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Vermont health leaders warn of funding shortfall as FQHCs and hospitals face deficits
Summary
Representatives of federally qualified health centers, the Vermont Medical Society and the state hospital association told the Senate Health & Welfare committee that primary care and hospitals are financially strained, citing multi‑million dollar deficits, shrinking 340B savings and a projected $20 million shortfall tied to AHEAD cohort timing.
At a meeting of the Vermont Senate Health & Welfare committee, state health leaders warned that federally qualified health centers (FQHCs) and hospitals are operating under mounting financial pressure that could force service reductions and site closures.
Mary Kate Mollman, director of Vermont public policy for Bi-State Primary Care Association, told the committee that FQHCs across Vermont are “very, very financially fragile” and that the association projects an $8,500,000 operational deficit across its members this year. “We have members with less than 20 days cash on hand,” Mollman said, and at least one member is “potentially considering bankruptcy,” she added.
The session included testimony from Jessica Barnard, executive director of the Vermont Medical Society, and Devin Green of the Vermont Association of Hospitals and Health Systems, who described statewide affordability and workforce pressures that compound the centers’ funding problems.
The testimony detailed several payment and program drivers behind the strain. Mollman said FQHCs receive an encounter rate that does not vary by complexity of care and rely on federal grants and the 340B drug pricing program for support. She warned that Vermont’s anticipated participation in AHEAD cohort 2 will create a funding gap: “starting January 1, 2026, we are looking at a reduction of $20,000,000 in our primary care system,” she said.
Barnard said the Vermont Medical Society represents about 3,100 clinicians and described how Medicare cuts and Medicaid payment formulas tied to Medicare rates have placed added pressure on providers. “Funding for health care services is extremely challenging right now,” she said, noting interest in alternatives to fee‑for‑service payment and continued work on prior authorization reforms enacted last session (Act 111).
Green described hospitals’ financial and operational diversity and echoed the funding and workforce concerns. He said Vermont has 16 nonprofit hospitals, including one academic medical center, and several small critical‑access hospitals. Green highlighted rising patient acuity and length of stay and urged broader attention to insurance market design as part of affordability efforts.
Committee members and presenters flagged operational consequences already visible: site closures and consolidations of dental practices at some health centers, staff reductions and constrained ability to recruit or retain clinicians. Mollman said these decisions could “lead to additional sites closing, additional service contractions, and potential reduction in force.”
The witnesses recommended multiple responses: updated Medicaid payment rates for FQHCs, protection and proper use of 340B program benefits for qualifying centers, support to launch and scale community‑based residency programs, workforce pipeline funding, and use of state funds to shore up smaller hospitals’ workforce training programs.
The committee indicated it will revisit the item during budget deliberations; witnesses said more detailed budget requests and data will be provided to the committee as the session proceeds.
