Why aren't there more non-profit businesses?

I was just thinking today, why isn't there a non-profit health insurance option to begin with?

Is it just like the credit card business or car manufacturing, where it's almost impossible for a start-up company to break into the industry?

Maybe I misunderstand the concept of non-profits, but it doesn't mean that everyone on the payroll makes $10/hour. Everyone at the company could make a decent salary, the company could focus on its employees and its customers, and customers would most likely pay less due to the profit factor being removed from the situation.

Is it just because most people are inherently greedy, and want more and more and more and more rather than just wanting enough to live a decent life?

It seems like Republicans fight the public option because it would essentially provide these same sort of benefits, and heaven forbid since we're all about free enterprise! :sarcasm:

But why aren't there more private non-profits to begin with? If the free market concept is to be believed, it seems like this would more of an option, because it would most likely provide the least expensive product while still providing a decent standard of living for its employees, and isn't that something that most people would want?

not intentionally, though.

Maybe I should have phrased it better, because given that criteria, even a lot of our most predatory businesses are non-profit, hah!

The most overpaid CEO's in my area work for non-profits. They keep direct care workers saleries low and take all the money for themselves.

http://www.recordonline.com/apps/pbcs.dll/article?AID=/20090607/NEWS/906050382

(1) I think that proves my point that anyone can make a killing from a non-profit organization as well. I don't like to hear that their employees are not being paid adequately, though.

(2) Do you think the reason your article says that non-profit executives make so much money is because they don't have stock options like in corporations? Can you even buy shares of a non-profit stock? Would there be a point to do so? I'm not too knowledgeable on that subject, but you think that a company that is able to create a large marketshare through lower prices would be an attractive buy; they wouldn't be for-profit, and I guess there would be no dividends, but wouldn't the value of the stock appreciate as the company grows? I am unsure about all of this.

sunshine is the best cure for that. The public ought to be taking a hard look at where their charitable dollars go - and info on the top salaries is easily available to anyone.

I think that your experience is more the exception than the rule, though. Health care (hospitals) and higher ed are two areas where you'll find CEOs making salaries that match or even exceed, comparables in the for-profit world. The rest of the sector is composed of a lot of people working for much less than they could demand in the private sector, because the worth of doing something to improve their world balances the lower paycheck. They work far more than 9-5 as well.

The execs get paid. The workers get screwed, unless they have a union.

Health care and higher ed - those execs tend to be very, very well-paid. Your list just makes that point.

And some arts in the biggest of markets (NYC, for instance, and the big monster organizations).

Otherwise though, a non-profit CEO has many of the same responsibilities (plus more in many cases) and doesn't make huge money. And since every employee can easily see what the boss makes, it's a whole lot harder to get away with grossly unequal scales.

Go to Guidestar or Foundation Center and pull up the tax return for your local foodbank. See if you think the CEO of that organization makes too much.

And keep in mind that these people are often people who could easily demand much higher salaries in the private sector. They choose to work for less at a non-profit because they feel the good work is part of their compensation.

It's really hard for a non-profit CEO to pull in multiple millions of dollars. Even televangelists, who don't have to account to anyone at all (except "God"), are doing very, very well to pull in 10 million. A non-profit and a church have limits of decency (although weak) that are completely absent when you get to the for-profit sector. Profit making companies exist solely to return capital to the shareholders, whoops make that the management, of which the CEO takes what he wants and leaves the scraps for the rest of the executive suite.

While Jimmy Swaggart may seem to be a thief for having a Gulfstream Jet, he doesn't have $500 million in stock options like a for-profit CEO can "negotiate" into his compensation package. Also, non-profits tend to provide a service at a cost to their operation and the money that does come in comes from pounding the tin cup. For-profit businesses charge "whatever the market will bear" and funnel the money straight up. It's also hard to grow a non-profit, as the advertising is to get people to donate their money, not buy some shiny piece of crap that you already created an inflated demand for.

To understand more about how for-profit companies run, check out "Liar's Poker" http://en.wikipedia.org/wiki/Liar%27s_Poker

Society. I thought it was cool that she worked for an organization that cured cancer. Then she told me that they were just about Cancer Awareness. I thought that she must not make much money, being non-profit but she explain that they are very well paid (she was a director) and that non-profit has no bearing on their pay.

Collapsed my bubble of the org.

At least, that's what I read about the Bill & Melinda Gates Foundation, which might explain why Gates and Buffett are dumping all the money they can into it. It's still a huge money-maker for them, while it generates good PR.

For some reason it reminds me of the old saw: a teaspoon of wine in a gallon of sewage makes sewage; a teaspoon of sewage in a gallon of wine... also makes sewage.

But on the other hand, you don't see Exxon-Mobil doing anything good for anyone but their Board of Directors, so five percent worth of good is infinitely better than that. I'm pretty sure there are plenty of non-profit workers here who can give us a better idea of how they work and how well they do it.

A "nonprofit" is granted a tax exemption by the IRS because it uses its revenue to promote its charitable purpose, and because no 'owners' (stockholders or partners or whatever) are allowed to take any share of the profits.

Foundations, a subset of nonprofits, are allowed to retain as much as 95% their cash in interest-bearing accounts in order to earn additional money to be applied to their charitable missions. They must, however, pay out the equivalent of 5%, by law, every year, except in some cases where they have paid out much more in recent years and may use the "extra" acquired thusly to limit their payout in a current year-- a practice which saved the existence of some foundations in the recent stock market plunge.

Yes, some nonprofit execs make high salaries. Some of them are doing the same things that EXTREMELY highly-paid people in the for-profit sector are doing. If a nonprofit wants a highly skilled, highly motivated leader they have to compete with those for-profit salaries.

Some, however, are just greedy assholes milking the deal for their own benefit. See my post downthread re: actual nonprofits versus pseudo-nonprofits.

informatively,
Bright

I knew there would be someone who could set me straight. Many thanks.

However, with the wave of deregulation that began in the Reagan era, it became clear that there was CA$H to be made from the sickness and suffering of our fellow citizens.

Combined with that, a huge PR blitz convinced people that a) Nonprofits were inherently "less cost-effective" (bizarre notion!) and more poorly-managed than for-profit businesses; b) That it's OKAY to make a profit off of ANYTHING, even the sickness and suffering of ourselves and our fellow-citizens, because that's the holy FREE MARKET at work; and c) Relying on "charity" (as in, nonprofits) is somehow morally and socially inferior to "robust competition in the private sector!"

Back when I was a child the only areas of health care that were invariably "for profit" were the drug companies, medical equipment manufacturers, and (technically) private practice physicians. And even there, much of the new drugs, equipment, and procedures were pioneered in NONPROFIT University hospitals and research institutes, not in corporate laboratories. Bayer aspirin was a for-profit business, but Jonas Salk made the polio vaccine for free.

Most hospitals were run by religious groups (and run damn' well in many cases) or local government units. Nursing services and other in-home care ditto. Nursing homes and intermediate care units, ditto.

Check into the history of the hospitals in your town. How many of them were onces "Saint So-and-So's?" or "Methodist Memorial" or suchlike?

Medical professionals like nurses and techs were trained in NONPROFIT colleges and training institutions, not in for-profit "schools."

Even many INSURANCE companies were nonprofit-- All of the Blue Cross/Blue Shield affiliates were once nonprofits. Many of the others were "Mutuals," that is, co-ops run for the benefit of the members/insured, rather than private, stock-issuing corporations. Google "demutualization."

Oh, no, my friend. The nonprofits were rolled over and flattened by the corporate profit juggernaut. They were bought and sold, right and left. They could NOT compete with the capitalization levels of big corporations, and many of them were handicapped by a need to actually put the QUALITY OF SERVICES above the bottom line. If the correct procedure cost $500 and they could only charge $510 or even $490 for it, that's what they did. Heck, if they couldn't charge at all, they found a way to do it anyway and begged for donations to cover the cost. But corporations simply make rules: "Must be an average of 28% margin on all type X procedures," so if what you need won't generate that 28% margin, they tell you that you need something else that WILL generate that margin or better.

Even many of the remaining nonprofits have had to adopt for-profit type management practices to remain sufficiently solvent to keep operating. No, they don't necessarily treat their employees any better. They might want to, but they can't, not and manage to make payroll at all.

And do NOT get me started on the "pseudo-nonprofits" that have been created as kabuki shadow plays to hide even more rapacious and disgusting forms of profit-raking. You can tell who they are because usually their Boards of Directors (which you can look up on Guidestar) are AMAZINGLY close to the very same Boards of Directors of certain FOR-PROFIT companies. This astonishing co-incidence is a clear signal: This "nonprofit" was created to enable the for-profit company to compete for contracts reserved for nonprofits, or to access government-owned real estate reserved for nonprofits, or to provide a "tax shield" for certain categories of revenue.

It's a jungle out there, and "nonprofit" is not what it used to be.

polemically,
Bright

So, do you not think that nonprofits could compete in today's times?

Would people simply not accept rising prices? I think it's inevitable, but all things being equal, you would think a nonprofit would have lower costs to a consumer than a for-profit business, even if costs at both are rising.

If that is the case, why can't nonprofits simply raise the prices in order to cover their costs, instead of being hampered by the limitations, or asking for donations, etc? Are they contractually bound to keep costs at a certain level, no matter what?

What I envision would be a company like the insurance companies we have now, except rather than hoard profits, you simply put that back into the system, benefiting the company's workers and its consumers. Hell, maybe costs to the average consumer would be similar, but you would still think that the service would be better due to the nonprofit not skimping on care, or not cutting people's coverage. I personally would be willing to pay for a plan that would ensure those things, which is why I support the public option, even if it means that it may be slightly MORE expensive than my current private plan.

The rules that govern how health care services are priced and provided and reimbursed and what facilities are permitted to offer and how many beds for what purpose they may have are incredibly complex. And they vary from state to state, and sometimes even among smaller jurisdictions. So one state might have very strict regulations about pricing (Maryland, for example, sets a highly comprehensive pricing policy for hospitals both private and nonprofit-- they are allowed to charge so much and no more, and each year the prices are reviewed based on how many procedures are done and the information about costs provided by the hospitals.) The rules in another state might be completely different.

Every state and jurisdiction has law and policy about how many of what type of service provider may operate in each geographical area. The intentions were generally good-- to prevent wealthy area A from having hundreds of hospital beds too many while poor area B has few or none-- but they have been so mucked about by bureaucrats, and they are so difficult to alter in the face of fast-changing realities that few if any are actually serving the basic needs any more.

Next, you have to add in the reality that different types of health care facilities have VERY different "profit" profiles. Hospitals, by and large, have much smaller profit margins, and in some cases, none at all-- even the "for profit" ones are relying on subsidies, contracts, and public funding to maintain operations. Because a hospital is no longer a hospital.

You may walk in the door of that big complicated-looking mass of masonry and think "ah, this is Jefferson County Hospital," but in fact, only PART of it is Jefferson County Hospital. Probably the emergency room is. Possibly the trauma unit. Maybe a few other units. But occupying that same mass of masonry, and getting a very sweet deal for the price, is ALSO the "Baird-Long Cardiovascular Institute," which specializes in churning out pricey, low-risk triple bypass operations for well-insured middle-aged executives, whether a triple bypass is the best treatment for them or not. And the BLCI is an entirely "separate" entity, and it makes a big, fat, healthy PROFIT.

BUT, it does not have to absorb any of the huge deficit run up by the emergency room which is generally required by law to provide all sorts of uncompensated care to anyone who walks in the door bleeding, whether they are insured or not. So Consolidated Healthcare, which operates "Jefferson County Hospital" on a contract from the County, and which OWNS the "Baird-Long Cardiovascular Institute," is able to shift the facilities operations costs onto the publicly-funded contract, and skim all the gravy from the private, fully-owned entity.

There are some large nonprofits that do extremely well in health care. The Mayo Clinic, for example. The Cleveland Clinic. Johns Hopkins. All gigantic, although none can compare with (for example) United Healthcare. And they operate exactly like you envision: They don't make "profits," any money over and above what it costs to provide their services gets plowed right back into providing more services.

Unfortunately, it's rarely very much money. And it's often restricted by the fact that those who fund nonprofits with grants and contracts and gifts tie strings to those gifts that prevent the nonprofit from using the excess of revenues over expenditures where it is most needed.

The economics of providing health care are enormously complicated. The key answer to your question is, in a nutshell, that the infrastructure that would have allowed nonprofit providers to compete was taken over and/or destroyed by big, for-profit entities and governments trying to hold things together with spit and string while still pleasing campaign contributors.

To bring back real nonprofit healthcare, we MUST have major structural reform that will remove the incentives to profit from bad systemic design. One back-door way to accomplish it is to bring in the 900-lb gorilla of nonprofits: THE FEDERAL GOVERNMENT. It is essentially the ONLY entity that can reasonably hold its own against a United Healthcare. And its administrative costs are exceptionally modest compared to all for-profits and most nonprofits.

Big Healthcare is terrified of the 900-lb gorilla because they understand with complete clarity that as soon as people realize they can pay moderate premiums for a decent-quality product, accessible and available and administered efficiently and at a modest cost, Big Healthcare will break apart, the profits will plummet, and the sweet gravy train they are on will derail.

The public option IS the nonprofit option.

The cost savings in the long run, from having a decent level of care highly accessible to everyone-- ESPECIALLY children, and especially if we can find a way to work in things like oral health, vision care, etc., will eventually bring the knee of the cost/benefit curve down and as a percentage of the public budget, health care will be comparatively moderate, but this won't happen overnight.

However, when our tax dollars are paying for everyone's health care, can you imagine the incentive for (for example) ensuring that the food we eat is much less likely to promote diabetes and obesity? Can you imagine the incentive to reduce stress and stress-related illness? When we're all paying for each other's myocardial infarcts and ulcer treatments?

Why do you think the countries that have publicly-funded health care ALSO have longer vacations, shorter work weeks, retirement security, and so on and so on and so on? Because a healthy population keeps costs down.

Of COURSE the big money corporate greedheads are pulling out all the stops in an effort to stave off their own extinction.

There will always be a place for entrepreneurship and making a decent living, maybe even a "profit" in parts of the health care sector. A good system will always include incentives for innovators, rewards for excellence, and higher compensation for higher value. There will always be a place for nonprofit do-gooders with a mission to take on seemingly-impossible challenges.

Lift the yoke of corporate profits from our necks and we will have even more benefit from that reality.

Will there be bureaucratic annoyances, inefficiencies, problems to solve, bitching and pissing and griping with public administration? Hell, yes.

But there will also be many more healthy people. Plenty of jobs, decent jobs where the bitching about lousy pay is because they need to conserve tax dollars, not because they need to pay CEOs upwards of 100K an hour.

Whew! You got me rantin'... sorry.

Hope it's helpful in understanding the mess we're in.

sheepishly,
Bright

well done and very informative!