Beyond the Grant: Strategies to Diversify Revenue and Strengthen Financial Sustainability

Federally Qualified Health Centers (FQHCs) are at a crossroads. For decades, grant funding has been the backbone of financial stability for these organizations. But the landscape is changing and fast. Grant funding is shrinking, operational costs are climbing, and payment models are shifting toward value-based care. These changes demand a new approach: health centers must diversify revenue streams and strengthen financial sustainability to thrive in the years ahead.

Why "Beyond the Grant" Matters

The reliance on grants is becoming increasingly risky. According to recent data, grant funding decreased by 5% through 2023, while patient service revenue grew—but at a slowing pace. This trend signals that health centers must rethink their financial strategies and adopt a more diversified approach.

Moving beyond grants means exploring new revenue streams, optimizing operations, and leveraging technology to capture every dollar possible. It also means preparing for demographic shifts and policy changes that will reshape healthcare delivery.

Key reasons to move beyond grants include:

Declining grant funding as a percentage of total reimbursement.
Slowing growth in patient service revenue.
Increased pressure on margins due to rising costs and regulatory demands.
Greater complexity in payer models and reimbursement structures.

Assessing the Financial Landscape

Understanding the current financial environment is the first step toward sustainability. Today's landscape is shaped by three major forces: rising operational costs, population changes, and payment model shifts.

Operational costs are climbing due to wage pressures, staff turnover, cybersecurity threats, and inflation. Non-clinical support staffing alone has increased by 50% over the past five years, adding significant strain to budgets. At the same time, patient demand continues to grow, particularly among underserved and aging populations. By 2030, one in five Americans will be 65 or older, requiring more chronic care, longer visits, and accessible facilities.

Payment models are also evolving. The shift toward value-based care offers opportunities for improved outcomes but demands robust data infrastructure and care coordination. Increased payer complexity—such as alternative payment models and state waivers—adds another layer of challenge.

What this means for health centers:

Rising costs require tighter financial controls and efficiency measures.
Aging populations will drive demand for chronic care management and geriatric services.
Value-based care models necessitate investment in analytics and care coordination.
Payer complexity calls for stronger contract management and scenario planning.

Understanding Your Current State

Before planning for the future, health centers must evaluate their current financial performance. Patrick outlined four critical areas to focus on:

First, analyze your payer mix to identify vulnerabilities and opportunities. Accurate categorization of payers is essential for scenario planning, especially as managed Medicaid and Medicare Advantage become more prevalent. Second, review revenue cycle performance using key metrics such as days in accounts receivable, aging AR percentages, denial rates, and claim velocity. These indicators reveal the health of your cash flow and highlight areas for improvement.

Third, assess operational capacity by examining provider productivity and facility utilization. Mobile units and school-based clinics are emerging as cost-effective solutions to meet growing demand. Finally, conduct a strategic service line review to ensure offerings align with community needs. Expanding behavioral health services, rebuilding dental capacity, and integrating pharmacy programs are just a few examples of how health centers can adapt.

Questions to ask during this assessment:

Is our payer mix structured for accurate scenario planning?
Are we meeting industry benchmarks for revenue cycle KPIs?
Do we have the capacity to handle projected patient growth?
Which service lines need expansion or adjustment to meet community needs?

Leveraging Technology for Sustainability

Technology can transform financial performance and operational efficiency. One powerful example is retroactive Medicaid tools, which automate eligibility checks for self-pay patients who later qualify for Medicaid. This technology can recover significant revenue that would otherwise be lost—some health centers have captured over $250,000 in just six months.

Role-based business intelligence is another game-changer. By providing tailored insights for different teams, analytics enable data-driven decision-making at every level of the organization. Dashboards that track KPIs such as AR days, denial rates, and claim velocity help leaders identify trends and take corrective action quickly.

Artificial intelligence (AI) also offers opportunities to streamline administrative tasks, improve operational efficiency, and enhance patient engagement. From automating repetitive processes to generating health literacy tools, AI can help health centers work smarter—not harder. However, safeguards such as HIPAA compliance and data anonymization are essential to ensure patient privacy. Strengthening your organization's defense against growing threats is critical, which is why many health centers are investing in comprehensive cybersecurity solutions to protect sensitive patient and financial data.

Technology priorities for health centers:

Implement retroactive Medicaid tools to capture lost revenue.
Use analytics dashboards for real-time performance monitoring.
Explore AI for administrative efficiency and patient education.
Strengthen cybersecurity to protect against growing threats.

Preparing Your Workforce for Change

Looking ahead, health centers must prepare for major policy shifts and evolving community needs. Medicaid recertification requirements beginning in 2027 will increase administrative burdens and risk coverage loss for patients. Proactive steps such as training outreach staff, tracking recertification data, and using automated reminders can help mitigate these challenges.

The end of Medicaid work requirements in 2026 will likely lead to a higher uninsured population, disproportionately affecting low-income and part-time workers. Cross-training staff, expanding community health worker programs, and modeling financial scenarios will be essential to maintain access and financial stability.

Behavioral health integration remains a top priority, requiring scalable models and partnerships with technology vendors to automate billing and triage. Additionally, the Rural Health Transformation Program offers a once-in-a-decade opportunity to secure federal funding for infrastructure and workforce development—health centers should act now to position themselves for success.

Organizations managing complex IT environments should consider how managed IT services can free up internal resources, allowing your team to focus on patient care and strategic initiatives rather than technology management.

Action steps for workforce readiness:

Train staff for Medicaid recertification and eligibility outreach.
Expand CHW programs to support high-risk populations.
Develop scalable behavioral health models and shared service arrangements.
Pursue federal funding opportunities for infrastructure and workforce development.

Key Takeaways

The path to financial sustainability requires a proactive, multifaceted approach. Health centers must invest in people and processes, actively pursue partnerships and funding opportunities, and adopt scalable systems that can adapt to changing demands. By leveraging technology, embracing data-driven decision-making, and planning ahead for policy changes, organizations can not only survive but thrive in this dynamic environment.

Final Thoughts

"The only thing we have to fear is fear itself." With strategic planning, innovative technology, and a commitment to adaptability, health centers can move beyond the grant and build a foundation for long-term success.