Can quality care be profitable?
Why mission and margin rarely align
Hi Friends, It’s been a beat! My kids for woke up with fevers and vomiting on Mothers Day and then generously shared the virus with me a week later, and I’m still recovering. It was very on-brand for us. Alex and the kids still showered me with love, and then sent me out to shop and drink a glass of wine by myself, and for that I feel fortunate.
Now it is full on Maycember around here, IYKYK. Three kids at two different schools, two who are “graduating,” all of whom will be going to new schools next year; the assemblies, school tours, field trips, performances, summer camp forms and baseball games, plus guardianship report renewals, etc. In addition to the “normal” chaos, this means that there are simply not enough hours in the day.
But also it’s sunnier and light until 9pm, and people in Seattle are emerging and smiling at each other more, so there’s that!
I recently attended the annual auction fundraiser for the nonprofit that supports my brother Leif’s care. I am so grateful that he has been supported by them for more than 20 years, to live independently while also getting the compassionate care he needs with a built in community for social activities. They currently support 35 clients and have a long waiting list, signaling that the demand for more of this type of support is huge.
It has often made me wonder how care communities such as his could be scaled. It strikes me that all of the best private care arrangements that I have experienced for my family members - and there have been many, whether daycare, disability care, or assisted living/nursing care - have been nonprofits. From the nonprofit nursing home (which accepts Medicaid with no spend down), to my daughter’s daycare (not lower priced but very high quality relative to for-profit daycares we’ve attended), to Leif’s program, these have been by far the best care arrangements my family has experienced.
I interpret this not just as an indication that a nonprofit structure is best per se, but as confirmation that care is an industry that requires subsidy and a different set of incentives and accountability measures. Whether the subsidies come via donations or government support, not-for-profit models almost always come with quality and access-related benchmarks as requirements - not profit targets. For-profit centers must only adhere to basic regulatory standards and be able to attract paying customers.
As Elliot Haspel has pointed out in much of his research and writing on private, equity-backed childcare in the US, these profit-based models often depend upon market scarcity, and target affluent families in the markets where they operate. Providing accessible care in the places that need it most is simply not a metric for success, and decisions are driven by shareholder profit.1
Haspel does point out that large, VC-backed operations differ widely from smaller for-profit centers; in the latter category is largely family-run businesses that are “for profit” insomuch as they generate enough profit for the family to stay in business - but not enough to pay large CEO salaries and bonuses and offer competitive shareholder returns.
Research seems to support my experience when it comes to nursing and disability care as well.2 In fact, a simple google search uncovers report after report detailing the demise of quality when a nonprofit care center gets purchased by a private firm.
Ideally care center subsidies would come from the government, rather than relying on individual donors. But absent government funding for childcare, there simply are not enough of these quality, nonprofit programs to go around. We waited for a year and a half for a room at the nursing home where my mom now lives, and I felt lucky and very relieved when she got the spot. We spent years on the waitlists for both a nonprofit daycare inside a nursing home, and for a bilingual school run by a nonprofit immigrant rights organization, only to finally get calls from each when our children were about to graduate to elementary school and it was too late.
Nonprofits often have the reputation of being less efficient, disorganized, understaffed, and unsustainable. They are also the structure most used for things that generate value that isn’t quantified with money - values and society needs-based programs that people can agree are incredibly important, but that don’t drive the economy (in the short term, anyway). National parks, education, emergency services and other public goods fall into this category, but for some reason care for the most vulnerable among us, does not. At least not in America.
Still, I’m not sure how exactly this type of service is scalable, especially in a country as large as the US, given the cost of labor and regulatory compliance - if they are to truly maintain the essential human aspect of care. When I think about the successful care enterprises that have scaled in Latin America, for example, despite being businesses, they have benefitted from subsidies in the form of low-cost impact investment and grant funding that holds them accountable to social goals, not just financial ones. And really - why should caregiving be expected to be profitable?
There are some examples of nonprofits that have scaled care models. Still, they are far from reaching the scale needed to address the care crisis and reach the most vulnerable. No type of care models can escape the cost and shortage of labor, and without the government subsidies that got most through the Covid-19 pandemic.
Its hard for me to see a way out of the care crisis in America without government support to build more of what is working, with accountability to the people and families being served, not the investors. Given that any government support in the next few years is unlikely, I’d love to be proven wrong.
I wonder what portion of the Gates’ Foundation resources between now and 2045 will focus on not just individual programs and people served, but on enabling a new generation of national and global leaders and on building the foundation for social systems that will truly prioritize caring societies for all.3
What do you think? Do you have experiences with private vs. nonprofit care? Do you know of large, for-profit solutions that prove me wrong?
With care,
Anna
See "The End User is a Dollar Sign, not a Child: How Private Equity and Shareholders are Reshaping American Child Care.”
A systematic review of nursing homes found quality to be higher in nonprofit facilities.
I really liked Ruth’s Friday Note about what a “successful” close of the Gates Foundation could look like 20 years from now.
I’ve thought that a brilliant political move by the Trump administration would be to get Congress to pass a 3% tax on any university endowment above $10 billion and use that money to fund a voucher program for early childhood education.
It would yield $12.15 billion a year, which is roughly the same budget as Head Start. You keep Head Start as an option, but if parents want to use the vouchers for nonprofit or private sector alternatives, they could. What do you think? I’m totally fine with Stanford or Harvard having to give up $1.5 billion their $50 billion endowments.