MARCH 2021 Issue Brief The Pandemic's Financial Impact on California's Community Health Centers: Largest Centers Suffer Significant Losses Overview any "surpluses" experienced by some centers through As a follow-up to the analysis of the financial impact December 2020 may ultimately be used to cover pan- of COVID-19 on California's Federally Qualified Health demic-related losses in 2021. Centers,1 Capital Link evaluated whether the size, num- ber of sites, payer mix, service mix, or location may have Whether measured by revenue size, number of patients, created a differential financial impact on specific groups or number of sites, the largest health centers bore the of centers. The findings of this analysis are summarized brunt of the financial losses between April and December below. 2020. A By revenue size. The top quartile,2 with revenues in Based on these findings, there is significant risk that excess of $36.7 million in 2019, absorbed 95% of the the health center system in California will be greatly losses, totaling approximately $557 million (an 11% weakened in a postpandemic future, absent additional operating loss), while the lowest two quartiles, with funding support - especially for the largest centers. revenues below $16 million, had combined surpluses While federal support is on the horizon, it will be impor- totaling $64 million (an 8% operating gain). tant to pay close attention to the financial health of these health centers if California hopes to preserve the integ- A By number of patients. The top quartile, with more rity of the safety net. than 31,000 patients in 2019, absorbed 97% of losses, totaling approximately $547 million (a 12% loss), while The centers that had the most capacity prepandemic, the lowest quartile, with fewer than 6,500 patients, and those that serve 68% of all patients and 69% of had estimated surpluses totaling $41 million (a 17% Medi-Cal patients overall, face the most financial risk. gain). They are on track to emerge from the pandemic in a A By number of sites. The top quartile, with 14–52 sites, significantly weaker financial position than before the absorbed 91% of losses, totaling $506 million (a 12% pandemic, potentially curtailing their ability to "bounce loss), while those with three or fewer sites had collec- back" to provide the range and volume of care they were tive surpluses of $32 million (a 5% gain). previously providing. Centers that serve the highest proportion of Medi-Cal Smaller centers may fare somewhat better, given they patients sustained almost all of the financial losses, total- entered 2021 in a stronger financial position - how- ing an estimated $549 million. ever, given the unknown course of the pandemic, they too may experience significant losses going forward A 96% of the losses were concentrated in the top quar- without additional resources to offset COVID-19-related tile - those centers serving between 20,266 and costs and losses through at least 2021. It is important 243,421 Medi-Cal patients in 2019. This group sus- to note that relief funds received through December tained average losses of $145 per patient, based on 2020 were intended to cover costs well into 2021 - so 2019 total patients. Between urban and rural centers, financial losses were Service Mix concentrated in urban centers; they bore 94% of total Centers with the most diversified service mix sustained losses. the greatest financial losses. A The quartile with the highest losses also had the highest proportion of dental visits (13% in 2019) as Why Were Losses Concentrated in compared to the quartile with the lowest losses or the Largest Centers? gains, for which dental visits were 1% of visits. While there were some minor differences in average visit decline (which affects revenues) and the average per- A The "high-loss quartile" also provided the highest centage of visits conducted virtually, centers of all sizes proportion of enabling visits (4% vs. 1% in 2019) and and across all regions were fairly tightly clustered, with the highest proportion of "other professional visits" 19% to 26% average visit decline and 49% to 56% of all (5% vs. 2%). visits conducted virtually. A Both groups provided an equal proportion of mental health visits (5% for each group in 2019). The two most important differentiating factors that appears to have financially disadvantaged the larger centers were prevalence of Paycheck Protection Program Location (PPP) loans and level of BPHC grant funding. In both Regionally, the losses were more balanced, although the instances, the dollar amount per patient greatly favored South and Central regions sustained the heaviest total smaller centers. losses and per patient losses. A PPP. Given that many of the largest health centers A Losseswere highest for centers in the South region, at were not eligible to apply for PPP funding, these cen- $179 million in total and $150 per patient. ters sustained the largest financial losses. Only 42% of centers with revenues above $36.7 million (the top A Centers in the Central region collectively lost $163 mil- quartile) received a PPP loan, while 100% of centers in lion, or $101 per patient. the bottom three quartiles received a PPP loan. A Centers in the Sacramento Valley region were close A BPHC grant funding. Bureau of Primary Health Care behind, in terms of per patient losses, at $100 per (BPHC) grant funding per patient averaged $153 per patient. patient for the centers with the smallest revenue (low- A These three regions serve the highest concentrations est quartile), while the largest centers (top quartile) of Medi-Cal patients at 70%, 66%, and 73% of all received an average of $44 per patient. This differen- patients, respectively, in 2019. tial also held true when evaluating based on number of patients, number of sites, and number of Medi-Cal patients. CALIFORNIA REGIONS COUNTIES* Central Fresno, Kern, Kings, Madera, Merced, San Benito, San Joaquin, San Luis Obispo, Santa Cruz, Tulare, Ventura Los Angeles Los Angeles North Butte, Glenn, Humboldt, Lake, Lassen, Mendocino, Nevada, Plumas, Shasta, Sierra, Siskiyou, Sutter, Trinity, Yuba Sacramento Valley El Dorado, Sacramento, Yolo San Francisco Bay Area Alameda, Marin, Napa, San Francisco, Santa Clara, Sonoma South Imperial, Orange, Riverside, San Diego *Counties not listed have no freestanding FQHCs with corporate headquarters in that county. California Health Care Foundation www.chcf.org 2 8.Small Business Administration (SBA) Paycheck Methodology Protection Program (PPP) loan amounts for each The data analysis contained in this infographic was con- eligible California FQHC: ducted by Capital Link, based on information from the following sources: $ Based on surveys of health centers in several states conducted by Capital Link and the National 1.FY19 audited financial statements of 192 California Association of Community Health Centers (NACHC) FQHCs (both Section 330s and Look-Alikes), col- between April 13, 2020, and June 9, 2020, and: lected by Capital Link. $ For survey nonrespondents, the SBA PPP loan 2.2018 and 2019 Uniform Data System (UDS) reports amount was calculated for eligible health centers submitted by 202 California FQHCs to the Health (those with 2019 UDS FTEs less than 450), from Resources and Services Administration (HRSA). FY2019 Audited Financials: Salaries & Related 3.HRSA's Data Warehouse for the number of California Expenses, divided by 12 and multiplied by 2.5. FQHC sites and the amount of COVID-19 grants $ Ifa health center's FY19 audit was not available, issued to each California FQHC. the loan amount was calculated as follows: Total 4.HRSA's Health Center COVID-19 Survey, including Revenues (from 2019 UDS) multiplied by the weekly responses from health centers from April 4, California FY19 median for Personnel-Related 2020, through November 27, 2020. Expense as Percentage of Operating Revenue, as calculated from the FY19 audits. The result 5.US Department of Health & Human Services (HHS) was then divided by 12 and multiplied by 2.5. Data Warehouse for the amount of Provider Relief Fund (PRF) General Distribution issued to each 9.COVID-19-Related Expenses include costs of pur- California FQHC health center: chasing personal protective equipment (PPE), telehealth implementation, and facility modifications $ General Distribution estimated at 2% of 2018 Net related to COVID-19. They were estimated on a Patient Service Revenue. per-patient per-month basis, based on data collected 6.HHS Data Warehouse for the amount of each PRF from health centers in multiple states by NACHC and Rural Distribution issued to each rural California Capital Link between March and October 2020. FQHC health center: $ Rural Distribution based on FQHC site addresses mapped by RUCA codes 4, 5, 6, 7, 8, 9, and 10, with a fixed amount of $103,253 per rural site. 7.FCC telehealth grants as published by the PCC on July 8, 2020. The Pandemic's Financial Impact on California's Community Health Centers: Largest Centers Suffer Significant Losses www.chcf.org 3 About the Author Endnotes Capital Link is a national nonprofit organization focused Holding On: How California's Health Centers Adapted 1. Operations and Care for Patients During the Pandemic, on strengthening FQHCs - financially and operationally California Health Care Foundation, February 2021. - in a rapidly changing marketplace. Capital Link helps 2.Quartiles refer to the size of the health center. The lowest quartile health centers plan for sustainability and growth, access consists of the smallest centers; the top quartile consists of the capital, improve and optimize operations and financial largest centers. management, and articulate their value. About the Foundation The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford. CHCF informs policymakers and industry leaders, invests in ideas and innovations, and connects with changemak- ers to create a more responsive, patient-centered health care system. California Health Care Foundation www.chcf.org 4