Transformation of a Free Clinic

By Robin Stombler, President, Auburn Health Strategies

Four years ago, the Traverse Health Clinic faced a daunting decision. Either find a new way to finance the operation of its health care services, or eventually close its doors to more than 2400 neighbors in need of its clinic and programs each month. Arlene Brennan, Chief Executive Officer of the Traverse Health Clinic, said at the time, “If our services are no longer required, we will close. We provide health care for people in need. Despite all the changes coming to the national health care system, leaders of the community made it clear that we are still essential.”

The well-managed Clinic did not suddenly run out of money. Generous financial support from community donors and volunteer efforts from local health care providers were – and still are – an important lifeline. Through no fault of its own, the Clinic was caught in the middle of health system reform. “Our decades-old free clinic model was suddenly in a precarious position,” explained Brennan.

A majority of the Clinic’s operating budget was made possible through the federal Medicaid Disproportionate Share Hospital (DSH) program. DSH payment adjustments, created by the Consolidated Omnibus Budget Reconciliation Act of 1985, were intended to help hospitals cover the cost of uncompensated care for uninsured or low-income individuals. On the state level, significant funding also came from the Michigan Adult Benefit Waiver program, which was expected to end in 2014.  

The phased-in reduction of these federal and state funding programs was based on the assumption that if more uninsured people became insured, there would be less uncompensated care. The Patient Protection and Affordable Care Act (Affordable Care Act), and the subsequent expansion of Medicaid in Michigan, follows this premise. By law, annual aggregate reductions in DSH allotments were required from fiscal year 2014 through fiscal year 2020.

With these governmental changes, the Clinic, a significant safety net provider in the community, was facing an annual operational funding gap of over 70%. Ms. Brennan and the Board of Directors for the Clinic realized that this shortfall would soon become unsustainable. The Affordable Care Act had only passed into law on March 23, 2010, and information on how it would be implemented would take months and years to formalize and publish. There were additional obstacles to understanding how the law might impact the Clinic and its long-range planning efforts, including repeated attempts by some in Congress to overturn all or part of the law as well as legal challenges culminating in U.S. Supreme Court decisions.

With these legislative, regulatory and legal uncertainties, the Clinic most craved stability so that it could move forward with some form of restructuring. The U.S. Supreme Court decisions (National Federation of Independent Business v. Sebelius, Secretary of HHS, et al.; Florida, et al. v. Department of Health and Human Services, et al.; and Department of HHS, et al., v. Florida, et al.) on June 28, 2012, offered some hope for predictability in that the Affordable Care Act had been upheld.

Determining future development opportunities for the Clinic became a paramount priority. The Clinic Board wasted no time in exploring many options. While the status quo clearly was not a sustainable solution, the Clinic grappled with many other possible scenarios, from seeking new federal program funding authorities to developing community-based health teams or care-delivery partnerships to transforming its structure. The Clinic weighed its strengths, namely 35 years of dedicated experience in providing access to affordable health services through community collaboration for people in need in Benzie, Grand Traverse and Leelanau counties. The onsite primary care clinic with access to hospital and specialty services at little or no cost was a major feature, but so was its large volunteer access program that provided uninsured, eligible enrollees with a primary care home, access to necessary medications, a vision program, free and low-cost dental services, mental health counselors, anonymous HIV/STI testing and counseling, and assistance with accessing other community resources. In fiscal year 2010 alone, over $9 million in services were donated to Clinic patients.

In 2010, the Clinic began to reassess its structure, the community it serves and the services it provided. It recognized that it must adapt to the impending, major reforms, but wanted overall to retain its ability to serve the health needs of the underserved population. The Clinic valued the strong linkages it developed within lower northwest Michigan, including strong collaborations with local health care providers, Munson Healthcare, and business and academic leaders. In light of these strengths and desires, and to understand better its options, the Clinic embarked on two specific paths.

In 2011, the Clinic applied for, and received, a Health Center Planning Grant from the federal Health Resources and Services Administration (HRSA). Health Center Planning Grants were awarded for the purpose of allowing public and private nonprofit organizations to plan and develop a comprehensive primary care health center, as authorized by section 330 of the Public Health Service Act. The Clinic used this grant funding to conduct a comprehensive needs assessment – through surveys and public forums – of the community and determine if its services met, or could meet, those needs.

Almost half of the individuals surveyed in the Clinic’s community needs assessment had three or more problems accessing affordable health care and 52% incurred medical debt.  

As one of 129 organizations nationwide to receive the planning grant funding, Daniel C. Edson, then-President of the Board of the Traverse Health Clinic, said, “It is gratifying to know that we live in a community that understands the importance of building a strong health care safety net for the underserved patient. From local doctors and nurses to the Munson Medical Center to Senators Stabenow, Levin and Congressman Camp, the Clinic is appreciative of the tremendous support we receive.”

Simultaneously, the Clinic pursued formal designation of its serving area as a medically underserved population (MUP). Almost 22 percent of the service area was living at 100% of the poverty level and nearly 49% of residents were living at 200% of the poverty level. Citizens aged 65 and older comprised nearly a quarter of the population and were, arguably, those most in need of medical services. With only .25 providers for every 1000 people, the MUP designation application, submitted by the Michigan Department of Community Health, was granted by HRSA.

Fresh with results from the community needs assessment and a newly minted MUP designation, the Clinic knew it would have to transform itself in order to keep its core services and continue providing them to the community. It soon became apparent that the only option for the Clinic was to change its existing quasi-free clinic structure to one that met the requirements for becoming a Federally Qualified Health Center (FQHC) Look-Alike. Yet, even if successful in attaining FQHC status, other forms of financial support would be necessary.

Organizations must meet certain program requirements before becoming a FQHC. While the Clinic already met many of the service, management and financial mandates, there were some that would require a sea change for the organization. It was not merely a matter of implementing these changes, it meant that the Clinic had to decide if it was willing to transform the underlying philosophy it had embraced for decades. The Clinic Board of Directors, comprised of many distinguished community leaders, agonized over this philosophical change, but ultimately felt that it was in the best interest of the community to make the transformation. It was also a gamble. The Clinic was agreeing to make the necessary changes in advance of applying for the FQHC Look-Alike designation. That designation was in no way a foregone conclusion.

Before instituting FQHC changes, the Clinic already conducted many comprehensive services, including integrating dental and mental health services into its primary care delivery process, providing free routine eye exams and low cost eyewear, operating a medication access program, and using electronic health records. It was accomplishing these tasks with a part-time medical director, volunteer practitioners, a growing patient population, and a team-approach to care delivery. The Clinic also developed a complexity survey tool that measured medical, psychological and social factors for each patient, noting that its clients often had more complex conditions than private practice patients.

Complying with the FQHC requirements meant that the Clinic would have to serve and bill patients with Medicaid, Medicare, private insurance as well as the uninsured. FQHC services are provided without regard for a patient’s ability to pay, and require the use of a sliding fee scale. The Clinic never used a sliding fee scale and did not see private insurance or Medicare patients. It would ask uninsured patients if they would like to make a voluntary contribution, but never required it. Changing to a billing format for all patients was, perhaps, the most difficult philosophical decision for the Clinic to make.

The Clinic focused on an adult patient population, since health care services for pediatric and Medicare patients were available elsewhere in the area. FQHCs require primary and preventive health services to cover all stages of life.

The Clinic would also need to alter the composition of its governing board. FQHCs require a patient majority representation on governing boards.

In 2012, the Clinic made the necessary transition to meet the requirements for FQHC. It applied for the FQHC Look-Alike designation in early 2013, noting that it was the major safety net provider within a 50 mile radius. Early in 2013, the Clinic applied for a New Access Point grant in order to obtain federal operational support for its comprehensive primary and preventive health care services.

In September of 2013, Traverse Health Clinic was granted status as a FQHC Look-Alike and received a New Access Point program award from HRSA in November 2013. The Clinic continues to provide access at its onsite facility to now over 2,000 people each month, but has expanded that service to all individuals – from children to seniors – in the Grand Traverse region of Michigan. With the federal approval of the state’s Healthy Michigan Plan, the application period for expanded health care coverage for individuals up to 138% of the federal poverty level opened on April 1, 2014. This is expected to increase the number of individuals seeking access to the Clinic’s services. As such, the Clinic has already added a new examination room, paid for through generous donations, and a new, full-time primary care provider.

By the end of May 2014, a total of 43% of the Clinic’s patients participate in Healthy Michigan or some other form of Medicaid coverage. The number of uninsured patients has decreased in response. The Clinic has set a goal for 60% of its patient base to be covered under Healthy Michigan or Medicaid. Already, 59% of the Clinic’s encounters are with individuals with some form of Medicaid coverage.

The Traverse Health Clinic negotiated a challenging path, filled with many uncertainties and fluctuations, to remain a vital component of this region. Becoming a federally qualified community health center was not a decision made lightly, nor does it solve all of the financial concerns facing this safety net provider. Yet, it was a courageous move decided by a group of dedicated community leaders resolved to continue to meet the health care needs of its neighbors.


Robin Stombler is President of Auburn Health Strategies, LLC, a strategic and business development company serving health and science clients since 2003.