The Importance of Our Community Health Centers

With National Health Center Week just wrapping up a couple of weeks ago (August 3-9, 2025), I think it is timely to highlight the work and obstacles that our community health centers across the country are facing, especially in light of increased regulation and decreased funding.

What Are Community Health Centers?

First off, for those of you who aren’t aware, Community Health Centers (CHCs) or Federally Qualified Health Centers (FQHCs) as they are also known are community-based health clinics that provide primary care and, in many cases, also provide other comprehensive services such as mental health, dental, pharmacy, and other key services designed to strengthen the health of the communities that they serve. These health centers are patient-governed with at least 51% of their board members being comprised of patients of the health center and the board composition matching the demographics of the community in which they operate. These FQHCs typically operate in underserved areas ensuring essential access to health care services for those who might have barriers to access elsewhere such as cost, no insurance, or language differences. FQHCs offer sliding fee schedules to accommodate those who don’t have insurance and might not be able to fully pay for their health care treatment. These health care centers provide a health care “safety net” for the populations that they serve ensuring that they always have access to essential health care services to improve the health of the communities they serve.

How Are FQHCs Funded?

Now that we all know what FQHCs are and the essential services that they provide, let’s talk a little bit about how they are funded. Like all health care providers, FQHCs have a mix of payors that fund or reimburse them for the services that they provide. These payors can include Medicaid programs, Medicare, federal grants, and to a lesser extent, commercial insurance payors. Additional sources of funding may also include private grants and donations. Federal grants for FQHCs are administered by the Health Resources and Services Administration (HRSA) which is part of the Department of Health and Human Services (HHS). These are competitive grants where potential grantees have to demonstrate need in their community and ability to serve that need. HRSA then looks at all grant applications and determines which communities have the most demonstrated need based on socioeconomic, demographic, and available health care resources to determine which areas qualify for the limited new grant funding available each year. Once a grant is awarded, a grantee has to continue to demonstrate performance through the annual submission of Uniform Data Systems (UDS) reports to HRSA which provide information on patient demographics, services, and outcomes which HRSA then uses to assess program performance and recommend quality improvement programs. Additionally, FQHCs are subject to intensive weeklong site visits either annually for newer or lesser performing FHQCs to every three years for more mature, higher performing grantees. 

To be clear, FQHCs probably have some of the most rigorous reporting and review requirements of any federal grantees and taxpayers can be assured that money spent on this program is not only put to the use that it was intended, but that those dollars are achieving measurable outcomes in the communities in which they are invested. The word "invested" in the last sentence is critical here as these programs aren’t entitlements as some politicians would like to frame them, but rather they are investments in the health of communities all around our country. Without healthy communities, we truly cannot have a healthy country, and these programs are quietly contributing to overall health and well-being of our country one community at a time.

Another service that many FQHCs provide is pharmacy services through a program administered by HRSA known as the 340B program. This program allows eligible entities such as FQHCs to access drugs from pharmaceutical manufacturers at deeply discounted rates. The FQHCs in turn use these savings to provide free or reduced-cost prescriptions to patients. In many cases, these pharmacies operated by FQHCs are the only pharmacy available in the community.

So, now that we have discussed what FQHCs are and their importance to the overall health and wellbeing of our communities, let’s talk about the challenges that FQHCs face. I am going to break these down into the following categories:

1. Funding
2. Workforce Shortages
3. Administrative Burdens and Regulation

Funding

We have talked a little bit about the sources of funding that FQHCs face. Unfortunately, most of those sources are under continuous political attack. The recently passed “One Big Beautiful Bill” is anticipated to result in the loss of Medicaid coverage for over 10 million people according to the Congressional Budget Office (CBO). Many of these recipients are currently patients of FQHCs and will probably remain patients in some respect even after they lose their Medicaid coverage. This means that in these cases, instead of receiving reimbursement from Medicaid for the essential services provided to these patients, these FQHCs will be providing care on a greatly reduced sliding fee scale which doesn’t even come close to covering the cost of those services. When an FQHC receives full Medicaid payment for a patient visit, that payment may only cover about 82% of the cost of providing the service. If that service has to be provided for only a nominal fee or even free under a sliding fee scale, that problem is greatly amplified. At the same time, grant funding is stagnate and has not kept up with inflation. Grant funding is what FQHCs depend on to bridge the gap between what they receive on fee-for-service basis to provide services and what those services actually cost. So, with inflation raising the cost of those services, fewer patients being eligible for Medicaid, and stagnate or even decreasing HRSA grant funding available to bridge the cost gap of those services, you can see how our system of FQHCs is becoming increasingly vulnerable to funding challenges. Without changes to how we prioritize and fund this valuable work, many of these essential health care centers providing safety net services are going to be forced close their doors in the coming years.

Workforce Shortages

While staffing and workforce shortages are rampant across our entire health care system, especially after COVID, the impact on FQHCs is even more dramatic. With limited funding, FQHCs struggle to compete with larger, private sector health care entities that can offer higher benefits and salaries. On top of that, many FQHCs are in rural areas which just adds to the difficulty in recruiting and retaining talent. Add to that the ever-increasing demand for FQHC services resulting in heavy workloads and high patient volumes and you have a recipe for staff burnout and dramatic staff turnover.

Administrative Burdens and Regulation

The administrative burdens and associated costs of running an FQHC are great. We already discussed the fact that FQHCs are under strict oversight by HRSA requiring submission of detailed UDS reports every year and intensive site visits, not to mention whatever regulatory burden that is imposed by state or local agencies. But in addition to that, FQHCs are increasingly being required to adopt frameworks around and address the complex needs of Social Determinants of Health (SDOH) which requires the FQHC not only to consider the patient’s physical health needs, but also things like housing or food insecurity which many traditional reimbursement models do not adequately address. SDOH requires complex coordination of services across various needs and specialties with ever shrinking resources.

Additionally, FQHCs are responsible for ensuring access to care for the populations that they serve. This means providing non-traditional care mechanisms such as telehealth services. Telehealth services require increased technology capacity and capabilities and, in some cases, even providing technology devices to their patients to ensure their ability to access services.

All health care entities are highly regulated under HIPAA which requires strict controls to protect the privacy of patient data. Compliance with these regulations require extensive and expensive compliance and cybersecurity programs. With all of the breaches of health care organizations that are occurring, the requirements under HIPAA are going to become even more extensive over the next year. These additional controls will just add to the expense and complexity of managing cybersecurity operations for FQHCs. Unfortunately, while acute (inpatient) organizations have access to funds from large technology companies like Microsoft and the federal government for cybersecurity, these funds are not made available to FQHCs. While inpatient health care is a key component of our health care system in this country, we need to keep in mind that the whole point of a healthy primary care system is to help keep our patients out of inpatient settings as much as possible. Many hospital admissions can be prevented by providing access to adequate primary care services, a fact that seems lost on our technology communities and government.

Conclusion

In this article, we have discussed what an FQHC is, how they are funded, and some of the challenges that they face to their continued survival. Through this article, I hope I have explained the urgent necessity behind our FQHC system and why they are vital to the continued health and well-being of our communities. The threats that our FQHCs currently face really threaten our entire health care system. When FQHCs are not available to provide services in their communities, that need will eventually need to be met, usually by emergency departments and urgent care centers. This additional load on our emergency departments and urgent care centers means that those services are less available to everyone else. FQHCs providing preventive and primary care services to these patients prevent that escalation in the need of care that results in emergency department or urgent care visits and relieves overall pressure on our entire health care system.

In future articles, I will address some of the challenges faced by FQHCs from my perspective as an executive responsible for the technology portfolio of an FQHC and integrated health system.