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Community Health Center Financing: The Role of Medicaid and Section 330 Grant Funding Explained

Executive Summary

Community health centers play a vital role in ensuring access to comprehensive primary care services for medically underserved communities. In 2017, 1,373 federally-funded health centers served 27.2 million patients. Health centers receive funding from multiple sources, but are primarily reliant on revenue from Medicaid and Section 330 grants.

  • What are the sources of health center revenue? Revenue from Medicaid and Section 330 funding account for nearly two-thirds of health center funding. Medicaid is the largest source of health center funding accounting for 44% of total revenue. Section 330 funding accounts for 18% of total revenue.
  • How do Medicaid’s special payment rules support health centers? Medicaid reimburses health centers under the Prospective Payment System (PPS), which ties payments to the costs of delivering care. Under PPS, each health center receives a per visit rate based on the cost of services to Medicaid patients that is updated annually to reflect medical inflation and costs of new Medicaid-covered services. While PPS payments align generally with the costs of providing care, shortfalls have emerged. In 2010, Medicaid paid 81% of health centers’ cost-linked charges; by 2017, payments covered 79%. Despite this shortfall, from 2010 to 2017, health center Medicaid revenue increased 97% when adjusted for inflation, reflecting the increase in Medicaid patients served by health centers following implementation of the Medicaid expansion. On a per patient basis, health center Medicaid revenue grew by only 11% suggesting the increase in Medicaid spending is the result of enrollment increases and not per-patient cost escalation.
  • What is the role of Section 330 grant funding? Section 330 of the Public Health Service Act created and authorized the health center program and permits the Health Resources and Services Administration (HRSA) to make grants to health centers. Section 330 grant funding supports health centers through two funding streams, an annual appropriation and the Community Health Center Fund (CHCF). Since the establishment of the CHCF in 2010 to supplement health centers’ regular, annual appropriation, total Section 330 health center grant funding has more than doubled, from $2.2 billion in FY 2010 to $5.6 billion in FY 2019. Funds from the CHCF now account for 72% of total Section 330 funding. Annual Section 330 grants support ongoing care to the uninsured and underinsured, while the expanded funding available through the CHCF has enabled health centers to establish new sites, expand the services they provide, reach more patients, and respond to emerging public health issues and priorities such as the President’s HIV/AIDS initiative.

    In 2017, 1,373 federally-funded community health centers served 27.2M patients and played a key role in ensuring access to comprehensive primary care for medically underserved communities. Centers rely heavily on money from Medicaid and Section 330 grants

  • How have funding changes affected health centers? Increases in the key sources of health center funding, Medicaid and Section 330 grants, have enabled health centers to expand their capacity and services. From 2010 to 2017, the number of health center sites increased 59%to 11,056, the number of patients served increased 40% to 27.2 million, and total staff increased 70% to 223,840 FTEs.

Stable financing from Medicaid and expanded Section 330 grant funding have enabled health centers to play an increasingly important role in providing care to vulnerable populations and communities and in advancing health policy priorities. The CHCF is due to expire in September 2019. An important policy question Congress will consider this year is whether to extend the life of the CHCF and if so, for how long and for how much.

Issue Brief