Not-for-profits feel budgetary burn - NH News Notes

Nursing Homes, Dec, 2002 by Douglas J. Edwards, Richard L. Peck

Sweating from the budgetary heat that has burned their for-profit cousins, not for-profit nursing homes had a negative 4% operating margin from 2000 to 2001, according to a study of 990 tax returns from 272 not-for-profit, freestanding facilities by the American Association of Homes and Services for the Aging (AAHSA).

"This report shows that many not for-profit nursing homes are operating very close to the edge," notes William L. Minnix, Jr., D.Min., president and CEO of AAHSA.

Although adding endowment income and private fundraising revenues brought the average margin to about positive 2%, AAHSA notes that endowments are usually intended to help facilties with future service needs (such as expanding and improving services); thus, using fundraising dollars to maintain service levels takes scarce private funds away from program improvements and benevolent care. Further, in light of the depressed economy and the proliferation of 9/11-related charities, not-forprofit organizations' fundraising yields are down, according to Susan Polniaszek, MPH, AAHSA's senior reimbursement policy analyst and author of the study.

Decreased Medicaid reimbursement rates, poor returns on stock investments, and uncertainty about the future of the Medicare add-ons (as of press time) exacerbate the situation, says Polniaszek: "In a good economy, if Medicare rates were to go down, [a not-for-profit organization] would say, 'Well, we'll do more fundraising. Investments are doing well; we'll get money from that.' That's not happening. There's absolutely no place else to turn to make up for these deficits."

Because not-for-profit organizations customarily do not operate with large shortfalls or resort to bankruptcy, Polniaszek predicts facilities will cut clerical staff or shut down units to stay in the black.