A Long and Winding Road: Federally Qualified Health Centers and Prospects Under Reform

Overview

Federally qualified health centers (FQHCs) have traveled a long road from their origins in the civil rights movement and the War on Poverty of the 1960s to becoming established pillars of the American primary care system. What began as a handful of community health centers founded by two Tufts University physicians in South Boston and the Mississippi Delta has grown into a national network of more than 1,200 organizations operating over 8,100 sites of care.

Published as HSC Research Brief No. 21 in November 2011, this study by Aaron Katz, Laurie E. Felland, Ian Hill, and Lucy B. Stark examined FQHC development across 12 nationally representative metropolitan communities tracked by the Center for Studying Health System Change (HSC) since 1996. Drawing on nearly 550 interviews conducted during the 2010 Community Tracking Study site visits, the researchers documented how FQHC capacity had expanded substantially, driven by growing numbers of Medicaid enrollees and uninsured patients, increased federal investment, and improved organizational management. At the same time, the development of FQHCs varied dramatically from one community to the next.

Growing Demand and Federal Investment

Several forces fueled the expansion of FQHCs over the preceding 15 years. The number of uninsured Americans grew faster than the general population, while private physicians became less willing to provide charity care. The share of the U.S. population covered by Medicaid rose from approximately 10 percent in 1999 to 17 percent by 2010. Both the Bush and Obama administrations increased direct federal funding for FQHCs, from roughly $750 million in 1996 to $2.2 billion in 2010. The American Recovery and Reinvestment Act of 2009 added another $2 billion in temporary capital and service improvement funding.

FQHCs serve a patient population that is overwhelmingly low-income — with incomes under 200 percent of the federal poverty level. They provide comprehensive preventive and primary care along with ancillary services like laboratory testing, radiology, pharmacy, dental care, behavioral health, and even some medical specialties. Many also offer language translation and transportation assistance. Their federal designation brings significant advantages: cost-based Medicaid payments, federal grants for capital and operations, discounted pharmaceuticals through the 340B program, access to National Health Service Corps clinicians, and medical malpractice liability protection.

Wide Variation Across Communities

Despite the national growth trend, FQHC development varied considerably across the 12 study communities. By 2011, the number of FQHC sites ranged from more than 100 in Boston and Miami to just a handful in Lansing and Little Rock. Adjusting for the size of uninsured and Medicaid populations, Boston, Seattle, Syracuse, and Miami had extensive FQHC capacity, while Phoenix, Little Rock, Cleveland, and Orange County lagged behind.

Two key factors shaped these differences. First, the level of demand for safety net services varied with local demographics, Medicaid eligibility rules, and economic conditions. The share of the population that was uninsured or had Medicaid in 2010 ranged from 23 percent in Boston to 51 percent in Miami. Second, the degree of state and local support for FQHC development differed widely. Communities where elected officials, state primary care associations, and local coalitions actively supported health centers tended to have more extensive FQHC networks.

Boston's long history of political advocacy and an active state FQHC association contributed to its extensive network. Miami's FQHC coalition, Health Choice Network, provided strategic planning assistance, and a 2002 county sales tax for children's services helped add more than 80 school-based FQHC sites. Northern New Jersey and Orange County made notable strides in more recent years — New Jersey through state general fund allocations and strong leadership from its primary care association, and Orange County partly in response to a 2006 visit by President Bush who questioned why the community was not taking better advantage of the FQHC program.

By contrast, some communities lacked the resources or political will to expand. Little Rock respondents lamented insufficient local support, with one noting: "At some point, things have to get bad enough that the political will is raised high enough to make change happen." In several communities, some church-funded clinics and free clinics preferred to remain outside the federal system rather than take on mandated services, patient fees, and consumer governance requirements.

Building Business Acumen and Financial Sustainability

Many FQHCs began as grassroots operations managed by community activists or clinicians. Over time, their leaders became increasingly sophisticated managers. Key to their sustainability was demonstrating effective use of resources and becoming more self-sufficient financially. Centers focused on increasing the proportion of insured patients, with Medicaid patients nationally rising from 31 percent of FQHC patients in 1996 to 39 percent by 2010. Some centers reversed their uninsured-to-Medicaid ratios over just a few years, significantly improving their revenue base.

FQHCs also adapted to Medicaid managed care by positioning themselves within health plan networks and, in four communities — Seattle, Syracuse, Boston, and Miami — operating their own Medicaid health plans. These plans tended to have among the highest enrollments in their markets. Centers invested in billing and collections technology, upgraded facilities to attract and retain patients, and improved operational efficiency through walk-in appointments, care teams, and productivity incentives. As one Orange County respondent put it, the goal was "going toward being a provider of choice, rather than provider of last resort."

Prospects Under the Affordable Care Act

The Patient Protection and Affordable Care Act (PPACA) of 2010 positioned FQHCs for a significantly expanded role in three areas. First, coverage expansions — extending Medicaid to people with incomes up to 138 percent of federal poverty and offering subsidized private insurance through exchanges — promised to convert many previously uninsured FQHC patients into paying patients, improving centers' financial stability. The law required private plans in the exchanges to include FQHCs in their networks and permanently reauthorized the FQHC program with $11 billion in additional grant funding to double capacity.

Second, FQHCs were well positioned to help address primary care workforce shortages. Their model of team-based care using nurse practitioners and other midlevel providers stretched physician capacity. The law provided $1.5 billion to expand the National Health Service Corps by an estimated 15,000 providers and $230 million to support health-center-based medical residency programs.

Third, FQHCs had significant experience with care coordination and were well suited to participate in new delivery models like medical homes and accountable care organizations. Final federal rules authorized FQHCs to participate in or form their own Medicare ACOs. Some health centers were already collaborating on innovative care and payment models — for example, Seattle FQHCs joined the Washington Patient-Centered Medical Home Collaborative, and Orange County FQHCs were integral to a "managed system of care" model for transitioning uninsured people into new coverage.

Challenges Ahead

Despite these opportunities, FQHC leaders identified several concerns. A 2011 budget compromise cut $600 million from discretionary FQHC funding, reducing grants for new sites and curtailing expansion. The law's coverage expansions excluded undocumented immigrants, who were expected to constitute about one-third of the more than 20 million people remaining uninsured. Providers in communities with large immigrant populations — Orange County, northern New Jersey, and Miami — worried that funding for uninsured care could become a political target if perceived as supporting care for undocumented individuals.

There was also concern about increased competition from private providers. As coverage expansions turned charity patients into paying patients, private physicians and hospitals might compete more aggressively for traditional FQHC populations. The law temporarily raised Medicaid primary care payment rates to Medicare levels in 2013 and 2014, making Medicaid patients more attractive to private practices. As one Little Rock respondent observed: "Our FQHC has to be just as competitive as a private physician's office, and our service has to be at that level."

Policy Implications

Federal policymakers from both parties had embraced FQHCs as central to expanding access to care for low-income Americans. Their ability to provide coordinated, comprehensive primary care with wraparound services was particularly valuable for patients with complex medical and social needs. Their experience with outreach and enrollment could support state efforts to connect eligible individuals with public insurance, and their model of culturally competent, team-based care offered lessons for private medical practices.

However, the significant variation in FQHC capacity across communities, combined with uneven state and local support, meant that some areas were better positioned than others to meet the coming surge in demand for primary care. Communities with large uninsured populations — Miami, Orange County, Greenville, and Phoenix — faced the steepest challenges. Whether FQHCs would become primary providers for populations beyond their traditional base, whether private providers would absorb more Medicaid patients, and how providers serving the remaining uninsured would survive were questions that remained open.

About HSC

The Center for Studying Health System Change was a nonpartisan policy research organization based in Washington, D.C., led by President Paul B. Ginsburg. HSC was affiliated with Mathematica Policy Research. The 2010 Community Tracking Study site visits and resulting publications were funded jointly by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform.

Sources and Further Reading

National Association of Community Health Centers — Data, advocacy, and resources for community health centers nationwide.

HRSA — Health Resources and Services Administration — Federal agency overseeing FQHC designation and funding.

Kaiser Family Foundation — Medicaid — Data on Medicaid enrollment, spending, and eligibility.

Robert Wood Johnson Foundation — Health policy research and programs.

Commonwealth Fund — Research on health care access, safety net providers, and primary care.