Federal Health Centers Face Fiscal Cliff, Plus New Challenges

Clinics that traditionally care for poorest residents are weeks away from possible 70-percent cut in key federal funding stream

Health center
Nearly half a million New Jersey residents have sought care at one of the state’s Federally Qualified Health Centers in recent years, community health clinics that provide a broad range of pediatric and adult care to patients regardless of income level or insurance status.

But, despite strong bipartisan support for FQHCs nationwide, these facilities are just weeks away from potentially losing billions of dollars in critical federal support if a 70-percent cut negotiated as part of a 2015 budget deal takes effect as planned on October 1.

While Medicaid pays for more than 43 percent of the patients who visit Garden State clinics — and some revenue comes from grants and commercial insurance and Medicare — the federal funding in question provides at least one out of every five dollars of the annual budgets of the FQHCs, according to the New Jersey Primary Care Association, which represents the 23 facilities that now provide care at 129 sites.

“We are always struggling to keep up with the funding,” said former state Assemblywoman Joan Quigley, president and CEO of the North Hudson Community Action Corp., an FQHC that treated more than 70,000 patients last year and stands to lose millions of dollars if what healthcare advocates are calling the “primary care cliff” becomes reality. “But frankly, FQHCs are such a popular program, we’ve never really faced a crisis before. (Federal funding issues) were always resolved amicably and early,” Quigley added.

In New Jersey, Gov. Chris Christie has emphasized — and added funding for — FQHCs in recent years, in part to help them absorb patients who could not access women’s healthcare services at other facilities, which have received fewer state dollars during his administration.

Fewer services

The potential cut, Quigley said, would likely result in fewer services at the North Hudson CAC, shorter hours, and — for those who can’t wait a few days for an appointment — more patients being diverted to already overcrowded emergency rooms, which are required by law to provide care. “And that (ER) treatment is going to cost so much more” than it would at an FQHC, she noted.

The funding loss would come at a time when FQHCs, a model developed five decades ago that now treats some 23 million vulnerable citizens nationwide, are already facing a variety of new financial pressures and struggling to adopt to significant policy changes, according to a study released last week by Sage Growth Partners, a Baltimore-based healthcare consultant and research organization.

“FQHCs already face a challenging set of financial circumstances, but the funding cut that could occur if Congress doesn’t act by September 30 would be devastating,” said Sage Growth Partners’ COO David Sheehy, who also serves as chairman of the Baltimore Medical System, the largest FQHC in Maryland. (Advocates, including the National Association of Community Health Centers, are lobbying Congress to extend what is now a $5 billion annual appropriation into the future.)

“FQHCs do not have the financial cushion to absorb the impact of what is likely a 10-20 percent net reduction in their total revenues without reducing sites, providers, services and, ultimately, access to care,” Sheehy added, noting that federal government estimates suggest it could lead to the closure of more than 2,000 sites, provider layoffs, and reduced access to care for some nine million Americans.

The Sage study — which involved interviews late last year with 175 FQHC leaders nationwide, including more than half a dozen from New Jersey — was an effort to fill a knowledge gap surrounding these established safety-net providers. “Little information exists on these centers, their leaders, and the trends affecting them,” Sage noted in a summary of its findings.

Growing pressure

While there were differences among urban, suburban, and rural facilities, Sage identified a number of shared trends: growing pressure to diversify revenue sources; difficulties adjusting to new payment models — like systems that reward outcomes instead of office visits; inconsistent leadership; limited marketing; and growing competition from urgent care centers and other clinics that have targeted the low-income patients who once had few options.

“I think the idea of competition for FQs is a new one,” Sheehy said. While in the past few other providers had much interest in treating patients who often had complex, untreated health conditions, but lacked insurance, that changed under the Affordable Care Act, or Obamacare, he said. The 2014 law extended Medicaid to more than 20 million Americans, including at least 500,000 in New Jersey, and that Medicaid card they now carry guarantees providers will be paid (albeit at lower rates) and makes these patients more attractive customers.

The ACA was “both a blessing and a curse, or challenge, to the FQHCs,” Sheehy said, noting that the expansion also enabled the federal clinics to tap Medicaid dollars that were previously out of reach. “But it also made other providers sit up and take notice of these patients who now have insurance.”

In general, Sage found that facilities that operated more like for-profit businesses — focusing on revenue diversity, developing leadership talent, and conducting effective marketing — were in a better position to adapt to ongoing changes at the federal level. FQHCs have also benefitted from expanding their partnership network to collaborate with hospitals, specialists, advocacy organizations and local governments.

‘Think like a business’

“It’s a mindset change, beginning to think like a business, not a not-for-profit,” Sheehy said. “It’s about adopting that future orientation and thinking about keys for future success, and working backward to begin to make some changes now, even if they are financially challenging.”

Sheehy said that while this type of transition is even more challenging when federal dollars are at risk, the situation also underscores the need to evolve and identify new support. “The uncertainty in federal funding — whether it is tied to the cliff or other potential cuts that could come through Medicaid program changes — further serves to reinforce the need for FQHCs to diversify their sources of revenue,” he said. “Federal and state grant programs are not a long-term solution for a weak business model.”

Such an evolution is in the works at the North Hudson CAC, Quigley noted. The organization now partners with several hospital systems, including Jersey City Medical Center, which provides cardiologists and other specialists several days a week at no charge. The CAC also works with the Diabetes Association, the Cancer Society, and others on dedicated campaigns and she said it recently acquired a seven-member dental practice to expand oral-care options.

And while North Hudson patients with Medicaid are sometimes “seduced away” by competing family health clinics, Quigley said many return to the CAC when they realize they can’t get all their healthcare needs met at a more traditional doctor’s office. The draw is that FQHCs offer quality care and a wide range of services, from blood-pressure checks, to fluoride treatments for children, to substance abuse and behavioral healthcare, she said, and services are tailored to the local community.

“We do a little bit of everything,” Quigley said. “And we are culturally competent in every way. We have people who speak every language.”