5 hours ago
Twenty years ago, when I started working with federally qualified health centers, I once performed a walkthrough and shadowed a routine medical exam. English was not this patient’s first language, and a translator was readily available and assigned immediately to ease communication. During the intake process, the patient mentioned an unstable housing environment, food insecurity, and child care challenges. Afterward, the patient service representative did something unexpected: She assigned a case manager.
After that visit, I asked why a case manager was assigned, and I will never forget the answer I was given: “We support the whole person and family structure, not just the appointment on the schedule.”
It was an eye-opening experience that taught me the immense value of these virtually invisible health care centers. I often wonder, do we really understand all they offer our communities and what the impact would be without them?
Federally qualified health centers (FQHCs) exist to ensure health access by providing primary and preventive care regardless of ability to pay. Increasingly, that mission is pushing FQHCs toward financial crisis and closure. As frontline safety-net providers, they are expected to expand access, absorb rising costs, and stabilize communities when everything else fails, whether or not the funding exists to support it.
Between 2019 and 2023, federal grant dollars for FQHCs remained essentially flat even as health care costs increased more than 25% over the same period. Now, an estimated 11.8 million Americans are projected to lose health care coverage as Medicaid spending is reduced by $344 billion across the next decade, driving even more uninsured patients through the doors of FQHCs.
The first U.S. FQHCs were established in 1965. Their design, inspired by community-oriented primary care models in South Africa, was simple: Nonprofit health centers would provide care for underserved and vulnerable communities while federal grant funding allocations would cover any financial losses incurred treating patients who could not afford to pay.
But after 50 years of operations, the same FQHCs that have cared for our communities are discovering that the financial structure has not kept pace with the realities of delivering on their mission.
Prior to the pandemic in 2019, FQHC net margins — the difference between revenue and costs — were less than 1%, with a brief boom between 2020 and 2022 at 5.3% due to one-time Covid pandemic funding.
By 2023, those margins had fallen back to 1.6% and, by 2024, margins were negative at around 2.1%. These numbers reflect a system that barely survived before Covid and is now actively losing ground.
The result: health center closures and program suspensions. In late 2025, one rural FQHC in New Hampshire announced it would close its doors at one location, citing a projected operating shortfall, Medicaid funding requirements, and other expected increases in costs. Last year, a South Carolina FQHC closed six locations and transferred services to other agencies and locations citing financial pressure and an increase in the number of underinsured and uninsured patients.
Such closures are not isolated events. They reflect the cumulative effect of sustained margin pressure and the difficulty in planning amid repeated and significant funding reductions.
I went into a recent FQHC restructuring assuming losses were driven by federal cuts alone. I was wrong. Margins had slowly eroded over the past three years, as measured on a combined service margin per visit. At the time of the restructuring, margins per visit were just $3. This means, after the center collected revenue and paid the direct cost of seeing a patient, it retained just $3 per visit. This was not enough to fund necessary support services and administrative expenses.
Once we dove deeper and broke margins down per visit by type of service provided, I was astounded to see core medical services were being provided at a loss of $5 per visit. In other words, each patient served cost the organization $5.
Faced with new data and the reality of an unpredictable economic environment, it became clear that leadership needed to address a structural profitability issue through a series of difficult but necessary actions, including layoffs, program closures, staff retraining, and a reset in minimum productivity benchmarks.
These decisions reflected a recognition that funding alone could not resolve underlying cost and margin pressures. For years, FQHC leadership teams have been stretched thin, focused on access expansion, compliance, grant acquisition, and the daily needs of their communities.
Yet, with margins this thin, even modest inefficiencies become existential, requiring leadership to examine program performance with a level of detail that most organizations never need to reach. Because every program is mission critical and every dollar constrained, FQHCs must now apply a more granular level of financial discipline than organizations with wider margins and greater flexibility.
The greatest threat to FQHCs may be less about federal funding itself, which is largely out of their control, and more about the reality that mission critical care is financially unsustainable under their current model. If FQHCs don’t begin treating financial discipline as foundational to mission delivery, more communities will lose care altogether.
Consider a recent proposal that aims to cut $600 million in public health funding across four states: California, Minnesota, Illinois, and Colorado. Though the proposal is currently blocked by legal action, health care executives need to be prepared to cut services and support or offset these losses in private fundraising. They have to determine who will bear the burden of the loss of operational sustainability and how to advocate to keep doors open to ensure they continue to provide a lifeline to voices that have been historically unheard.
To achieve operational sustainability, it is imperative that leadership push to understand critical metrics including margin per visit, days cash on hand, provider productivity ratios, support staff ratios, days in accounts receivable and denial rates.
Beyond this, FQHC leadership should be leaning into scenario planning to proactively understand the full impacts of future changes and have contingency plans in place. Scenarios will serve them best when designed with fluidity, leading to accurate calculations around the effects of further potential reductions or losses in grant funding, changes in payor mix, changes in patient acuity, and other operational variables.
Change always comes with significant resistance. While structural adjustments may feel at odds with community health values, they may be the only way to preserve access and limit disruption in an increasingly unstable funding environment. Targeted program reduction has become a non-negotiable in potentially preserving core primary care for an entire region. FQHCs cannot afford to delay tough decisions due to the inherent burdens of running already lean day-to-day operations.
As a critical lifeline for vulnerable populations, the loss of an FQHC has far-reaching consequences. When a center closes, underserved communities lose access to care or face barriers that are difficult, if not impossible, to overcome. For low-income or elderly patients, traveling to another facility may require transportation they simply do not have.
The result is delayed preventative care, increased reliance on emergency services, and the unraveling of hard-won disease management. Beyond the impact on patients, closures strain nearby providers, eliminate jobs, and weaken community support systems that FQHCs help sustain. In a period of uncertain public funding, leadership may need to choose between being criticized today for unpopular decisions or closing permanently tomorrow.
Courtney McFarland is a partner at AAFCPAs with extensive experience advising federally qualified health centers, clinics, and behavioral health providers on financial management and operational challenges.
