For a few community health centers, serving the poor brings huge profits.

Those sales helped Genesis turn a profit of $52 million in 2021 — a margin of 37 percent — to a profit of $19 million, according to the audited financial statements. The center’s profits were up 35 percent for the fourth consecutive year, data showed. A federally funded report on health centers’ financial performance shows the industry average is 5 percent.

Genesis says its biggest margins are good governance and that it needs the money to expand and modernize its services as it is not dependent on government funding. The center is funded through the government’s drug rebate program.

Still, Genesis’ high profits stand out among nonprofit federally qualified health centers, the nation’s safety net for treating the poor.

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In 2021, of The federal government spent more than 6 billion dollars [nachc.org] Through basic funding, 1,375 centers across the country provide primary care to more than 30 million low-income people. That same year, America’s Rescue Plan provided an additional $6 billion over two years for Covid care.

These community health centers must take all patients regardless of their ability to pay, and in return, receive annual government subsidies and higher reimbursement rates from Medicaid and Medicare than private physicians.

KHN’s analysis shows that a handful of the centers have posted gains of 20 percent or more in at least three of the past four years. Health policy experts say that profit alone should not be a concern if the health centers plan to spend the money on patients. But the high margins suggest more federal scrutiny is needed for the industry and that the money is being spent fast enough.

“No one is keeping track of where their money is going,” he said. Ganisher Davlyatov, assistant professor at the University of Oklahoma Studied Health Center Finance.

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of Federal Health Resources and Services AdministrationUnder the federal law that governs the centers, the centers have limited authority over how much they spend on services and how they use their profits, he said. James McRae, Associate Administrator.

The purpose of the federal funding is to help the clinics meet the health needs of many of the nation’s poor.

“The expectation is that they will take any profit and plow it back into the operations of the center,” he said. “We’re definitely looking at what they’re doing with those resources,” he said of KN’s findings.

But Gee Bai, a professor of mathematics and health at Johns Hopkins UniversityWhy are some centers making profits of 20 percent or more for consecutive years?

A high-margin center raises questions about “where the profits go” and the tax-free status. “The centers should provide enough benefits to be exempted from public taxation, and what we see here is a lot. [surpluses],” she said.

Bai said that centers should be able to answer the questions of why they are not making more efforts to help the local community by expanding their scope of services.

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The officials of the health centers argued that the money would allow them to expand services without depending on federal funds and help them save for large projects such as building new buildings. Their operations are overseen by a board of directors, at least 51 percent of whom must be patients, which apparently meets the needs of the community.

“Health centers are expected to have operating reserves to be financially sustainable,” said Ben Money, senior vice president of the National Association of Community Health Centers. “Profits are important as long as health centers plan to use the money to help patients.”

Some officials at the center have suggested that bottom-line profit margins may be skewed by large contributions earmarked for construction projects. Grants and donations are shown as income in the year they are awarded, but project costs are allocated on the financial statements over a longer period, often decades.

Centers average about 20 percent of their annual federal base grant, according to HRSA. Grants have more than doubled in the past decade. Federal aid to the center is awarded annually on a competitive basis, taking into account the need for services in the area, and clinics providing care to specific populations such as homeless people, agricultural workers or residents of public housing.

The centers’ Medicare and Medicaid payments can also be double what the federal programs pay private doctors, said Jeffrey Allen, a partner at the Forvis consulting firm.

In addition, some health centers, such as Genesis, benefit from the 340B federal drug rebate program, which allows them to purchase drugs from manufacturers at significant discounts. The patients’ insurers typically pay the centers higher, and the clinics keep the difference. Clinics may, but are not required to, reduce out-of-pocket costs for patients.

For its analysis, KHN began with a study conducted by Davlyatov, using the centers’ tax filings with the IRS to identify the two dozen centers with the highest profit margins in 2019. KHN then examined the audited financial statements of those centers for the past four years (2018 to 2018). In the year

It was one of the primary health care facilities in North Mississippi.

“We don’t take unnecessary risks with corporate assets,” said Christina Nunnelly, chief quality officer at the center. In the year By 2021, the center had a profit of nearly $9 million on $36 million in revenue. More than $25 million in revenue comes from drug sales.

He made it clear that the Center is building a financial cushion in case the 340B program ends. Drugmakers have been seeking changes to the program.

The center recently opened a school-based health program, a new dental clinic and clinics in neighboring districts.

“There may come a day when this kind of margin is no longer applicable,” she said. He doesn’t want the center to “start cutting programs and people” if it hits hard times.

CEO of Friends of Family Health Center, outside Los Angeles Bahram Bahramand He said the high margins are the result of California’s extensive Medicaid coverage for low-income residents and good governance.

The center — which saw profits rise 25 percent from 2018 to 2020 — last year opened a $1.9 million facility in Ontario and bought its main clinic building in La Habra for $12.3 million, which it plans to expand, he said.

Bahremand added that the center has reduced administrative costs by focusing on having more providers in relatively smaller areas.

“Why do we make so much money?’ You don’t have to ask. You have to ask: ‘How come other clinics don’t make this much money?’

Genesis started as a stand-alone clinic in South Carolina and at times was unable to pay salaries, said Tony Megna, CEO and general counsel of Genesis. Converting to a federally qualified health center a decade ago brought federal funding and a stronger foundation. From 2018 to 2021, it has recorded a profit of more than 65 million dollars.

“Our approach to money is different than most because it’s ingrained in us to worry about whether we’re going to pay our bills,” says Cathy Noyce, Genesis’ head of special projects.

The center is spending $50 million to renovate and expand its aging services, Meghna said. A new $20 million building in Darlington that will double the facility’s space is slated to open in 2023. And the strong bottom line will help the center pay all employees at least $15.45 an hour, more than twice the state minimum wage. , he said.

Megna was paid nearly $877,000 in salary and bonuses in 2021, according to Genesis’ most recent IRS tax filing, an amount more than four times the industry average.

David Corey, chairman-elect of Genesis’ board of directors, told CNN in a memo that part of that compensation was compensation for several years during which Meghna was unwittingly underpaid. “We have already decided that giving Mr. Mena ‘average’ compensation like other FQHC CEOs is not what we want. Mr. Magna’s extensive legal experience and education as well as his institutional and regulatory knowledge set him apart from others.

Meghna’s base salary is $503,000.

Genesis officials said the financial guarantee provided by the center’s profits allowed them to provide additional patient services, including foot care, to people with diabetes. In the year In 2020, Genesis used $2 million to create an independent foundation to help families with food and utility bills and other needs.

Most of Genesis’ revenue comes from the 340B program, according to audited financial statements. Many prescriptions filled at the clinic’s pharmacy are expensive specialty drugs to treat rare or complex conditions such as cancer.

Meghna, 67, a former bankruptcy attorney, said it was important to make the center financially secure in order to keep it open for patients.

“We are very careful about how we spend our money,” said Meghna.

KN (Kaiser Health News) is a national news division that produces in-depth journalism on health issues. Along with policy analysis and polling, KHN is one of the three major work programs on the KFF (Kaiser Family Foundation). KFF is a non-profit organization that provides information to the nation on health issues.