Tuesday, October 14, 2014

New Report Analyzes the Factors that May Contribute to Health Center Failure

The Federally Qualified Health Center (FQHC) business model is complex but for the majority, it has proven to be sound when competently implemented. Not all FQHCs have implemented it successfully, however, and the result is that some have failed outright while others were forced into mergers. It is clear that while all health centers share a similar basic business plan structure, enough to collectively call them an “industry,” many factors conspire to make operating one center very different from the next. In order to identify which factors may contribute to health center demise, Capital Link and Community Health Center Capital Fund (Capital Fund) issued a report examining the differences between failed or failing health centers and their more successful counterparts.

Based on an analysis of the financial and operational performance of 29 health centers over a four-year period leading up to the centers’ demise, this analysis is the third topic in the Citi Foundation-sponsored series Community Health Center Financial Perspectives. The report contains two issues to address different audiences: Identifying the Risks of Health Center Failure: A Guide for Health Centers and Identifying the Risks of Health Center Lending: A Guide for Lenders.

The health center guide (Issue 5) offers health centers a better understanding of what operational and financial issues have resulted in financial stress for other centers and impacted their ability to stay in business. The lender guide (Issue 6) provides lenders and investors with the insight necessary to determine potential early warning signs of future financial distress when underwriting health center loan requests—whether for capital project financing, working capital, or growth capital.

The following infographic illustrates key findings and the complete report is available at www.caplink.org/resources/reports.