Future-Proofing Community Health Centers: Navigating Medicaid Changes with Confidence

H.R.1, signed into law in July 2025, includes several major changes to Medicaid that are likely to affect Healthcare facilities that rely heavily on patients who use Medicaid.

Community health centers can take several proactive steps to stabilize finances, optimize operations, and continue serving their communities. Your finance team can also leverage your fund accounting software to help navigate these changes and proactively make the necessary adjustments.

Major Changes to Medicaid Included in H.R.1

The changes to Medicaid included in H.R.1, phased in throughout 2026, will establish more requirements for those on Medicaid. This will likely decrease the number of clients who will be covered by Medicaid. At the same time, increases in those uninsured and the rising cost of living could push more individuals toward community health centers for care.

Here are a few provisions from the legislation that your CHC should be watching.

• The enhanced federal funding for Medicaid sunsetted on January 1, 2026. With this enhanced funding going away, there will be a reduction in Medicaid revenue at healthcare facilities. This will force these organizations to find other sources of revenue to fill the gap.
• By the end of 2026, states must implement work requirements for expansion enrollees. With expanded requirements, a drop in participation in Medicaid is expected, also negatively impacting Medicaid revenue for facilities.
• Beginning on January 1, 2027, states must conduct eligibility checks every six months for expansion enrollees, up from annually. It is anticipated that increased eligibility checks will lead to a decrease in Medicaid enrollment.

What Do These Changes Mean for Community Health Centers?

With all the changes, CHCs should expect to see a decrease in Medicaid participation, which in turn can significantly impact Healthcare facilities and the amount of Medicaid reimbursements they receive. For CHCs that have received enhanced federal funding in recent years, this will be a big shift and will force them to look more closely at their facilities and plan accordingly.

Given the potential for reduced reimbursements, CHCs need timely, actionable insight into operating margins across multiple lines of service, service locations and providers. This can illuminate opportunities for consolidation and reduction of facility-driven expenses, as well as expose variances across contract services and providers.

What Should Your CHC Do Now to Prepare?

Now is the time to start evaluating how this will impact your facility. Using your fund accounting software, you likely have many ways to help analyze your data and forecast multiple scenarios. Here are a few steps to take:

• Assess your revenue mix. Determine how much of your revenue includes Medicaid reimbursements and identify other established streams. A clear picture of your revenue sources will help you build a more informed strategy.
• Review cost centers for leaks. Examine balance sheets for each business unit to identify areas operating at a loss. Segmenting these in your fund accounting system makes it easier to isolate and analyze areas for improvement.
• Model multiple scenarios. Create forecasts that reflect best-, worst-, and middle-case outcomes for Medicaid changes. A range of projections will support stronger planning and decision-making.
• Strengthen reimbursement processes. Ensure reimbursement workflows for all funding sources are efficient and airtight. Missing eligible reimbursements or delays in receiving reimbursement funds can significantly impact cash flow.
• Track funding sources individually. Monitor dynamic sources—such as grants and payors—at a granular level (e.g., Medicaid Capitated vs. Non-Capitated, private insurance, each federal/state grant). This enables you to adjust revenue expectations and mitigate margin risk.

Proactive planning today ensures your CHC can adapt quickly, protect margins, and deliver essential care—no matter what changes come next.

How to Leverage Blackbaud Financial Edge NXT® for Analysis

If your team uses Financial Edge NXT as your fund accounting software, there are several features that can help you identify opportunities to shore up your center’s finances. If you aren’t currently using Financial Edge NXT, check with your current fund accounting provider to see if these features are available in your system.

The first tool is the Chart Organizer. By leveraging the Chart Organizer, you can develop your financial statements from top to bottom to show the areas of focus most important to your organization on a row-by-row basis. Once that is complete, you can then incorporate that Chart Organizer into the reporting section to create an income statement or statement of activities.

In the report sections, you can leverage multiple columns to separate the data by location, service line, cost center, and revenue source, among other options. The drill down capabilities will allow you to analyze the data side by side in an apples-to-apples format, so you can make more informed decisions.

In Financial Edge NXT’s budgeting section, you can create forecasts using multiple scenarios. You can simulate what a 10 or 20% decrease in Medicaid reimbursements might do to the bottom line in anticipation of the upcoming changes. You can also forecast by the various reporting units you have to see the impacts individually as well as organization wide. This will allow you to look at multiple possibilities and help you feel more confident as the federal and state-level policies come together. You’ll be able to see the impact of these scenarios, so you can plan accordingly and pivot quickly if the need arises.

You’ve Done the Analysis. Now What?

You can look at this two ways: how do you adjust what you are currently doing, and what are new areas you can focus on to raise additional revenue.

Adjusting Current Operations

When looking at those newly created reports, you can find areas of potential weakness and identify opportunities to deal with possible upcoming shortfalls. You may want to explore consolidating service lines or locations for those that are operating at a deficit or close to it.

There may also be an opportunity for new partnerships that you may want to explore. This is not always the first choice, but sometimes it might be necessary to avoid larger problems down the road.

You can also look at new technology or leverage existing technology to streamline operations as efficiently as possible, which in turn can lower costs. Incorporating tools like automated payments reduces the number of manual tasks that people are performing.

Incorporating New Operations

To mitigate the impact of these Medicaid changes, you may look at creating or expanding services that help patients navigate the new requirements and filings coming from the legislation, assisting them in retaining Medicaid eligibility.

You may want to explore more opportunities for private or federal grants to bring in additional revenue. While most grants come with reporting requirements, a purpose-built fund accounting system with sub-fund capabilities helps meet those requirements, giving you an advantage over others that might not have the same ability to track all the necessary information.

Now is also the time to start or increase fundraising for the organization. With these changes still making headlines, fundraising outreach can be an effective and cost-efficient way to help mitigate shortfalls from other areas. By establishing or growing a fundraising arm within your organization, you can raise money to offset the upcoming decreases in Medicaid reimbursements.

Moving Forward with Confidence and Resilience

Medicaid changes may bring uncertainty, but with the right tools and insights, your CHC can plan effectively and continue delivering exceptional care to your community.

Looking for a deeper dive into how to stay proactive in a quickly changing environment? Check out the white paper, Future-Proofing Your Organization’s Finances.