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Issues and opportunities facing nonprofit healthcare.

The nonprofit sector is increasingly being recognized for its impact in our country. It is an amazing sector as reflected in the following statistics:

* 17 million employees

* Comprises 10 percent (9.8 percent) of the GDP

* Of the existing 1.8 million organizations, roughly 275,000 file tax returns (those who have income of $25,000 or more must file returns)

* Another 600,000 (with income of less than $25,000) do not file tax returns (excludes churches and religious organizations)

Within the long term care community, 5,600 facilities identify themselves as nonprofit organizations affiliated with the American Association of Homes and Services for the Aging (AAHSA). Those 5,600 nonprofits serve more than one million older people every day.

The entire nonprofit sector is resilient sector philanthropically. Even during the recent economic downturn, it has maintained low, single-digit growth, according to Giving USA, the annual study of U.S. philanthropy. Americans donated approximately $240 billion in 2003. Of this amount, approximately $21 billion went to organizations in the health subsector (which includes long term care facilities).

This represents an increase in giving to the health sector of 8.2 percent over 2002 (adjusted for inflation). These numbers are quite impressive, in light of the numerous pressures on the sector and the economy. Similar results are expected in the 2004 survey, to be released in the spring.

Research shows that the following are the four most important for consideration: (1) When the S & P 500 goes up 100 points, it results in approximately $1 billion in giving for philanthropic causes. (2) During economic downturns, individuals, corporations and foundations endeavor to maintain their current levels of giving, and therefore the previous year's giving is a good indicator of what to expect in the current year. (3) Growth in percentage of household income is the next most important factor as it reflects growth in discriminatory income within households. Individuals give away approximately 2 percent of their household income. (4)There is a huge debate underway regarding the impact of reducing tax rates on philanthropic contributions. The "supply side" argument says that with lower taxes, individuals have more money to contribute to charity. The opposing position is that with higher tax rates, the cost to make a contribution is less and therefore serves as an incentive.

The critical question for the nonprofit sector is what great opportunities exist for leadership and influence as we shape the sector for the future. The following issues, or "challenges," seem to be the most prominent:

Fiscal Challenge--changes in the revenue structure of nonprofit organizations reflect the following key trends:

* Federal retrenchment--the growing federal deficit will continue to impact resources available to the nonprofit sector at the federal, state and local level.

* Changes in form of government support--the pressure to reflect outcome-based performance in seeking or realizing government support will increase.

* Modest giving growth--philanthropic support will not grow sufficiently to meet the expanding need. Nonprofits will be forced to find alternative revenue streams, continuing to blur the lines among the nonprofit, for-profit, and governmental sectors.

Competitive challenge--A basic tension exists between for-profit and nonprofit organizations resulting in an increasing dilemma as nonprofits strive to be competitive. Nonprofits will have difficulty in accessing capital for growth. The pressure to grow through debt will ultimately be very detrimental to the sector.

Legitimacy or trustworthiness challenge--Over time, public trust in the nonprofit sector has diminished. The percentage of individuals who are highly confident in the ability of nonprofits to fulfill mission and maintain public trust is continually decreasing:

The growth of the nonprofit and healthcare sectors is bringing about a continually increasing challenge to develop diverse revenue streams to meet financial needs. Philanthropy can be the marginal difference.

Jimmie R. Alford, CFRE, is founder and chair of The Alford Group Inc., Evanston, Ill., a national consulting firm to the nonprofit sector He may be reached at or (800) 291-8913 ext. 141, or go to
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Title Annotation:PHILANTHROPHY
Author:Alford, Jimmie R.
Publication:Contemporary Long Term Care
Date:Feb 1, 2005
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