We last wrote on this topic in 2024, when Medicaid membership was growing and reimbursement wasn’t keeping pace with inflation. Reimbursement still lags, but that is no longer the biggest threat. H.R. 1 will cut federal Medicaid spending sharply, and as people lose coverage, uncompensated care will climb. Those patients will still need care, and many will arrive in your emergency department without coverage. Health systems still have to care for them and hold the local safety net together, on thinner margins than ever. Federally Qualified Health Centers (FQHCs) are one of the few levers that can protect Medicaid revenue and quality at the same time, whether as partners or as a model for a system’s own clinics.
Three proven approaches stand out:
- Partner with the strongest FQHCs already in your market
- Convert high-Medicaid clinics to an FQHC model
- Rework Medicaid managed care contracts to reward FQHC value
These strategies can be pursued independently or together.
Strategy 1: Make FQHCs Core Partners in Your IPA, CIN or ACO
FQHCs already serve the patients health systems most need to manage well: Medicaid, low-income Medicare, dual-eligible, subsidized exchange and uninsured. Their primary care, dental, optometry, podiatry and other specialty services help keep patients out of the emergency department and the hospital, and they lift quality scores. That makes FQHCs a natural, high-value partner for health systems and IPAs, CINs or ACOs that are in or evaluating risk arrangements.
FQHCs are mission-driven, and they get something most clinics don’t: enhanced, cost-based reimbursement that includes care coordination services (interpretation, transportation, health education, care management) that address social drivers of health (SDoH). Those services are where cost and quality are won or lost. Three moves build or deepen these partnerships:
- Bring FQHCs into existing IPA networks, with access to MSO services and value-based, or at minimum quality-upside, arrangements
- Tighten discharge and transitions-of-care programs so patients are connected to FQHC services before they leave the hospital
Solve FQHC pain points, starting with access to high-quality specialty care. Placing specialists in FQHCs part- or full-time can also capture higher reimbursement
Strategy 2: Convert High-Medicaid Clinics to an FQHC Model
If your system, medical group or IPA runs clinics with heavy Medicaid volume, those clinics may be strong candidates for an FQHC model. The transition takes real operational work, but the payoff is concrete:
- Higher revenue: Medicaid and Medicare* both pay an enhanced per-visit FQHC rate, which is based on the clinic’s actual costs and often well above standard fee-for-service rates
- Better quality: FQHCs are funded to provide additional care coordination services
The table below compares three models for transitioning existing clinic sites at any time. Each carries different benefits, governance structures and FQHC requirements. Choose without understanding them, and you risk the alignment, value-based contracting participation and long-term care coordination you set out to protect.
Clinic Transition Options
| Model | How It Works | Best-Fit When |
| Expanded scope | Clinic joins an existing FQHC’s HRSA-approved scope of project | A strong, aligned FQHC already serves the market; speed matters most |
| Subrecipient | Clinic receives part of an existing grantee’s Section 330 funding under a subrecipient agreement | A separate local entity and board underneath an established FQHC grantee can be maintained and provides value to the entity |
| Look-alike | A new, independent nonprofit meets all HRSA requirements without Section 330 funding | No suitable partner exists and the system can support sliding-fee care without grant dollars |
Strategy 3: Rework Medicaid Managed Care Contracts
FQHCs and similar organizations can do something most providers can’t: align incentives and capture quality and total-cost-of-care upside without eroding their guaranteed cost-based Medicaid payments.
The details decide whether a value-based contract with an FQHC pays off. Structure each piece deliberately: the capitation amount, the quality bonus program and how quality gates shared-savings participation.
H.R. 1 leaves health systems a narrowing window to act. The decisions made in the next year will determine which clinics stay open, how they are paid, and who in your community still has access to care. Systems that move early will have the most options, whether that means deepening FQHC partnerships, transitioning high-Medicaid clinics, or rethinking managed care contracts.
If you are weighing any of these paths, we would welcome the conversation. Stephanie King works with health system leaders to find the approach that protects both their margins and their mission. Contact Stephanie at sking@copehealthsolutions.com to start the conversation.