Privatization: Part 4

By Todd Cohen

Some social services simply offer no payoff to for-profit providers, nonprofit executives and experts says.

“When you’re dealing with homeless shelters and transitional shelters and soup kitchens and feeding programs, it’s not very attractive to a profit-making organization,” says Commissioner W. Todd Bassett, national commander of The Salvation Army in Alexandria, Va.

“There is not adequate funding to begin with, so we run it on a shoestring and volunteers,” he says.

Yet demand for social services is growing.

Catholic Charities USA, for example, has seen an increase in people needing emergency services such as shelter, food and clothing, said Thomas A. DeStefano, interim president.

At 86 local Catholic Charities agencies the organization surveyed recently, 73 percent reported greater demand for assistance for rent, mortgage and utilities, 69 percent reported more requests for food, 77 percent saw more families seeking help, and 63 percent said more seniors were requesting aid.

Burton Weisbrod, an economics professor at Northwestern University in Evanston, Ill., says the drive for profits can shape the markets and clients that companies target.

In a recent study, for example, Weisbrod and Richard Lindrooth of the Medical College of South Carolina found patients at for-profit hospices stayed a lot longer on average than those at nonprofit hospices.

Because the first five and last five days of care are the most labor-intensive and thus the most expensive, and because Medicare pays a set daily reimbursement, Weisbrod says, for-profit hospices are more likely than nonprofits to take advantage of the financial incentives to attract patients likely to stay longer.

The study also found that cancer patients, who typically do not live long once at a hospice, account for a much smaller percentage of patients at for-profit hospices than at nonprofit hospices.

“It appears that nonprofits are more concerned about social mission, to provide needed services, whether profitable or not,” Weisbrod says.

Other stories in series:

Part 1: Social-services market adapts to lessons of outsourcing.

Part 2: For-profit firms turned to nonprofits to deliver social services. 

Part 3: Outsourced social services fall short of expectations. 

Part 5: Nonprofits last resort for delivering social services.

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