Packard Health received a $25,000 grant to support its bid to create a health clinic on Washtenaw County's east side.

The Ann Arbor-based health center received the grant from the Ann Arbor Community Foundation to support its efforts to become a federally-qualified health center.

The federal designation would make it eligible for increased Medicaid reimbursement rates and make a new clinic more financially viable, Packard Health officials have said.

"Packard Health has been an important part of the health care network in Washtenaw County for nearly 40 years," Cheryl Elliot, foundation president and chief executive officer, said in a statement. "Designation as a Federally Qualified Community Health Care Center would significantly increase its reach and will positively affect other health care providers in the region as well."

The center is interested in opening an Ypsilanti health center because there are large numbers of people on the east side of the county who are medically underserved because they have no health insurance and are otherwise unable to afford health care, said Kimberly Kratz, Packard Health's executive director.

It would be Packard Health's third location, in addition to its Packard Road home near Platt Road and its Packard West clinic that opened on Maple Road last fall. Making a center more geographically accessible to residents on the eastern side of the county is one part of Packard Health's strategy for reaching out to increasing numbers of people struggling with access to health services.

"At last count, more than 80,000 people in Washtenaw County are uninsured or underinsured," Kratz said in a statement. "The application process to become a designated FQHC is time-consuming and expensive. Packard Health is deeply grateful to the Community Foundation for its support in helping us make this happen."

U.S. Census data released last week shows more than 14 percent of Washtenaw County residents under 65 — or about 43,000 people — were uninsured in 2007, the most recent data available. In a needs assessment of the Ypsilanti area, Packard Health found there were numerous primary care offices available, but none that offered sliding-fee scale discounts to low income, uninsured patients.

Earlier this year, the state said it was backing Packard Health's push to qualify with an exception for the designation, saying Washtenaw County had significant numbers of people who are medically underserved, despite the presence of several large health care entities in the county.

The federal government has since said the health center is eligible to apply.

The U.S. Department of Health & Human Services will review Packard Health's application in September and is expected to make a final decision by early 2011. An approval would make Packard Health the only federally-qualified health center in the county.

"It would be fantastic if (Washtenaw County) got a federally qualified health center," said Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation. "On that side of the county, we have higher rates of the population who are uninsured or are newly eligible for Medicaid services."

But, she said, "We as a community, state and nation are going to need to meet huge demand for primary care."

There is an increasing challenge for providers to accept an influx of Medicaid patients because historically, its reimbursement rates have been too low. Just getting covered with expanded eligibility from health care reform legislation doesn't necessarily mean access to health care, officials said.

Packard Health already accepts a larger group of Medicaid patients than the typical physician's office, but the designation could improve its ability to do that, Udow-Phillips said. In addition, the fact that the health center already follows the patient center medical home model makes it uniquely positioned to serve the community.

Clinics with FQHC status receive higher reimbursement rates for Medicaid patients and are allowed to compete for additional grant funding. In the stimulus package, $11 billion was set aside over five years for FQHCs to develop organizational capacity, add patients and enhance services. Federally qualified health centers, also called Community Health Care Centers, were launched in 1965. The application process can take more than a year.

To receive the designation, a clinic must provide comprehensive primary and preventative care services - including dental and mental health care, must use a sliding scale payment system, be run by a board made up of a majority of patients, and follow specific performance and accountability requirements.

Packard Health has received support from a number of partners around the county, including both the University of Michigan and St. Joseph Mercy Hospital - a factor in the foundation's decision to offer the grant.

Tina Reed covers health and the environment for AnnArbor.com. You can reach her at tinareed@annarbor.com, call her at 734-623-2535 or find her on Twitter @TreedinAA.