To better understand the financial challenges facing health centers today, the African American Research Collaborative, with Commonwealth Fund support, interviewed federally qualified health center (FQHC) leaders and experts in the spring of 2023. In the study, 29 participants, including FQHC chief executives, CMOs, senior staff members, and experts who study FQHCs and health systems were asked about quality improvement, value-based care, health equity initiatives, COVID-19 recovery, workforce issues, and financial challenges.
According to the Commonwealth Fund, the findings of the study suggested three policy options that could help with funding challenges at health centers:
Increase Medicaid Reimbursement Rates and Continue to Expand Medicaid
“Centers have increasingly relied on Medicaid reimbursements, but this revenue stream is expected to decline this year as patients are automatically disenrolled. Medicaid expansion can ensure more patients have access to health care, while generating revenue for health centers and bolstering their workforce. Increasing reimbursement would offer centers greater opportunities to invest in their workforce and care delivery, which our interviewees described as difficult to do under current levels.”
Reauthorize and Increase the Community Health Center Fund
“Without reauthorization by the end of September, centers will lose $4 billion in annual funding. But given that the Fund has not kept up with inflation or the increasing number of centers, reauthorization alone will likely not be enough to overcome the financial challenges our interviewees described. By one estimate, the Fund would need to increase by $2 million to account for inflation.”
Revise the 340B Prescription Drug Program
“Inconsistent oversight, disparate court rulings, reduced participation from pharmaceutical companies, and decreased revenues mean centers are uncertain about their future revenue. Experts have called for greater data collection and transparency regarding how savings translate into improved patient care. Policymakers have called for stronger oversight and accountability for pharmaceutical companies that restrict their supplies through legislation. Ultimately, revision of the program should ensure that centers continue to maintain revenue streams and can facilitate cost savings for patients.”
The Commonwealth Fund pointed out that “Medicaid reimbursements are the largest single source of revenue for centers (roughly 44%), but low reimbursement rates have made it difficult for them to improve their care delivery and hire new staff.” In addition, Medicaid revenue increased during the COVID-19 pandemic because “beneficiaries were able to remain continuously enrolled, leading to higher revenue despite flat reimbursement rates.” However, as this policy ends and beneficiaries are disenrolled, “Medicaid-related revenue is expected to drop by up to 17 percent across all health centers,” according to one estimate.