1. Hawkins, Daniel Jr BA
  2. Schwartz, Roger JD


Abstract: The 38-year-old federal Health Centers program funds community-owned preventive and primary health care for 14 million people, mostly from low-income and minority groups. Studies show that health centers provide quality health care efficiently and effectively. President Bush has begun a major program expansion to serve 6 million more people, but the states' fiscal crisis has forced funding cutbacks that could undermine the administration's initiative. The authors argue that states could actually save money by increasing their investment in health centers, given the health centers' record of reducing the need for high-cost specialty and hospital care and eliminating health disparities.


THIRTY-EIGHT YEARS ago, the nation's first Community Health Center opened its doors across the street from a public housing project in the Columbia Point section of Boston; a month later, another center began providing services to the people living in the Mississippi delta town of Mound Bayou. These new "Neighborhood Health Centers," as they were originally known, were hardly the first effort to bring health care to people and communities that desperately needed them. But they went about doing so in a unique-indeed, an unprecedented-way, by giving the needy communities they would serve a voice and a choice in deciding how that health care would be delivered.


Health Centers were established to meet a two-fold purpose: (1) to be agents of care to people and communities that had long suffered from inadequate health care and (2) to be agents of change, giving communities ownership and some control over their local health care system for the first time.


Over the past 38 years, local health centers have adapted themselves to meet the changing needs of their communities and to the ever-changing health care system. Today, health centers are the "family doctor and health care home" for 14 million Americans in some 4,000 communities across the country (National Association of Community Health Centers, 2003a). The demographics of health center patients parallel those of the most vulnerable populations in America:


* Two-thirds of their patients are people of color-African Americans, Latinos, Asian-Pacific Islanders, and Native Americans-whose health status is much worse, and who generally receive poorer health care, than whites, even when income, insurance, and medical conditions are similar.


* Eighty-six percent are from low-income families, with incomes below 200% of the federal poverty level (66% have incomes below the poverty level).


* Forty percent are completely uninsured, while another 40% are dependent on coverage under Medicaid or SCHIP, the State Children's Health Insurance program (U.S. Department of Health and Human Services, 2003).



To meet the significant health needs of the people and communities they serve, health centers provide top-quality medical, dental, and other health care in an ethnically and culturally responsive way. The centers are open to everyone in their communities, but with a special focus on making care available and accessible to those who are uninsured and publicly-insured.


Health centers benefit their communities in many other ways, as well:


* They are a major source of jobs and meaningful employment. Most of the 60,000 employees of health centers are residents of the same neighborhoods and towns they serve, and in many of those communities, the centers are often the largest employer.


* They are engines of economic development for their communities, spending nearly $5 billion a year, with combined payrolls equaling $3.5 billion, and generating almost $20 billion in economic output for low-income communities across America.


* They also serve as critical "anchors" in their communities, helping to attract or retain other businesses, including other physicians, pharmacies, or diagnostic services-even local hospitals and also other local businesses. They play a pivotal role in sustaining a sense of community, giving residents a feeling of pride and helping to revitalize their communities.


* They provide a training ground for community leaders and a means of involving residents in the political process and system. Through these health centers, more than 25,000 governing board members are learning business and civic skills as overseers of substantial local corporations.



Thus, from a broad analytic perspective, health centers provide a national model for community empowerment. Their 38 years of achievement provide an object lesson on how consumer involvement and community empowerment can succeed where other models have failed. When it comes to prudent management of public resources, this is an investment that produces a great return.


President Bush understands this economic argument and has made a substantial commitment to the nation's health center safety net by proposing a five-year initiative to increase federal funding for the program by at least $2.2 billion through Federal Fiscal Year 2006. The President's call has received a very supportive bipartisan response from Congress, who for the past two years, has approved the largest increases in funding over the program's entire history, enabling the health centers to reach out and serve more than 2 million new people since the President took office. Over the full five-year period, the President's proposed increases in funding would support new and expanded sites and services designed to serve an estimated 6.1 million additional patients. Additionally, a bipartisan Congressional REACH (Resolution to Expand Access to Community Health) initiative seeks to extend care to an additional 10 million patients over the same period.


However, even as official Washington has increased its investment in health centers, the broader health care system has been buffeted by dramatic changes over the past few years-changes that pose perhaps the most severe challenge to health centers in their entire history-in what a growing number of health center leaders are referring to as their own "perfect storm." These changes, which affect all Americans in one way or another, have had a dramatic effect on the health care safety net-the health centers and a dwindling band of other providers who continue to offer care to those who need it at an affordable price, with a special focus on serving the uninsured and the uninsurable.


It has been widely reported that states have experienced the most dramatic and severe fiscal downturn in nearly half a century, with state revenue shortfalls expected to exceed $100 billion for this fiscal year and next-roughly 15% of their budgets (Toner, 2003). The response of most states has been to adopt severely austere budgets, cutting spending for almost everything-but especially for health care, which is typically the second or third largest part of a state's budget.


The states' fiscal crises have already wreaked havoc on those organizations that strive to furnish a broad range of services to low-income populations, and health care is no exception. A recent state-by-state survey completed by the National Association of Community Health Centers (NACHC) revealed that at least 20 states have enacted or are considering severe cuts in dedicated state funding for health centers. According to the report, the sum of those cuts could range from $78 million to as much as $134 million nationally, equal to between one-quarter and one-half of all state funding received by health centers last year (National Association of Community Health Centers, 2003b). Stated another way, the above-noted potential cutbacks in state funding for fiscal year 2004 are equal to the full cost of a year's worth of care at a health center for 200,000 to 300,000 people. If total cuts approach the higher amount, they would virtually erase the value of the $161 million increase in federal funding voted by Congress earlier this year, putting the Bush Administration's health center expansion goals at severe risk.


The NACHC survey of state budget proposals and their impact on health centers found that instead of sustaining or increasing their funding levels for health centers, a majority of states appear to be using the federal funding increases as a justification for balancing troubled state ledgers, in part by reducing or eliminating their line items of support for health centers. Unfortunately, states appear to have the blessing-indeed the encouragement-for such actions from the National Governors Association, which recently recommended that states reduce support for health centers (National Governors Association, 2002).


In fact, it appears that state and local governments were already reducing their support for health centers before they began experiencing the fiscal crisis that has gripped them more recently. According to reports filed by all health centers for 2001 (U.S. Department of Health and Human Services, 2002), the following reductions occurred:


* Sixteen states reduced direct grant support for health centers by $6.8 million nationally.


* Nineteen states cut their Medicaid payments for care provided to enrolled individuals by an average of about 9% from the previous year. Overall, Medicaid payments to health centers grew by less than 1% per Medicaid patient, well below the 4.6% growth in the cost of care for each patient served, producing a net loss of more than $60 million for the year.


* Nineteen states cut their payments for indigent care to health centers by more than $12.8 million over the year.


* In 18 states, local government support for health centers fell by almost $13 million.


* In all, 46 states had reduced their support or payments to health centers by more than $90 million in 2001-an amount equal to more than 2% of all health center revenues in that year. Even though, for each type of support listed above, the remaining states had increased their support or payments to health centers by an amount sufficient to offset the above-noted losses, the fact is that, in the aggregate, state and local support failed to keep pace with the growth in patient volume and the cost of care at health centers during 2001. As a direct result, more than one-third of all health centers experienced an operating deficit in that year-half of them by more than 5% of revenues (U.S. Department of Health and Human Services, 2002).



Continued or accelerated cutbacks in state funding are sure to exacerbate the already strained financial condition of health centers all across the country. If revenues from state and local sources continue their downward spiral-even as federal support grows-the end result will leave health centers able to serve few if any additional patients, even in the face of rapidly rising numbers of uninsured people seeking care at health centers today. Alternatively, if the growth in health center patients keeps pace with the rate in 2001-more than 7%, or about 1 million new patients-then most health centers could face operating deficits averaging 10% or more, thus jeopardizing their very existence.


But cutbacks in direct state funding for health centers are only a portion of the financial dilemma they face. Nearly 40% of all health center patients are Medicaid recipients or are covered under the State Children's Health Insurance Program (SCHIP) (U.S. Department of Health and Human Services, 2003). Health centers care deeply about the design of these programs and staffs work tirelessly to ensure that their states establish and maintain benefits that are generous; cost sharing requirements that are nominal; outreach and enrollment programs that are aggressive; and eligibility limits that provide coverage to the widest range possible of low-income beneficiaries. During economic downturns, the Medicaid program often gets squeezed between competing needs to provide coverage for a growing number of eligible beneficiaries and the erosion of state revenues that pressures policy makers to constrain budget spending. Even though a majority of Medicaid's funding comes from federal payments to the states, in times of economic distress, states often have difficulty affording their share of the program's costs. If state funds are not available, a state may be forced by economic circumstances to cut the program's eligibility levels or benefits, cap enrollment, or pull-back on expansion plans at a time when the need for the coverage may be greatest.


Recent state surveys have shown that Medicaid spending grew 13.2% in fiscal year 2002, the fastest rate of growth since 1992 (National Governors Association and National Association of State Budget Officers, 2002). Many states are focusing on Medicaid as a key part of their efforts to balance burgeoning deficits. Medicaid constitutes about 15% of state general fund spending and is the second largest program in most states' budgets after elementary and secondary education. Forty-nine states and the District of Columbia report plans to reduce their Medicaid spending growth in fiscal year 2003, and nearly two-thirds of states are planning mid-year cost containment strategies (Smith, 2003).


The NACHC state survey also found that nearly every state in the Union is either acting now, or has plans, to reduce their Medicaid spending by typically restricting or eliminating altogether their coverage of individuals and services that goes beyond the minimum federal requirements, which could leave up to 15 million people at risk of losing their current coverage (National Association of Community Health Centers, 2003a). More than one-half of the 40 states that cover dental care for adults under Medicaid are expected to eliminate that coverage, and many more are considering such action.


Health centers are bracing for the financial impact of Medicaid eligibility restrictions and the growing state trend of reducing coverage and benefits to federal minimum requirements. In particular, the elimination of optional adult dental coverage under Medicaid will have a dramatic effect on health centers and their ability to serve communities in need. Health centers provided more than 3 million dental visits to patients last year-many are Medicaid beneficiaries who have difficulty finding providers willing to treat their oral health needs. This phenomenon is also evident in medical care, as other health care providers have begun cutting back on the uncompensated or charity care they provide to people without health insurance, leading to an even greater concentration of uninsured patients among a dwindling band of "safety net" providers. As a result of these multiple factors, health centers overwhelmingly report increases in the numbers of uninsured seeking care at a time when resources to pay for it are dwindling. It is noteworthy that health centers experienced a 33% growth in the number of uninsured patients over the past 5 years alone and 65% over the past 10 years (National Association of Community Health Centers, 2003a).


Some of the Medicaid cuts currently being proposed by the states may actually cost states more in the long term. Low-income children and families will continue to get sick, regardless of whether there is a program to provide health insurance for them. If a beneficiary's cost-sharing is prohibitive, if the benefits are not comprehensive, if there is a cap or freeze on enrollment, if some beneficiaries are dropped-off the rolls by lowering income eligibility standards, then these newly uninsured people (or those who retain coverage but have no real access to care) place deeper demands on the fraying safety net and thus, become more costlier to serve, either because they are sicker or because they seek less cost-effective treatment options at hospital emergency rooms.


One potential target of state cutbacks may be a special Medicaid payment system for health centers (known as Federally Qualified Health Centers, or FQHCs, in the Medicaid law). In establishing this system back in 1989, the Congress clearly recognized the threat that low Medicaid payments pose to health centers' ability to care for uninsured patients, and they included language in the Omnibus Budget Reconciliation Act of 1989 requiring Medicaid to reimburse health centers on a reasonable-cost basis for services provided to Medicaid beneficiaries. In its report on this provision, the Committee wrote:


"The Subcommittee on Health and the Environment heard testimony that, on average, Medicaid payments to federally qualified health centers cover less than 70% of the costs incurred by the centers in serving Medicaid patients. The role of the programs funded under sections 329, 330, and 340 of the PHS Act is to deliver comprehensive primary care services to underserved populations or areas without regard to ability to pay. To the extent that the Medicaid program is not covering the cost of treating its own beneficiaries, it is compromising the ability of the centers to meet the primary care needs of those without any public or private coverage whatsoever." (U.S. Congress, 1989, p. 415).


In the 14 years since enactment of that requirement, health centers have increased their capacity for uninsured care by 2.5 million people-double the number of uninsured patients served in 1990, a rate of growth that is more than twice that for the nation's uninsured population. In other words, Congress received a higher rate of return on its annual appropriations investment in health centers because Medicaid cost-based reimbursement was in place.


While some states may complain that this special Medicaid payment system places a heavy financial burden on them, the fact is that health centers actually save states' money on their Medicaid programs. According to one recent study, preventable hospitalizations in communities served by health centers were lower than in other medically underserved communities not serviced by health centers (Epstein, 2001). Patients in underserved areas served by these centers had 5.8 fewer preventable hospitalizations per 1,000 people over three years than those in underserved areas not served by a health center (Epstein, 2001). Several other studies (Braddock, 1994; Duggar et al., 1994a; Duggar et al., 1994b; Falik, 2001; Starfield, 1994; Stuart, 1993; Stuart, 1995) have found that health centers save the Medicaid program more than 30% in annual spending per beneficiary due to reduced specialty care referrals and fewer hospital admissions. Based on that data, it is estimated that health centers already save almost $3 billion annually in combined federal and state Medicaid expenditures-$1.2 billion in state spending alone. That amount is more than four times the current national total of state-appropriated funding provided to health centers across the country. In other words, when states invest in health centers, they receive a four-fold return.


A major reason for their success is found in the growing number of health centers participating in a federally supported effort called the Health Disparities Collaboratives, with the goal of improving care and outcomes for chronic diseases. The Health Disparities Collaboratives initiative was developed to change the way health care is delivered-from a provider-oriented to a patient-, family- and community-oriented system. Patients and clinicians want a holistic, unified approach that works for them. The collaboratives are designed to cover all chronic illnesses and, ultimately, prevention as well. Currently, the program focuses on six chronic diseases: diabetes, cardiovascular disease, asthma, depression, prevention, and HIV. Since 1998, more than 450 health centers have participated in the program, and by the end of 2003, the number will exceed 600, or two-thirds of all health centers-marking significant progress toward meeting the federal goal of having all health centers enrolled in the collaboratives by 2005 (Health Resources and Services Administration, 2003). To date, more than 75,000 health center patients with a chronic disease have been enrolled in the Health Disparities Collaboratives' electronic registries that drive pro-active, planned care for patients and documents outcomes.


The key to the collaboratives lies in transforming care through a chronic-care model that identifies and tracks which patients need care for each different health condition; applies the most current clinical knowledge and practice guidelines to the care that is provided; and actively involves the patients in their own care-helping them learn about their condition and set goals for their own health improvement, using planned individual and group visits to keep track of their improvement and to stay the course. Multidisciplinary health center teams participate in year-long intensive learning and improvement activities, attending three learning sessions that use a performance-based method of learning to support a community of learners to apply, adapt, share, and generate knowledge about what does and doesn't work, and to spread positive change throughout their health centers and to others. Changes are implemented through a system that enables a health center's clinical team to test changes in their care delivery system in a fast and efficient way, and to expand the most effective changes throughout their clinical practice. In the years following their intensive learning experience, health center clinical teams spread the most successful changes throughout their organization and continue to report progress on nationally shared measures.


The collaboratives are supported in their efforts by a national and statewide quality improvement infrastructure, which includes support from both the federal agency that administers the Health Centers program and from state primary care associations that work with state health departments to support the health centers' efforts to disseminate improvement thought their entire organization and all populations served. The health centers themselves are partnering with local, state, and national organizations, ranging from local businesses, YMCAs, and faith-based organizations to national partners like the National Association of Community Health Centers (NACHC), the Centers for Disease Control and Prevention (CDC), and the Bayer Corporation. These partnerships have increased access to expertise, computer software, discounted pharmaceuticals and laboratory equipment, direct community resources for patients, health education materials, and community-level marketing and educational resources.


Today, almost 25% of all health center visits are for chronic conditions-most notably diabetes, hypertension, asthma and other respiratory illnesses, and heart conditions-or for mental health problems, and nearly 30% of visits are for prenatal care or for key preventive services, like breast and cervical cancer screenings, immunizations, and HIV testing (U.S. Department of Health and Human Services, 2003). Thus, the ability of the collaboratives to improve the health of health center patients will undoubtedly assist in closing the health gaps for racial and ethnic minorities, as well as the poor in America.


The collaboratives are only the latest advance in a long history of quality health care delivery by health centers. Numerous studies over the years have documented that health centers deliver effective, high-quality health care, using both objective and comparative measures of performance. For example, a recent article in a peer-reviewed journal (Politzer, 2001) examined various health policy studies and reports documenting the success of health centers in reducing and eliminating health disparities. Some highlights from the article include the following important findings:


* Even though health center women are more likely to be at greater risk for adverse pregnancy outcomes, their infant mortality and low birth-weight rates are at or below the national averages for all women. African American women who use health centers gave birth to low birth-weight infants at a rate of 9.9%, in contrast to their national rate of 13%. Compared with national figures, health center rates represent a 50% reduction in this disparity (Politzer, 2001).


* Medicaid beneficiaries who seek care at health centers were 22% less likely to be hospitalized for potentially avoidable conditions (Ambulatory Care Sensitive Conditions, or ACSCs) than beneficiaries who obtain care elsewhere-14.7% for health center patients and 18.9% for other Medicaid beneficiaries (Politzer, 2001).


* Health center patients were 16% more likely to have outpatient visits for ACSC-associated conditions. As a result, health centers have demonstrated reductions in Medicaid costs of 30 to 34%, compared with patients receiving care elsewhere.


* Health center practices meet or significantly exceed literature-based standards for treatment of the most common conditions of hypertension, acute otitis media, diabetes, and asthma on over 80% of the care elements. For example, health center diabetics were twice as likely to have their glycohemoglobin tested as schedule than the national population.


* African American and Hispanic health center patients with hypertension report at a rate of 90% that their blood pressure is under control, more than three times the rate of a comparable group of hypertensives in the nation and nearly double the Healthy People 2000 goal of 50% (Politzer, 2001).



The quality of the care provided by health centers was recently recognized by the Institute of Medicine (IOM), a branch of the Congressionally chartered National Academy of Sciences. A report issued by a panel of experts appointed by the IOM (Institute of Medicine, 2002a) cites growing numbers of uninsured and rising health costs, and concludes: "The American health care system is confronting a crisis [horizontal ellipsis] The health care delivery system is incapable of meeting the present, let alone the future, needs of the American public" (Institute of Medicine, 2002a, p. 1).


The report recommends several "rapid advance" demonstrations to foster needed change, including a health center-based pilot project to develop "model primary care practices." Noting the health centers have "a strong track record in chronic care management, electronic patient registries, and performance measurement," the panel recommended that the Department of Health and Human Services select about 40 health centers across the country to participate in a pilot project to build on their success of providing quality health care to medically underserved populations. The IOM recommends that by 2006, the health center demonstration sites "should open their doors to health care professionals across the United States and even worldwide who would like to see primary care at its best." (Institute of Medicine, 2002a, p. 7). It is noteworthy that another recent IOM report on the topic of health disparities specifically recognized the importance of community health centers, stating that "the CHC model has proven effective not only in increasing access to care, but also in improving health outcomes for the often higher-risk populations they serve" (Institute of Medicine, 2002b, p. 112).


This provision of high-quality health care, with a special, community-driven focus on the unique health needs-not to mention the special linguistic and cultural needs-of the populations they serve, has enabled health centers to deliver savings to all payers, but especially to Medicaid. In South Carolina, for example, the state health department analyzed their annual costs for patients who have diabetes as a primary or secondary diagnosis. They found that patients of CareSouth, a health center system that had implemented a special diabetes collaborative, had annual costs of $343 per patient, while patients of other providers had a cost of $1,600, and specialists had a cost of $1,900. The health center had produced those results by reducing the average blood sugar level of their diabetic patients from 11 to 8-a 3-point drop (a 1 point decrease translates into a 17% decrease in mortality, an 18% decrease in heart attacks, and a 15% decrease in strokes) (Health Resources and Services Administration, 2003).


The example of CareSouth is quite dramatic, but other health centers are also producing similar results-significant cost savings for the system, with fewer hospitalizations and emergency room visits. Health centers across the country have already achieved an average of more than a 1 point drop in the blood sugar levels of the approximately 65,000 diabetic patents currently in their collaborative registries, which-using the data on CareSouth's savings-would produce a savings of $43 million per year. And that is only the beginning: there are another 500,000 diabetic health center patients who will soon be benefiting as their health centers implement the collaboratives (Health Resources and Services Administration, 2003).


But that only tells a part of the story, because health centers save the health care system in other ways as well. For example, a 1994 Stanford University study (Baker, 1994) reported that 10% of all emergency room visits are for non-urgent conditions that could be treated in a primary care setting, such as a physician's office or health center. The researchers estimated that between $5 billion and $7 billion would have been saved nationally if the needed care had been provided in a more appropriate setting-this roughly equates to a potential $650 in savings per unnecessary emergency room visit nationally (Baker, 1994). Numerous studies (DePrez, 1987; Freeman, 1982; Fleming, 1986; Gold, 1974; Moore, 1972; Okada, 1980) have found that the presence of a health center has been associated with a reduction in unnecessary emergency room use, ranging from 13% to 38% in the case of pediatric emergency room use, together with improved health outcomes and lower incidence of chronic disease and disability. If states were to invest in expanding health centers to serve more uninsured individuals, the savings in reduced emergency room use alone would more than repay the investment.


It is clear, then, that health centers could be the foundation for reforming how states provide health care to the poor in tough economic times, but only if the states come up with more funds. In Massachusetts, for example, the state's 49 health centers have told state officials that they could handle an additional 1.1 million visits annually if the state increases rates and helps with renovations (Massachusetts League of Community Health Centers, 2003). As the Governor and leaders in the state legislature have grappled with measures to squeeze more care for the needy from less money, health center representatives have said that they are willing to help, but they are wary of being asked to do more without adequate funds.


The health centers can do the job, according to a recent study commissioned by the Massachusetts League of Community Health Centers (2003), but more resources will be required. Currently, Massachusetts health centers serve 566,000 patients, who account for nearly 2 million visits a year. With adequate resources, they could extend care to an additional 314,000 patients, according to the study (Massachusetts League of Community Health Centers, 2003). Most of the health centers' services are covered by public funding, but the centers report that the state pays about 77 cents on the dollar for care provided, forcing the centers to make up the difference. Although financially strapped, the centers have been able to maintain high standards, meeting quality goals set by a national accrediting board. But helping states meet the growing need for cost-effective care to the uninsured means hiring more staff in a tight labor market and making renovations, even adding buildings in some cases. While several health centers have recently upgraded, renovated, and/or expanded their facilities, some centers still operate in undersized or antiquated facilities, which results in lower efficiency and limits potential capacity.


Health centers are uniquely poised to deal with more state demands, according to their leaders. They have the expertise in dealing with the unique health care needs of the poor, they are in the right locations, and they are always looking for ways to expand services. In numerous cases, including states like Texas and Colorado, health centers have responded to pleas from state health agencies to provide greater access to prescribed medicines for underserved and low-income residents; but that also costs money. If states are serious about such initiatives, there has to be some investment on their part.


A key message for policy makers, at the federal and state levels, is that dramatic improvements in health care can be achieved from system change. But any health care organization that is working for quality improvement has a need for infrastructure and the development of capacity. Policy makers should recognize that both health centers and other providers are making these changes and support them financially. They are generating significant savings for the system, even as they improve the well-being of their patients and communities. But health centers have to cover their costs in order to expand. By sharing the savings that they produce with the centers, states will be enabling the centers to cover more medicines for their patients, ensure better access to specialists, and support innovations like group visits and outreach. If policy makers would look at what health centers are doing as a financing system, and share those savings with those who produce them, they will deliver even more. Alternatively, if states continue to follow the path of reducing their investments in these winning strategies, their actions will inevitably swell the ranks of the uninsured across the country, even as they cripple the very safety net providers whose mission and purpose is to serve them.