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Academic Medicine:
doi: 10.1097/ACM.0b013e31828ace4e
Articles

Transforming a Family Medicine Center and Residency Program Into a Federally Qualified Health Center

Cousineau, Michael R. DrPH; Flores, Hector MD; Cheng, Scott MPH; Gates, Jerry D. PhD; Douglas, James H.; Clute, Gerald B.; Coan, Carl E. MS, MPH

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Author Information

Dr. Cousineau is associate professor, Department of Family Medicine and Preventive Medicine, Keck School of Medicine of the University of Southern California, Los Angeles, California.

Dr. Flores is codirector, Family Medicine Residency Program, White Memorial Medical Center, Los Angeles, California.

Mr. Cheng is evaluation specialist, Department of Family Medicine, Keck School of Medicine of the University of Southern California, Los Angeles, California.

Dr. Gates is chairman, Department of Family Medicine, Keck School of Medicine of the University of Southern California, Los Angeles, California.

Mr. Douglas is president, JD Healthcare Management LLC, Reseda, California.

Mr. Clute is the former president and chief executive officer, California Hospital Medical Center, Los Angeles, California.

Mr. Coan is chief executive officer, Eisner Pediatric and Family Medical Center, Los Angeles, California.

Correspondence should be addressed to Mr. Cheng, Department of Family Medicine, Keck School of Medicine of USC, 2001 N Soto St., MC 9239, Los Angeles, CA 90032; telephone: (323) 442-8249; e-mail: scottche@usc.edu.

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Abstract

The authors describe a family medicine center before and after a merger between the Keck School of Medicine of the University of Southern California, the California Hospital Medical Center, and the Eisner Pediatric and Family Medical Center in 2012. The merger provided new opportunities to stabilize the financial base of a clinical practice struggling financially and to enhance the training of residents and other health professionals in primary care, which motivated the partners to consider this new model. After 18 months of negotiations, they were able to convert the family medicine center and residency program into a new federally qualified health center. The benefits to this new model include an increase in both patient volume and the quality of education, supporting residency accreditation; a greater number of residents from U.S. medical schools; enhanced education and preparation of primary care physicians for practice in medically underserved communities; enhanced reimbursements and new opportunities for state, local, and federal grants; and quality improvement and new information technology. The partners overcame academic, administrative, legal, and regulatory obstacles, communication barriers, and differences in culture and expectations to achieve this merger. Keys to their success include the commitment of the leaders at the three institutions to the goals of the merger, a dedicated project manager and consultants, opportunities for new revenue sources and reimbursements, and support from a pioneering charitable foundation. The authors conclude by discussing the implications of using community health centers as the focal point for training primary care clinicians and addressing workforce shortages.

Many have written about the projected primary care physician shortage. Yet, most medical students continue to choose specialty training rather than careers in primary care.1 If current trends continue, the physician workforce will be unable to meet the projected need for primary care physicians with the advent of the Patient Protection and Affordable Care Act (ACA),2,3 particularly in low-income and rural communities.4–6

Some have proposed reconsidering where physicians are trained as one solution to the primary care workforce shortage, particularly in medically underserved communties.7 Hospital-based family medicine residencies increasingly are becoming unsustainable because many academic medical centers (AMCs) care for uninsured patients, which poses a financial threat to clinical practices and their AMC sponsors.8 This strain and proposed reductions in federal funding for graduate medical education (GME)9,10 have contributed to the decline in the number of family medicine residencies in the United States.11

As hospital-based residencies become less feasible, physicians’ offices, clinics, and other ambulatory settings provide alternative venues for GME training in primary care.12 These venues offer clear benefits for training primary care clinicians,13 including teaching disease management models14 and promoting interprofessional team-based care.15,16 However, the current GME payment structure does not easily support such ambulatory care-based training programs. Community health centers (CHCs),17 however, have promise as future training sites because of their role in the health care safety net.18,19 Currently, over 8,000 CHCs serve over 20 million low-income patients annually in the United States.20 Under the ACA, the number of CHCs could double and play an even larger role in serving both the newly insured and those who remain uninsured.21 However, CHCs have a particularly difficult time recruiting and retaining a primary care workforce given the competition for the limited and declining pool of trained primary care clinicians.22 Still, although health professionals trained in CHCs may be more likely to practice in medically underserved areas, there are few training programs formally preparing physicians to work in such settings.20,23

Linking a university and a hospital-based residency program with a CHC creates a new set of challenges. Morris and Chen9 noted that a successful CHC-based residency program requires that the institutions that govern such programs share a mission of education, service, innovation, and flexibility. However, as described in another study, administrative problems and governance issues were the primary obstacles in establishing effective partnerships for such CHC-based residency programs.24 Moreover, managing federally funded CHCs requires compliance with federal rules concerning volume, access, and quality of care at each site. These rules may be incompatible with the requirements of the residency program accrediting boards because residency programs also must ensure sufficient time for faculty teaching and, among residents, for learning. Meeting these requirements is particularly challenging for family medicine residency programs because of the required faculty-to-resident ratios, practice space requirements, a curriculum that includes a specific number of hospital-based rotations, and Medicare regulations governing GME-supported activities.25

In this article, we describe the conversion of a family medicine center and residency program into a jointly operated clinical and educational collaboration involving a university medical school, a community hospital, and a CHC. We also identify barriers, keys to success, and lessons learned that we hope will inform other efforts to build health-center-focused training programs. To prepare this article, we first conducted guided interviews with key leaders from each of the three partner organizations, including the Keck School of Medicine of the University of Southern California (USC), the California Hospital Medical Center (CHMC), and the Eisner Pediatric and Family Medical Center (EPFMC). We also interviewed the residents, clinicians, and faculty at the original family medicine center. We asked interviewees about their motivations for the merger (financial, patient care, organizational, and training), their expectations in achieving the merger, challenges and keys to success in the merger process, and lessons learned. Additionally, we reviewed grant proposals, affiliation agreements, progress reports, meeting minutes, and other documents related to the merger process. In this article, we describe the changes that occurred in the family medicine center before and after the merger in five areas: structure and governance; revenues and finances; quality improvement and information technology; volume of care; and the residency program (see Table 1 for a comparison of the family medicine center before and after the merger).

Table 1
Table 1
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The Family Medicine Center and Residency Program Before the Merger

This merger involved three organizations—the Department of Family Medicine at the Keck School of Medicine of USC; CHMC, a community acute care hospital in downtown Los Angeles and sponsor of the residency program; and EPFMC, a federally qualified health center (FQHC). Each has a long history of serving South Los Angeles,26–28 which includes some of the nation’s most impoverished communities.29 Under a contract with CHMC, USC has operated the residency program since 1984 and continues to oversee the clinical services. Although all three institutions are geographically close, there had been little clinical integration before the merger, so this formal affiliation process required transferring assets, personnel, and clinical and administrative functions between the partner institutions.

Each institution had a different motivation for pursuing the conversion of the family medicine center. Before the merger, the family medicine center, for example, had inadequate patient management systems, and their quality improvement and billing systems met the needs of a university such as USC but not those of a busy community-based practice with patients with complex health and social problems. Also, the family medicine center had no operable health information technology system that aligned with federal requirements.30

In addition, our review of residency review committee reports showed a consistent underperformance in the number of patients seen by the residents at the family medicine center, leading to the residency committee citing deficiencies in their accreditation reports. In 2010, the family medicine center reported just over 11,000 patient visits, fewer than the federally required number based on the number of residents. In addition, its patient volume and payer mix was insufficient to maintain fiscal solvency—most patients were covered by Medi-Cal (California state Medicaid), and the volume of patients was not high enough to compensate for the relatively low per-visit reimbursement rate from the Medi-Cal program.

Contributing to this less-than-optimal patient care volume at the family medicine center was the time required for educational activities. Both faculty and residents had non-clinical-care responsibilities that limited their ability to see patients, thus limiting the center’s ability to generate the revenue needed to support the clinical enterprise. This setup challenged the financial underpinning of the family medicine center, which relied entirely on patient care reimbursement and GME payments (which it received through a contract with CHMC). As a result, the family medicine center was operating with an annualized deficit of over $650,000. The unstable financial state of the center made it difficult to recruit and retain faculty and residents. Before the merger, the residency program could not fill its classes with graduates of U.S. medical schools, and leaders at CHMC proposed closing it.

Meanwhile, EPFMC pursued the merger as an opportunity to incorporate medical education into the hospital to expand its commitment to the community and to begin to solve its workforce challenges.

Because of these ongoing problems, USC considered converting the family medicine center into an FQHC under the auspices of the university. USC leaders, however, rejected this approach because the university could not comply with the federal regulation that required a 51% consumer majority on the governing board of a health center.31 An alternative solution was to merge with EPFMC, an existing FQHC located in close proximity to the family medicine center. A grant from a local foundation provided the resources for USC to hire a project manager to oversee the merger, consultants for grant writing and organizational transformation, and program evaluation.

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Completing the Merger

Leaders at the three partner institutions (CHMC, USC, and EPFMC) identified the administrative and legal obstacles to the merger, established committees and subcommittees for overseeing the transformation, convened meetings between the clinical and teaching faculty, and submitted a federal Health Resources and Services Administration (HRSA) grant proposal. With the guidance of a project manager, they developed affiliation agreements and governance arrangements and completed personnel and asset transfers. After 18 months of planning and difficult negotiations, USC successfully transferred the family medicine center to EPFMC. This merger alone was an achievement for the partner institutions, given the complexity of their organizations, the delicacy of their negotiations, and the risks associated with the transfer for all parties.

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Structure and governance

This merger brought about some important changes to the roles and responsibilities of each institution. The previously independent family medicine center became an FQHC governed by an innovative partnership and an oversight committee with members from all three partner institutions serving both clinical and administrative functions. Under the new model, some areas of responsibility overlap, whereas others are specific to each of the partner institutions. CHMC, for example, continues to sponsor the residency program and contracts with USC for faculty time. Responsibility for clinical operations and management shifted from USC to EPFMC, whereas EPFMC maintained control of its employees and other management functions. Both USC and CHMC now occupy one seat on the EPFMC board of directors, and new committees that were established to monitor the transformation process include representatives from each institution (see Figure 1).

Figure 1
Figure 1
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The merger removed the responsibility for many of the day-to-day administrative tasks of running a clinical practice from the faculty, allowing them to concentrate instead on teaching. For EPFMC, the merger provided both new teaching opportunities and faculty positions for the clinical staff and access to a new network of subspecialty physicians. Teaching residents now engages physicians at the family medicine center in education as well as clinical service activities.

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Revenues and finances

The merger provided new opportunities for expanding and stabilizing funding for clinical operations at the family medicine center, and the $650,000 annual operating deficit was replaced with new funding sources. For example, the ACA provides funding for new and expanded CHCs, called new access points.32 On behalf of the partner institutions, in January 2011, EPFMC submitted the application to HRSA to designate the family medicine center as a new access point.20 HRSA approved the application a year later designating the family medicine center as an FQHC, which entitled it to receive cost-based reimbursement for Medi-Cal patients, $600,000 in start-up funding, and ongoing operational grants.

In addition to this federal revenue source, the family medicine center tapped into local funding sources for serving the uninsured, because EPFMC had existing contracts with the Los Angeles County Department of Health Services. These funding sources included programs funded under the State of California’s 1115b Medicaid waiver, in which the family medicine center previously was ineligible to participate because it had not been part of the Los Angeles County Public Private Partnership Program.33 Under this waiver, the family medicine center converted the Medi-Cal Seniors and Persons with Disabilities (SPD) group into a managed care plan, which acted as an additional source of revenue. Because of EPFMC’s relationship with the L.A. Care health plan, they were able to secure a $125,000 grant to support SPD patients assigned to the family medicine center.34 Through the same relationship with L.A. Care, the family medicine center secured a medical home demonstration grant. These new grants and contracts erased the family medicine center’s existing deficit, and today the center operates with a balanced budget.

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Quality improvement and information technology

As an existing FQHC, EPFMC brought years of experience running a program for low-income and working families, including cultural and linguistic systems for patient care management, front office and appointment systems, quality improvement, appointment scheduling, patient education materials, and clinical management tools. Additionally, EPFMC provided health information technology that has allowed the family medicine center to improve its workflow by introducing new patient registration, billing, patient management systems, and electronic medical records to its day-to-day operations.

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Volume of care

In the year after the merger, patient volume at the family medicine center increased from 11,600 patients to over 13,600 patients. As a result, the family medicine center is operating more efficiently and is serving not only a more diverse population but also more patients with chronic illnesses, with whom the faculty and residents are trying to establish ongoing relationships.

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The residency program

In the year after the merger, the quality of the medical school graduates applying to the residency program improved dramatically. In 2012, the residency program filled all eight first-year slots with U.S.-trained medical students, all of whom who entered the National Resident Matching Program for the class of 2012.35

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Lessons Learned

This collaboration is an innovative model for training family medicine residents in a CHC. It combines the benefits of a community-based teaching program closely affiliated with a medical school and a community hospital with those of a training program focused on the principles of primary care and community health. These changes are important for the management of the family medicine center, but they also enhance the residents’ educational experiences by exposing them to these new systems that are based on performance, quality, and efficiency in a safety net setting.

The partner institutions overcame significant barriers to bring about this merger, including several administrative and legal obstacles related to governance, personnel, procurements, contracts, and leases, which the literature has shown other large organizations have found difficult to overcome.36 Addressing personnel issues was particularly difficult because staff had to agree to transfer their employment from USC to EPFMC. In addition, legal counsel from all three partner institutions often raised seemingly insurmountable issues throughout the merger process.

Although all three partner institutions had worked together in the past, the culture underlying each remained quite different. Safety net hospitals and health centers focus on the delivery of care and must overcome the health, economic, and social disparities of their patients. USC, a university, however, must address its academic mission. The administrative difficulty in merging these organizations was exacerbated by these different cultures and business processes. USC recognized the need to adapt to a new environment that emphasized higher levels of clinical productivity, strict governance regulations for FQHCs, and addressing the family medicine center’s financial deficits. EPFMC recognized the challenges and time needed for teaching residents, achieving accreditation faculty-to-resident ratios, and meeting Medicare and Medicaid GME regulations about training residents in nonhospital settings.

In addition, the lack of effective and timely communication among the partner institutions threatened to delay the merger. In some cases, the project manager was unable to obtain financial and other data needed for grant applications and other administrative tasks in a timely fashion. The communication between the partner institutions was often limited by the restrictions posed by nondisclosure and confidentiality agreements and a desire to avoid creating anxiety among the staff and residents. In addition, the staff, residents, and faculty at the family medicine center were unaware entirely of some milestones in the merger, such as when the transfer would occur, who would be affected, and how it might change clinical care or residency training activities or their jobs. Finally, leaders at the partner institutions are busy executives without the discretionary resources and time to accomplish the myriad tasks that were necessary to bring about the merger.

In solving all of these problems, we identified four key lessons for success:

1. Leaders at the three partner institutions brought an unrelenting commitment to achieving the ultimate goal, which helped to eliminate some of the communication problems that resulted from the cultural differences and expectations among the partners. This commitment has been critical to the success of other health center organized teaching programs and proved to be important to the success of ours as well.9,37 These leaders were able to expedite the approval process through their own complex organizations in what otherwise would have been a long process of review and revision. Instead, they met all the deadlines for submitting grant proposals and materials for overcoming these obstacles.

2. Hiring a project director and consultants facilitated the resolution of many of the obstacles faced. The project director kept the project on track and navigated the merger efficiently in spite of the busy schedules of the leaders at the partner institutions. The project manager served as a liaison between all the committees, developed and implemented project timelines, communicated with government officials, and wrote grant proposals.

3. The opportunities for securing additional federal and local revenue sources motivated all parties to move quickly to facilitate the merger, submit applications for funding, and secure access to new funding streams. Because of this efficiency, the parties were able to establish a financially stable structure for the family medicine center and the residency program that set it on a course toward sustainability.

4. Financial support from a pioneering local foundation provided the resources needed for infrastructure development, grant writing, legal counsel, and other administrative tasks.

Although the merger process was a success, this partnership is only the beginning of the transformation process. The partner institutions face ongoing challenges, including developing or improving systems to ensure and better the quality both of the patient care delivered at the family medicine center and the training provided by the residency program. The merger has brought to the family medicine center a patient population with significant chronic diseases and mental health problems that will require the practice to reconfigure its patient care delivery system to emphasize continuous care and chronic disease management under a patient-centered medical home model. Going forward, the center must identify the appropriate clinical leaders and empower them with clear and well-defined lines of authority, accountability, and governance structures within the collaborative framework. It must also promote the family medicine center as an integral setting for training residents and other health professional students in patient care.

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Going Forward

Connecting a clinical practice and training program that are financially struggling to an FQHC can help to stabilize their financial base while maintaining the role that academic and inpatient institutions play in their management. Replicating our model with other primary care residencies in the United States also could help to close the gap between the need for and supply of primary care physicians serving CHCs and other safety net providers. In addition, training residents in a CHC will give future physicians a better understanding of the social determinants of health and how community agencies can promote the health of families and communities.38

To expand the number of community-based training sites, however, will require a review of the regulations governing residency programs, many of which now act as barriers to transforming such practices to better align them with the goals of primary care. Leaders also should consider combining innovative approaches to training with new ways of delivering care with the goal of transforming training programs into settings where research and development in deploying policy initiatives takes place, such as the patient-centered medical home39 and accountable care organization models.40 Moreover, leaders should consider expanding this model through the Teaching Health Center Graduate Medical Education program,41 which is designed to increase the number of primary care residents and dentists trained in community-based ambulatory patient care settings. Finally, we recommend that institutions considering such mergers continue to study their effects on the cost of health care, patients’ access to care, and the quality of care delivered.

Acknowledgments: The authors wish to thank the leaders of the three partner organizations who participated in interviews and shared data. They also wish to thank Christine Feifer, DrPH, the staff, faculty, and residents of the family medicine center, the Keck School of Medicine of USC, the California Hospital Medical Center, and the Eisner Pediatric and Family Medical Center, who agreed to be interviewed for the study component of this merger process.

Funding/Support: The study component of this merger process was supported by a generous grant from the Unihealth Foundation, Los Angeles, California.

Other disclosures: None.

Ethical approval: The study component of this merger process was submitted and approved by the USC institutional review board for the protection of human subjects.

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© 2013 Association of American Medical Colleges

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