Federal Qualified Health Centers (FQHCs) received much support from the federal government to boost response during the COVID-19 Pandemic. While the confidence the feds placed in FQHCs solidified the sector's role in managing the health of both underserved populations and the general population through a lower infection rate (R-factor), the funding was always intended to be temporary.
According to a projection from the nonprofit National Association of Health Centers, 16 million people, including seven million children, stand to lose their Medicaid coverage when the temporary pandemic funding expires in 2023. While some of the public health emergency grants, such as The American Rescue Fund, deadlines could be extended, this looming end in additional grant funding will arrive sooner than later.
"It's critical that FQHCs forecast and plan now to avoid," said Amy Brisson, COO of Community Link Consulting. "FQHCs may see many of its Medicaid patients convert to uninsured patients in 2023, which could dramatically impact finances."
Steps FQHCs Should Take Now
CLC’s COO, Amy Brisson, suggests an action plan that FQHCs should undertake immediately. It is important for FQHCs to gather and analyze actionable data to develop a new financial plan in response to change and avoid a crisis. Solid financial forecasting considers a host of factors, such as operational trends, community trends, employment trends, and break-even insight.
- Project cash flow: Such calculations are a tool that runs the gamut from cost per visit to revenue by payer to understanding current earnings, and cash flow ratios. The bottom line of cash on hand is where operations and finance materialize; immediate action is required if cash in is not covering cash out.
- Run a break-even: Know your financial drivers, which encompass insight about net income, cost per encounter, and new patient trends. Understanding a new break-even encounter point is critical if a grant source disappears. To accomplish this end, it's likely that proformas need an update.
- Think about the investment strategy: What changes can improve income from investments? With rising interest rates, there is an opportunity to help offset rising costs with more investment income.
- Plan for the Medicaid unwind: Just as ‘Winter is Coming” to the Seven Kingdoms, the Medicaid funding cliff is coming to FQHCs. Do you know how your state will react to a funding expiration? Are your outreach teams prepared? What will be the impact on your payer mix?
- Develop a financial plan: The remedy for any disruption in operations is an actionable plan as far in advance as possible.
Opportunities for FQHCs
Brisson, who served as an FQHC CFO before joining CLC and has served in several fractional CFO roles as a consultant, understands that pandemic-driven market forces are a cause for concern. She noted that in a 2022 State of Employee Well-Being survey, “Dealing with uncertainty of what will happen in the future” is the top worry (45%) related to the pandemic work environment.
Also, it is important to note that change always represents an opportunity for new strategies at an FQHC. These include:
- Targeted outreach: Seek and find eligible patients who are not yet in your care network. For example, targeted community events collaborating with local employers, and providing screenings, are an effective way to increase patient counts.
- Service area and service line expansion: Now is an excellent time to update your community needs assessment to identify new services. Ask your staff what needs they have identified.
- Billing/revenue cycle analysis: Are you capturing all your charges accurately? Is your fee schedule up to date and are your providers coding correctly? Where are your opportunities to reduce costs and increase revenue?
- Evaluate Medicaid PPS rate: Do you have an opportunity to request a change in your Medicaid PPS rate? It is important to know the process in your State and stay on top of making these requests whenever you are eligible.
- Maximize clinic schedule: It's a good idea to regularly review clinic hours to see if hours/days might increase to generate patient revenue that exceeds the additional operating costs.
- Perform an operational assessment: An outside pair of eyes can often find opportunities to increase efficiencies, revenue, and reduce costs.
We at CLC are concerned for FQHCs. With the end of the pandemic, several grant funding sources will soon end. We encourage FQHCs to plan ahead so that they can continue to provide the mission-driven work they were founded to provide Brisson said.
If you want to talk one-on-one with one of CLC’s Consultants to help your organization plan for these changes, please reach Amy at: amyb@communitylinkconsulting.com.