²⁰ Learn more about the special telehealth flexibilities for Medicare ACOs (PDF – 172 KB).

Key considerations for financing IBH in health systems compared to other primary care settings include:

• Contracting Environment: Health systems leverage market power to negotiate global budgets or value-based arrangements with private payers.^27,42 These contracts can include IBH quality metrics (e.g., depression remission, follow-up after hospitalization for mental illness). Learn more about navigating value-based payment and aligning incentives with health system and hospital goals.
• Philanthropic Infrastructure: Larger health systems often utilize dedicated 501(c)(3) foundations, dedicated fundraising staff, capital campaigns, and major gift programs to secure the upfront capital necessary for behavioral health integration.^36–41 Philanthropic gifts provide capital that can fund non-billable startup costs for IBH—such as physical space renovations for co-location, specialized electronic health record modules, and initial staff recruitment—that are difficult to finance through revenue from payers. Learn more about healthcare philanthropy and find insights about fundraising and philanthropy for hospitals and health systems.
• Telehealth and Telemedicine: Health systems can utilize their hospital outpatient departments as distant sites, allowing hospital-employed clinicians to provide home-based telebehavioral health services to patients in any location. Additionally, hospitals can bill for outpatient therapy and mental health services furnished remotely by hospital staff through December 31, 2027.²¹ These flexibilities allow health systems to maintain facility-based billing. While federal rules no longer restrict where the patient is located, provider licensure remains state governed. Clinicians must be licensed in the state where the patient is physically located at the time of the visit, unless specific state reciprocity or compact agreements are in place.²⁰ Learn more about telehealth and telebehavioral health flexibilities (PDF – 3 MB).

The table below provides strategies to address unique, setting-specific financing considerations of health systems. For additional strategies that are relevant, but not specific to health systems, you can check:

• Strategies for Financing Integrated Behavioral Health by Payer
• Strategies for Financing Integrated Behavioral Health by Patient Population

Key considerations for financing IBH in PCMHs and Medicaid Health Homes compared to other primary care settings include:

• Contracting Environment: PCMH recognition can be used to initiate pay for performance, shared-savings opportunities, or per-member-per-month care-coordination fees from public and private payers.^49,50 However, Medicaid Health Homes are restricted to Medicaid beneficiaries who meet federal and state-defined criteria (e.g., serious mental illness, substance use disorder, or multiple chronic conditions).⁴⁶ Find payers that provide incentives for NCQA PCMH recognition, payers that provide incentives for Joint Commission PCMH recognition, and see if your state has a Medicaid Health Home program (PDF – 476 KB).
• Federal Benefits: The federal government provides a 90% federal match for state expenditures on Medicaid Health Homes during the first eight quarters of an approved state plan (10 quarters for SUD-focused programs) to incentivize state adoption and implementation.⁴⁶ Learn more about Health Home financing for states.
• Medicaid and Children's Health Insurance Program (CHIP): State Medicaid agencies administer Medicaid Health Home programs, determining which providers (e.g., care managers, behavioral health consultants, and care coordinators) or provider teams can deliver services. They use federal matching funds to support fee-for-service, per-member-per-month, and other value-based payments that cover required care team members.^51,52 See whether your state has a Medicaid Health Home program and what payment model(s) it uses (PDF – 476 KB).
• Reporting Requirements: Both PCMHs and Medicaid Health Homes are required to report on quality and utilization metrics, such as depression screening and follow-up, hospital readmissions, and chronic disease management.^53–55 Reporting often incorporates nationally recognized measures, including Healthcare Effectiveness Data and Information Set (HEDIS) measures, patient-reported outcome measures (PROMs), and patient-reported experience measures (PREMS).^56,57 States may require additional reporting for Medicaid Health Homes beyond federal requirements. Learn more about NCQA PCMH reporting requirements, Joint Commission PCMH reporting requirements, and Medicaid Health Home reporting requirements. Find reporting requirements and resources for your state’s Health Home program, if there is one, on your state’s Medicaid website.

The table below provides strategies to address setting-specific financing considerations of PCMHs and Medicaid Health Homes. For additional strategies that are relevant, but not specific to PCMHs and Medicaid Health Homes, you can check:

• Strategies for Financing Integrated Behavioral Health by Payer
• Strategies for Financing Integrated Behavioral Health by Patient Population

Key considerations for financing IBH in independent primary care practices compared to other primary care settings include:

• Contracting Environment: Independent practices typically have limited leverage in negotiating reimbursement rates with private payers and fewer resources to manage the regulatory and administrative requirements of payer contracts than larger health systems. Smaller practices, in particular, have limited capacity to assume risk in alternative payment models.⁵⁸ However, larger practices can assume more risk in alternative payment models. Those practices that participate in value-based payment models (e.g., ACOs and shared savings arrangements) can succeed financially and often outperform larger health systems.²⁸ Find payer-specific strategies for financing IBH. Learn more about accountable care and ACOs, and the savings achieved by Medicare ACOs led by independent physician groups (PDF – 3 MB).

The table below provides strategies to address setting-specific financing considerations of independent primary care practices. For additional strategies that are relevant, but not specific to independent practices, you can check:

• Strategies for Financing Integrated Behavioral Health by Payer
• Strategies for Financing Integrated Behavioral Health by Patient Population

Key considerations for financing IBH in DPC practices compared to other primary care settings include:

• Contracting Environment: Federal law does not classify standalone DPC arrangements as health insurance, so they are not required to cover the mental health and substance use benefits mandated by the Patient Protection and Affordable Care Act. Many states also exempt DPC arrangements from insurance regulation through specific statutes, limiting the applicability of state insurance mandates.^64,65
• Payment Provisions: Whether DPC agreements may involve third-party reimbursement or must remain strictly patient-paid also varies by state.⁶³ Hybrid DPC practices that keep separate insurance panels face the added complexity of financing IBH under two distinct payment structures.
• Medicare: DPC physicians participating in Medicare cannot accept private payment from beneficiaries for Medicare-covered services; offering memberships that include or facilitate covered services may violate assignment rules.⁶⁶ Many DPC physicians choose to opt out of Medicare to privately contract with beneficiaries. Learn more about Medicare participation options and opting out of Medicare to privately contract for health care services covered by Medicare (PDF – 397 KB), and review sample Medicare private contracts and affidavits.
• Medicaid and Children's Health Insurance Program (CHIP): Rules for DPC vary by state and depend on whether the physician is enrolled as a Medicaid provider. Generally, physicians who are not enrolled may privately contract with Medicaid patients for services, unless state law prohibits it.⁶³ However, under 42 CFR Part 455, only enrolled providers may order or refer tests, prescriptions, or specialty care for Medicaid beneficiaries.⁶⁷ Some states offer an Ordering and Referring Only status for direct primary care clinicians.⁶⁸ Others have piloted or allowed DPC contracts within primary care case management programs, and a few have completely banned privately contracting with Medicaid patients.⁶³ Learn more about Medicaid provider enrollment requirements (PDF – 477 KB). Find rules for direct contracting with Medicaid beneficiaries on your state’s Medicaid website.
• Private Payers: The Patient Protection and Affordable Care Act allows qualified health plans sold through health insurance exchanges to pair DPC arrangements with wraparound coverage, ensuring patients can access major medical services alongside primary care memberships.⁶⁴ Additionally, beginning in 2026, the One Big Beautiful Bill Act will classify DPC membership fees as medical expenses eligible for health savings accounts (HSAs), allowing patients with a high-deductible health plan to pay up to $150 per month ($1,800 per year) with pre-tax HSA funds.⁶⁹ Some states have also piloted or allowed DPC contracts within Medicaid managed care plans.⁶³ Find qualified plans pairing with DPC arrangements with wraparound coverage.

The table below provides strategies to address setting-specific financing considerations of direct primary care practices. For additional strategies that are relevant, but not specific to direct primary care practices, you can check:

• Strategies for Financing Integrated Behavioral Health by Payer
• Strategies for Financing Integrated Behavioral Health by Patient Population