The floor, the three APM shapes, the reconciliation under each path, a worked example, and the questions a board should answer before it signs the election form.
CMS's State Health Official letter of April 26, 2016 states the two conditions plainly, and names the problem managed care produced: reconciliation disputes and complaints about the timeliness of supplemental payments [1].
An APM is never a discount. If the methodology cannot show at least PPS, the state owes the difference, so the real question is timing, plumbing and who carries the reconciliation.
CMS SHO #16-006
SD, TN, NC
TN, NV
The first design moves the cash obligation from the state to the plan. Designs 2 and 3 change the rate itself, and in most states the money still arrives through MCO plus wrap, so the reconciliation work does not disappear.
Qualifying encounter
One encounter line, one expected value
Oversight and reconciliation
No wrap needed
Your check is the remittance against the PPS rate per visit
The floor is tested per center, not per visit. Tennessee is the clearest statement: if PPS is greater than the APM payment the state reimburses the difference; if PPS is less, no recoupment [3].
A floor tested once at election can drift if the APM and PPS trend differently.
| State | Floor language | Annual trend | Rebase or review | Source |
|---|---|---|---|---|
| South Dakota | APM encounter rates will be at least equal to the FQHC's PPS rate | MEI for primary care each July 1 from 2027 | Re-evaluated at least every 5 years from cost reports | [2] |
| Tennessee | State pays the difference if PPS exceeds APM; no recoupment the other way | FQHC market basket each July 1 | Option 1 updated no more than once every 5 years | [3] |
| North Carolina | Lump-sum reconciliation of APM versus actual payments from July 1, 2023 | Greater of FQHC market basket or medical CPI | Rebased triennially from Medicaid cost reports | [4] |
| Maine | Annual review that APM rates exceed PPS rates | Set by FY27 rate letters | Rate letters each fiscal year | [5] |
| Nevada | APM must result in payment at least equal to the PPS entitlement | MEI each October 1 | Change in scope on request | [6] |
Ask the state to show you the floor test in writing: which rate, which year, which reconciliation, and who pays the difference if PPS wins.
| Question | PPS plus state wrap | APM paid in full by the MCO | Enhanced-rate APM through MCO plus wrap |
|---|---|---|---|
| Who owes the gap to the floor | The state, as a supplemental payment | The plan, under its contract | The plan up to its rate, the state for the rest |
| Primary reconciliation file | State wrap report versus encounter ledger | 835 remittance versus PPS rate per visit | Both files, keyed to the APM rate year |
| Where underpayment shows up | Encounters missing from the wrap pool | Lines paid below PPS on the remit | Either, often months apart |
| Timing of full payment | Interim now, settlement later | One payment per visit | Interim now, settlement later |
| Who you escalate to | State Medicaid agency | Plan, then state oversight | Plan and state, by component |
| Line | PPS plus wrap | APM in full via MCO | Enhanced APM via MCO plus wrap |
|---|---|---|---|
| Rate the center is entitled to | $250.00 PPS | $250.00 PPS | $265.00 APM |
| Paid by the MCO per visit | $140.00 | $250.00 | $140.00 |
| Owed by the state per visit | $110.00 | $0 | $125.00 |
| Annual entitlement, 10,000 visits | $2,500,000 | $2,500,000 | $2,650,000 |
| Arrives with the interim payment | $1,400,000 | $2,500,000 | $1,400,000 |
| Depends on later settlement | $1,100,000 | $0 | $1,250,000 |
| Encounters that never enter the pool at 5% | $55,000 lost | $0 if the remit is checked | $62,500 lost |
Round numbers chosen to show the mechanics: not a state rate, a client rate or a benchmark. Replace them with your rate letter and MCO fee schedules.
Rate times volume is the headline. Cash timing, pool leakage and reconciliation labor decide whether the headline shows up in the bank.
| State | Service-line treatment | Figure or rule | Source |
|---|---|---|---|
| South Dakota | Separate medical and dental APM elections | Medical $336.71, dental $390.36, both from July 1, 2026 | [2] |
| Tennessee | Option 2 lets an FQHC request a separate dental rate | Built from the two most recent fiscal years of dental cost; interim statewide average until then | [3] |
| Nevada | Multi-visit service-specific APM | Up to three encounters per patient per day: one medical, one behavioral health, one dental | [6] |
| District of Columbia | Rebasing schedule, all lines | Next FQHC rebase moved from January 1, 2026 to January 1, 2027 | [7] |
| # | Question | Evidence to request | Red flag |
|---|---|---|---|
| 1 | Is the APM above PPS today, site by site and service line by service line? | Current rate letter and the APM rate schedule | A blended APM below PPS for dental or behavioral health |
| 2 | Do APM and PPS trend by the same index each year? | State plan trend language [2] [3] | APM frozen until a rebase while PPS moves by MEI |
| 3 | How often is the APM rebased, and on whose cost data? | Rebase interval: 5 years in South Dakota and Tennessee, 3 in North Carolina [2] [3] [4] | A rebase that can lower the rate without a floor test |
| 4 | Can we still file a change in scope? | South Dakota and Tennessee allow it under the APM [2] [3] | Silence on change in scope |
| 5 | Who pays the gap if PPS wins in a given year? | Floor language and reconciliation timing [3] [5] | A floor tested only at election |
| 6 | Does the APM end state wrap, or add to it? | MCO contract language and capitation treatment [1] | Enhanced rate with no plan contract change |
| 7 | What is the exit? | Election form terms and revocation rules | A one-way election with no revert date |
| 8 | Can our ledger prove the floor? | Encounter-level variance file by rate year | Reconciliation done in totals, not encounters |
Published wrap reconciliation case study, seven-site FQHC
Same case study
PPS is the default Medicaid payment for FQHC services: a per-visit rate built from the center's own costs and updated each year by the Medicare Economic Index, with a change-in-scope adjustment. An APM is any other methodology a state offers under section 1902(bb)(6). CMS's 2016 guidance sets two conditions: the state and the center must agree to it, and it must pay at least what PPS would have paid.
No. The CMS State Health Official letter of April 26, 2016 says states must be prepared to demonstrate that each affected FQHC and RHC has agreed to the APM, and the approved state plans we reviewed require a written election. South Dakota's 2026 amendment says the request must be made in writing on a form the department specifies.
The floor still applies. Tennessee's approved plan says that if the PPS rate is greater than the payment resulting from the APM, the state will reimburse the facility the difference, and if the APM pays more, no recoupment is made. Maine states in its FY27 rate letter bulletin that it reviews each year to confirm APM rates exceed PPS rates.
Only if the APM is designed that way. CMS's 2016 letter describes an APM in which the state requires managed care plans to pay the full PPS rate and builds that rate into capitation, which removes the general need for state supplemental payments. An enhanced-rate APM paid through the same MCO-plus-wrap plumbing still needs encounter-level reconciliation.
Among the CMS approvals and state notices we opened: South Dakota (medical and dental APM from July 1, 2026), Tennessee (APM menu approved February 25, 2026), the District of Columbia (rebasing moved to January 1, 2027), Nevada (statewide managed care language submitted March 2026) and Maine (FY27 letters confirming APM above PPS). Our FQHC Medicaid APM tracker lists each with its source.
A floor tested once at election can drift if the APM and PPS trend differently.
We run the at-least-PPS floor test on your own encounter file, by site and service line, and hand your board a variance table it can act on.