Community Health Centers in Financial Jeopardy Without Sufficient Federal Funding

January 17, 2024

Data Note
January 2024
Peter Shin, Feygele Jacobs, and Rebecca Morris

Community health centers (CHCs) are the backbone of the primary care safety net, providing care to all regardless of ability to pay. In 2022, health centers served 30.5 million people in high-need urban, rural, and frontier communities across the United State.1Nine in 10 health center patients have incomes below 200 percent of the Federal Poverty Level (under $23,030 for a family of three in 2022),2and a majority of CHC patients are either uninsured (19%) or covered by Medicaid (50%).3While health centers rely on a mix of revenue streams, federal funds are critical to sustaining community health centers in resource-poor communities, enabling CHCs to support care for uninsured patients, services for insured low-income patients who need care that is not covered, and costs related to expanding access.4

Table 1 shows the distribution of health centers by federal funding levels, patient volume, and margin. Federal funding includes mandatory and discretionary health center grants and temporary COVID-19 funding reported in the 2022 Uniform Data System (UDS)5, a comprehensive national CHC reporting system administered by the Health Resources and Services Administration. Health center margins were calculated using revenue and expense data reported in the 2022 UDS.6 Because health centers vary markedly in size and payor mix, federal funding may account for as little as three percent of their revenue or as much as 100 percent in CHCS that depend entirely on grant funding, such as those located in the US Territories. However, as shown below, federal funding at any level is critical to both CHC revenue and operating margins. Nationally, median health center margins are 3.5 percent. Further, irrespective of the extent to which they rely on federal funding, median margins are relatively thin across all CHCs, at less than 5 percent.

Healthy operating margins are necessary to sustain health center programs and services, and strong margins allow health centers to invest in strengthening and expanding care. Table 2 highlights the number of health centers operating with negative margins or margins of up to 5% for each of the 50 states, District of Columbia, Puerto Rico and the US Territories. Notably, 750 health centers – more than half of all community health centers nationwide – operate with margins below 5%. These health centers served 16.5 million low-income patients in 2022. The majority of these patients (11 million) were served by health centers with negative margins. In every state, distressed margins threaten continued CHC viability and access to care. California has the greatest number of health centers at financial risk, followed by New York and Texas. States where the majority of health centers operate on thin margins, such as Connecticut (94%), Massachusetts (84%), Maine (82%), Hawaii (77%), Maryland (76%), North Dakota (75%), and South Dakota (75%) appear to be at substantial risk of losing the core of the health care safety net. While other health centers may report margins exceeding 5%, their financial viability is nonetheless highly vulnerable to changes in federal funding.7

Even as the number of health center patients increased, and in a period of mounting inflation, the mandatory Community Health Center Fund and base discretionary appropriations combined have remained flat at approximately $5.6 billion annually for the past several years.8 Supplemental pandemic-era funding of $3.2 billion in 2022 helped bridge the gap, but this temporary funding has ended. With FY 2024 health center funding unresolved, CHCs are at risk of losing funding that is critical to maintaining staffing, services, and access to care.9

This analysis suggests that health centers will require a substantial boost in federal funding to strengthen access to care that, for example, helps to reduce the risk of pregnancy-related deaths,10 prevent onset and spread of vaccine-preventable diseases,11 and reduce overdose deaths.12 We estimate that at minimum, $10 billion in annual funding would be required just to maintain current service levels (based on historic $5.6 billion federal FY funding levels and $3.2 billion in temporary COVID-19 funding reported in the 2022 data, plus estimated revenue shortfalls) but additional funding increases will be needed to account for inflation, cost trends, and workforce and operational growth.13 With the substantial uncertainty surrounding federal funding, health centers are highly unlikely to be able to expand to serve the estimated 100 million people who lack access to primary care.14 In fact, should Congress continue to delay, or to cut federal health center funding, more than half of the nation’s health centers are in immediate financial jeopardy and at imminent risk of reducing operations or potentially, closing altogether. Even health centers with relatively higher margins are financially vulnerable and will likely face significant challenges to supporting current services and maintaining access. This analysis underscores the importance of stable, long-term federal community health center funding and the urgency of immediate and increased funding to support essential community health services.

Download Tables 1 and 2

1HRSA (2023). Table 4: Selected Patient Characteristics. Available at: https://data.hrsa.gov/tools/data-reporting/program-data/national/table?tableName=4&year=2022
2CMS (2024). Federal Poverty Level. HealthCare.gov. Available at: https://www.healthcare.gov/glossary/federal-poverty-level-fpl/
3HRSA (2023). Table 4: Selected Patient Characteristics. Available at: https://data.hrsa.gov/tools/data-reporting/program-data/national/table?tableName=4&year=2022
4Farc, Jessica (2023). HEALTH CENTERS Trends in Revenue and Grants Supported by the Community Health Center Fund. GAO. Available at: https://www.gao.gov/assets/gao-23-106664.pdf
5We thank BPHC for permitting us to analyze the UDS data under a Data Use Agreement.
6Expenses are based on reported accrued costs and revenue includes collections from insurers and patients and other cash receipts, such as grants.
7Health centers also face underpayments and significant delays in third-party reimbursement. See https://www.healthaffairs.org/content/forefront/community-health-centers-and-medicaid-deeper-dive-into-fqhc-alternative-payment-reform
8Shin, P., Morris, R., & Jacobs, F. (2023). Community Health Center Funding Needed to Preserve and Sustain Critical Access to Nearly 31 Million Patients. Available at: https://geigergibson.publichealth.gwu.edu/community-health-center-funding-needed-preserve-and-sustain-critical-access-nearly-31-million
9Boden, S. (2023). Federal shutdown could disrupt patient care at safety-net clinics across U.S.. NPR. Available at: https://www.npr.org/sections/health-shots/2023/09/29/1201738506/federal-shutdown-could-disrupt-patient-care-at-safety-net-clinics-across-u-s
10Markus AR and Pillai D. (2021) Mapping the Location of Health Centers in Relation to “Maternity Care Deserts” Medical Care 59(10 Suppl 5): S434-S440.
11Crane JT, et al. (2022) Advancing COVID Vaccination Equity at Federally Qualified Health Centers: a Rapid Qualitative Review. J Gen Intern Med 37(4):10-12-13
12Kaiser Family Foundation (2020). Community Health Centers and Medication-Assisted treatment for Opioid Use Disorder. www.kff.org/uninsured/issue-brief/community-health-centers-and-medication-assisted-treatment-for-opioid-use-disorder/
13HRSA (2023). Table 9E: Other Revenues. Available at: https://data.hrsa.gov/tools/data-reporting/program-data/national/table?tableName=9E&year=2022
14National Association of Community Health Centers. (2023) Closing the Primary Care Gap: How Community Health Centers Can Address The Nation’s Primary Care Crisis. https://www.nachc.org/wp-content/uploads/2023/06/Closing-the-Primary-Care-Gap_Full-Report_2023_digital-final.pdf