by Chester Czuj, Director
Idea in Brief:
Philanthropy often has played a catalytic role in launching community health programs.
The goal is to get the program off the ground, often with the belief that after a program is established government or private payers would step in to sustain the program and its services.
In practice, many community health programs lack the capacity to move beyond grant funding; hope is not a sustainability plan.
Grants are only one tool, and philanthropy should make frequent and broader use of other capital tools to help community organizations operate sustainability.
In part 2 of this series, we will look at what steps can be taken to advance alternative payment models, how to structure these arrangements, and which programs are good candidates.
From Proof to Scale: How Funding of Community Programs Needs to Change
Philanthropy has often provided the” first in” capital that gets things started. Many community programs at work today exist because a philanthropic partner took the first risk and provided that initial grant to get the program off the ground. Foundations fund programs and ideas that are too new, too risky, or too small to attract other institutional dollars.
New services don’t immediately have billing codes, and organizations without prior experience don’t often win government contracts. With no track record, no demonstrated outcomes, and no institutional infrastructure or muscle memory, time and money are needed to build a foundation – and then more is needed to advance toward sustainability and (possibly) scale.
So, who steps in with that support after the start-up phase? The original idea was that philanthropy – having paid for proof of concept - could step aside for other payers, including local, state, and federal government. In practice, many programs never make that transition – perpetually relying on grants or ceasing operations altogether. In our work at QV Health Solutions, we see three major reasons for this unfortunate state.
The Unfortunate Paradox of the Renewal Cycle
As most community organizations know, programs that run primarily on grants are one funding decision away from trouble. Time limited by design, grants are highly dependent on changing priorities, board turnover, and external market and policy pressures. An organization that depends on one or two grant funders for a program has no real way to plan beyond the year ahead.
Funders end up stuck too. While many want to focus on the next idea, the critical underserved population, or the gap that no one else is filling, walking away from current grantees can feel like abandoning important community partners. Either way, someone loses; either important programs close, or foundations dedicate a growing share of their budgets to support existing operations – leaving fewer resources for the innovations that philanthropy is uniquely suited to fund.
So why do we find ourselves in this predicament? A big driver is the collective lack of capacity to actually move beyond grants and transition to more market-based and/or governmental payment models. Health insurers and hospital systems may benefit from community programs, but their full value proposition may be obscured, and the absence of shared language, processes, and requirements often inhibits partnership. Government funding through billable service revenue, while potentially more accessible to larger community organizations, is still complex to secure, slow to arrive, and often comes with requirements that small organizations aren’t set up to meet.
Funding Activity Instead of Capacity
Without addressing these issues head on, all parties are left to hope; and hoping a program will transition to earned revenue is not a sustainability plan. We characterize this aspect of the problem as funding defined services as opposed to service capacity.
When funding is tied to program activity, an organization has little budget for the systems, staff, and infrastructure that could expand revenue opportunities. That includes capacity to support billing and claims, data collection and outcomes of reporting, negotiations and contracting, and relationship development (especially with health plans and provider systems). These investments in capacity rarely fit inside a discrete program budget, and don’t always show up as line items in a grant.
So, organizations stay dependent on philanthropic funding - not because it is the best model, but because it’s the only one they have the resources to build. That dependency also makes it harder to be nimble during periods of significant market and policy change. When funding is locked into a singular program, it is harder to adapt to changing community needs and circumstances.
What Happens When the Grant Runs Out
When grants end without replacement, community organizations generally have three options, and none of them are good for the community:
Downgrade the service: keep the program running with fewer staff and reduced service intensity,
Limit access: cap capacity or narrow who can qualify
End operations: close the program altogether, often after years of building trust with community members and partners
In the Nonprofit Finance Fund’s 2025 survey of more than 2,000 nonprofits, 36% ended 2024 with an operating deficit, the highest in the survey’s history. Among organizations that answered the survey in both 2025 and 2022, 37% ran a deficit in 2024, compared with 13% in 2021. Plus, 85% of respondents expected demand for their services to keep rising.
The Center for Effective Philanthropy saw the same trend this spring. In its State of Nonprofits 2026 survey, 29% of foundation-funded nonprofits reported a deficit, up from 22% in 2022. Two thirds were worried about their financial stability, and nearly three-quarters said demand for services had increased.
Not New, but a More Extreme Problem
None of this is new. For decades, community organizations have been asked to do more with less – leading to underinvestment in their own infrastructure to look lean and efficient. It’s no wonder that community organizations and their philanthropic funders have been talking about sustainability without seeing much actual progress.
What is new is the radical and abrupt change in the role of government as an adjuvant funder of services. Historically a much larger funder of community organizations than philanthropy, that backstop has become far less reliable since January of 2025. We know that philanthropy can’t fill that gap alone, but it can start to offer a broader range of products that can make grant dollars go further, while also helping community organizations to build capacity and sustainability.
Making Grant Dollars Go Further
There is a difference between a grant that keeps the doors open for another year and a grant that supports transition (even partially) to earned revenue.
Grants will always have a role. New models and untested programs still need the risk-tolerant, first-in capital that philanthropy is uniquely positioned to provide. But grants are only one tool. Philanthropy has several other capital options it can use to help community organizations undertake broader strategic planning and get ready to diversify their revenue – work that traditional program grants rarely cover in full.
We would like to see funders make more explicit and frequent use of these tools to help community organizations, over time, operate sustainably. By deploying a broader suite of products and directing more aligned capital as each situation demands, funders can use grants where risk is the highest and proof is still needed, and other forms of capital when sustained impact is the goal.
Next in the series, we will look at how to structure these arrangements, which programs might be good candidates, and what steps can be taken to advance enabling alternative payment models.
In the meantime, we'd like to hear from you. How have you seen philanthropic grantmaking, and the funding landscape around it, change in recent years? What sustainability challenges are you facing now that you haven’t faced before? And how are you preparing, both within your own organization and for the organizations you fund?
Share you experience at info@qvhealthsolutions.com. Follow QV Health Solutions on LinkedIn to catch each part of the series as it’s released.
