Building State Primary Care Capacity

“Last year’s Health of US Primary Care Scorecard report found that chronic underinvestment in primary care is creating gaps in access to health care, which are likely contributing to lower life expectancy than that of peer nations.”
Milbank Memorial Fund

Despite broad agreement that the United States has insufficient primary care capacity, the health policy literature has devoted far more attention to how primary care should be paid for than to how states can develop and finance the additional capacity a high-functioning system requires. The shortage is evident at the most basic level: too many people cannot obtain timely access to primary care. But the problem extends beyond access. The United States also underperforms many peer nations in mortality, morbidity, and other measures of health system performance. The objective, therefore, is not merely to create enough capacity to see everyone who needs care. It is also to build the capacity required to deliver consistently high-quality, high-functioning primary care.

Increasing reimbursement and shifting a larger share of healthcare spending toward primary care are important policy objectives, particularly for sustaining the existing workforce and delivery system. But they do not determine what additional capacity must be built or provide the investment and development capability needed to create it. The Rural Health Transformation Program is an important recent exception, providing substantial resources and requiring integrated planning for rural healthcare systems. Its rural focus and restrictions on how the funds may be used leave the broader statewide challenge unresolved. States need an infrastructure development and investment strategy that identifies what must be built or improved, mobilizes the necessary capital and other funding, and assigns continuing responsibility for carrying the work forward.

For readers seeking a concrete financing model, the companion paper, State Primary Care Funding Strategy: An Infrastructure Investment Fund, describes one possible approach to organizing and financing this work.

Three Types of Capacity

If states are to make a substantial investment in primary care, they must first decide what they intend to build. In this article, primary care capacity consists of three complementary forms of capacity, each of which contributes to a high-functioning primary care system.

Care Site Capacity

Care site capacity is the ability of the primary care system to provide timely access to care directly to patients. It includes the facilities, equipment, clinical space, and practice infrastructure needed to serve the population, along with the modalities used to deliver that care. Expanding care site capacity may require opening new practice sites, constructing or renovating facilities, or modernizing existing sites.

Connecting Infrastructure Capacity

Delivering care at a well-equipped site is not enough if that site operates in isolation from the rest of the health system. Patients move between primary care, specialists, hospitals, and other settings, and the effectiveness of the primary care system depends on how well information and care follow them.

Connecting infrastructure capacity consists of the systems, technologies, and organizational linkages that connect a care site to the rest of the health system. These include interoperable information systems, health information exchange participation, clinical decision support, AI-assisted diagnostic tools, and the data and referral pathways that support care coordination across organizations. Together, these capabilities allow a care site’s efforts to be recognized, coordinated, and reinforced by the broader system in which it operates.

Workforce Capacity

Workforce capacity has two components: the pipeline that educates and trains future clinicians, including medical schools, residency programs, faculty, community-based training sites, and continuing professional education, and the deployment of that workforce into care sites, including recruiting, staffing, and retaining the clinicians and care teams needed to keep pace with demand. Building the training pipeline is necessarily long term; decisions made today will determine the size and capabilities of the primary care workforce for decades to come. Deployment is more immediate and depends primarily on sustainable reimbursement to support clinicians and care teams working in care sites. The training pipeline, however, may require capital and other upfront support for training sites, new or expanded residency programs, and loan, loan-guarantee, scholarship, or loan-repayment programs.

These three forms of capacity are closely interconnected. New facilities require a workforce to staff them. Care sites depend increasingly on connecting infrastructure to coordinate care with the rest of the system. And workforce training programs require care sites capable of demonstrating best practices. Quality improvement, the ability to use data, technology, and clinical processes to steadily improve outcomes, is not a fourth, separate capacity. It is what results when connecting infrastructure (the tools) and workforce capacity (the skills to use them well) are both sufficiently developed and applied at a care site. An effective state investment strategy should therefore view these three capacities, and the quality gains they jointly enable, as complementary components of a single effort to build a stronger primary care system.

Financing Primary Care Capacity

Identifying the capacity that must be built is only the first step. The next question is equally important: How will it be financed?

Financing Requirements

Expanding primary care capacity will require several forms of financial support. New and expanded facilities, modern information systems, clinical technologies, and other long-lived assets require capital financing. New practices and care sites also require startup funding and working capital to cover preopening expenses, payroll, reimbursement delays, and initial operating losses while patient volume develops. Although working capital and startup operating support are not capital expenditures in the accounting sense, they are part of the capitalization required to establish new primary care capacity. Workforce development requires a different mix of support, including grants, loan funds, guarantees, and funding to establish or expand education and training programs. Many primary care organizations lack the financial capacity to meet these requirements on their own.

The Structural Financing Gap

The financing challenge is particularly acute for newly formed or rapidly growing primary care organizations, which often have limited balance sheets, modest operating margins, and little access to conventional capital markets. Even established organizations may find it difficult to finance major expansions when reimbursement is designed primarily to support current operations rather than long-term capital formation.

The challenge is familiar in capital-intensive sectors, where long-lived assets are financed over the periods in which they produce value. Hospital reimbursement historically recognized capital costs through depreciation and interest, supporting long-term financing of facilities and equipment and adequate debt-service coverage. Hospitals consequently developed routine access to tax-exempt bonds, commercial lending, and other forms of capital financing.

Primary care has developed differently. Tax-exempt financing and other sources of long-term capital are available in many states, particularly to established, creditworthy nonprofit organizations. What primary care generally lacks is a dependable reimbursement component that recognizes depreciation and interest and thereby supports debt repayment. Access to financing therefore does not necessarily create the capacity to repay it, particularly for new or rapidly growing organizations.

The State’s Role

Closing that gap is a central challenge for state primary care policy. The task is to mobilize and deploy capital and other funding to build the facilities, technologies, organizational capabilities, and educational resources required for a larger, higher-performing primary care system.

The financing challenge extends beyond individual practices. As discussed in Key Lever 5, Provider Organization and Governance, many underserved communities lack organizations capable of creating and sustaining the primary care capacity their populations require, and the market is unlikely to create them without state intervention. That paper proposes qualified primary care organization standards to identify organizations capable of receiving public support and using it to provide accountable, community-responsive primary care.  Building viable primary care organizations in underserved communities may also require a health center “incubation” program such as Texas has employed, financed with state funds.

Fortunately, states can draw on a diverse set of existing financing mechanisms, including state capital programs, health facilities authorities, nonprofit community development lenders, public-private partnerships, and private technology investment. The challenge is not the absence of financing tools, but the absence of a comprehensive strategy for using them to build primary care capacity. The following sections examine several approaches that states have already employed and consider how they might be expanded or combined into a more coherent statewide investment strategy.

Existing Financing Approaches

States are not starting from scratch. The Rural Health Transformation Program can substantially help close the capacity-building gap in rural communities.

The Rural Health Transformation Program

The federal Rural Health Transformation Program was enacted to provide $50 billion over five years, with $10 billion appropriated for each fiscal year from 2026 through 2030. CMS has made the first-year awards to all 50 states, ranging from approximately $147 million to $281 million. If fully implemented as enacted, the program would provide states an average of approximately $200 million annually for five years.

The program allows states to finance together activities too often pursued separately:

• Redesigning rural services and care models
• Developing regional partnerships
• Renovating and equipping facilities
• Implementing technology and data systems
• Strengthening educational pathways
• Recruiting, training, and retaining the workforce

It also supports the planning, technical assistance, and implementation needed to turn these investments into functioning delivery capacity. Although new construction is prohibited, RHT can finance a remarkably broad range of rural delivery-system development.

The program requires states to assess needs, develop projects, coordinate participants, oversee implementation, and measure results. These are many of the same capabilities required for a statewide primary care investment strategy. States can build on the expertise, relationships, and institutional capacity demonstrated through RHT to address primary care investment needs throughout the state.

State tax-exempt financing authorities

Most states operate some version of a health and educational facilities financing authority. The National Association of Health and Educational Facilities Finance Authorities counts 42 member authorities across 35 states, though many finance education only or are effectively limited to hospitals. Of the roughly 27 states whose authorities appear broad enough to finance nonprofit outpatient healthcare organizations, at least 13 (California, Connecticut, Kansas, Louisiana, Massachusetts, Missouri, New Jersey, New York, Oregon, Rhode Island, Texas, Washington, and Wisconsin) have documented bond financings or express eligibility for community health centers and FQHCs.

Examples include CHFFA‘s bonds for AltaMed in California, CHEFA‘s $24.9 million bond for the Moses Weitzman/Community Health Center system in Connecticut, and MassDevelopment‘s financing of Dimock Center and other Massachusetts health centers.

These conduit authorities typically do not lend their own capital or assume credit risk; they open access to tax-exempt debt from banks and bond investors, which makes them most useful to established, creditworthy health centers pursuing larger projects.

Dedicated state capital vehicles

A handful of states have built dedicated primary care capital programs rather than relying solely on conduit bonding. New Mexico’s Primary Care Capital Fund, created in 1994 and jointly administered by the state finance authority and health department, is the clearest example of a permanent state revolving loan fund built specifically for primary care.

New York’s Community Health Care Revolving Capital Fund (administered by PCDC) and New Jersey’s FQHC Direct Loan Program (run directly by the state’s health facilities financing authority) both provide capital to organizations that cannot access conventional financing. California’s Health Impact Fund and Colorado’s Strengthening Primary Care initiative are public-private partnerships that do similar work at smaller scale.

Illinois’s Community Health Center Grant Program made a one-time $50 million capital grant available in 2026.

Texas’s FQHC Incubator Program stands out for funding capital grants for new clinical sites, facility renovations, equipment, mobile units, and organizations working toward FQHC or look-alike status directly out of the state’s general revenue, rather than federal dollars or payer reimbursement, making it a notable example of a state financing primary care capacity with its own money.

Mission-driven nonprofit lenders

A parallel set of national and regional CDFIs maintains active health-center lending practices, including PCDC, the Community Health Center Capital Fund, Capital Impact Partners, Vital Healthcare Capital, IFF, and LISC’s Healthy Futures Fund. These organizations provide direct loans, New Markets Tax Credit financing, and technical assistance to primary care organizations that have difficulty securing conventional capital. Of these, the Community Health Center Capital Fund is the closest national counterpart to PCDC.

Additional Sources of Capital

State-directed financing is not the only capital flowing into primary care. Hospital systems, private equity, and large corporate payers are all active investors in primary care capacity, whether or not a state has an investment strategy of its own. In May 2025, Mass General Brigham announced a $400 million, five-year investment in primary care, covering care coordination, virtual-care tools, training, and a new system-wide chief of primary care. The announcement illustrates both the scale of resources that health systems can deploy and the ambiguity surrounding the term “investment.” Acquisition of existing practices does not by itself add capacity, and health-system investment priorities may not align with state objectives for access, workforce distribution, or affordability.

State Primary Care Investment Strategy

In this article we have identified three types of primary care capacity that states must develop if they wish to transition to high-functioning statewide primary care systems: care-site capacity, connecting infrastructure capacity, and workforce capacity.  The Rural Health Transformation Program provides an extraordinary source of capacity-building investment, but its rural focus and programmatic restrictions leave broader statewide needs unresolved.

Even within those limits, an average first-year award of approximately $200 million represents a major source of investment. It can address substantial rural needs while states direct complementary resources toward other underserved areas. RHT also requires states to exercise and strengthen planning, project-development, coordination, and implementation capabilities that can be applied beyond rural communities.

Most importantly, RHT illustrates both the scale and the integrated character of the investment required. High-performing primary care cannot be created through isolated expenditures on facilities, technology, workforce, or delivery reform. These elements must be planned, financed, and developed as parts of a functioning system. This Key Lever series is written for states prepared to carry that work forward.

Carrying this work forward begins with determining the scale of the investment required. States must distinguish between the maintenance-level capacity needed to preserve existing services after workforce attrition and population growth and the aspirational-level capacity needed to close access gaps and improve performance. That distinction provides the basis for a multiyear investment plan identifying what must be built or improved, how much capital and other funding will be required, and when it must be available.

Developing and executing this investment plan requires a statewide primary care development organization capable of assembling appropriate sources of capital, managing and deploying funds, providing administrative and technical assistance, and overseeing projects through implementation. A state could create a new entity, expand the mandate of an existing health facilities finance authority, or designate another public agency or private nonprofit organization to perform this role.

The companion article, State Primary Care Funding Strategy: An Infrastructure Investment Fund,describes one possible approach to organizing and financing this function. Its principal features include:

• Two financing windows: practice-level assets financed against a practice’s own cash flow, and statewide infrastructure financed as a public good.
• A menu of financing tools, including tax-exempt bonds, revolving and working-capital loans, loan guarantees, leases, capital grants, startup grants, and time-limited operating support, rather than reliance on a single instrument or funding source.
• Repayment arrangements tailored to the type of investment and coordinated with provider payment reform.

Increasing primary care reimbursement is necessary to sustain clinicians and practices and may provide the cash flow needed to repay certain investments. It is not, however, a substitute for the upfront capital, startup funding, and development capability required to create new capacity. The relationship between investment repayment and primary care reimbursement will be addressed more fully in Key Lever 7.

Without a continuing development and financing capability, “investment in primary care” will continue to mean increased spending without assurance that the care sites, connecting infrastructure, and workforce capacity required for a high-performing primary care system will ever be built.

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