Medical & Healthcare

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Most people don’t enjoy asking for money—asking feels awkward. So don’t rely on courage or charisma; rely on method. Behavioral design—clear framing, smart timing, and low-friction paths—turns dread into a predictable decision flow. With the right strategies, rooted in behavioral science, a nonprofit can turn asking for funds into one of its greatest strengths.

Why People Give: The Psychology

Giving isn’t just a whim—it’s the end result of a whole series of thoughts, feelings, and decisions. Psychologists have mapped out this process in detail. There are three models that explain how donors’ attitudes shape the way they give:

The Hierarchy of Effects lays out the steps a donor takes, from first learning about your organization to making a gift.

Functional Attitude Theory explores the motivations and needs that drive a donor’s decision.

The Multi-Attribute Model explains how, after a person decides why they want to give, they decide which organization deserves their support.

Understanding these models reveals where potential donors might get stuck, how to move them toward action, and why they may choose to support your organization over another.

Hierarchy of Effects – The Donor’s Journey

The Hierarchy of Effects model breaks down a donor’s journey into clear, sequential steps:

Awareness: The donor needs to know your organization exists.

Knowledge: They want a clear sense of your mission and impact.

Liking: They develop an emotional connection to your work.

Preference: They start to choose your cause over others.

Conviction: The belief forms that their gift will truly make a difference.

Action: All of this leads to the actual donation.

At each stage, different strategies are effective. A compelling video or strong branding sparks initial awareness, while clear impact metrics help build trust. Stories from beneficiaries foster connection, and a distinctive hook sets you apart. Tangible results reinforce donor confidence, and a simple, mobile-friendly giving platform makes it effortless to take action.

In real life, it might look like this:

David first hears about your nonprofit when a friend shares a campaign post online (awareness). Curious, he visits your website and reads your mission statement and recent success stories (knowledge). He watches a short video of a family that your organization helped and starts to feel a real connection to the cause (liking). Over the next few weeks, he notices himself thinking of your organization first when he considers giving (preference). Your newsletter shares data and stories that convince him that his gift will make a difference (conviction). When he clicks a “Give Now” link and makes a donation in under a minute, he’s crossed the final step (action).

 Functional Attitude Theory – Why They Care

After understanding how people make giving decisions, the next question is why they give at all. Functional Attitude Theory answers this by showing that a single act of giving can be motivated by a range of needs—practical, personal, or emotional.

The theory identifies four main functions that can drive a gift, depending on what’s most important to the donor at that moment. Sometimes people give because they want results—they’re looking for clear, tangible outcomes, such as, “Your $100 trains a teacher, impacting 50 students.” Other times, giving is about expressing identity and values. For those donors, a campaign claiming, “Empower every child to reach their potential,” feels personal.

There are also moments when people donate to feel like they’re doing the right thing or protecting something important. They’ll respond to affirming language, such as, “Your support creates lasting change.” And sometimes, it’s all about transparency and hard numbers. “Every $1 invested yields $4 in community benefits,” really resonates with those who want to know exactly where and how far their money can go.

Multi-Attribute Attitude Models: How the Donor Chooses You

Of course, motivation is only part of the story. Once a person decides why they want to give, there’s still the question of who will earn their support.

Even when the heart says yes, the mind still runs the numbers. Donors use a mental scorecard to weigh what they know about an organization against what matters most to them. Psychologists call this a multi-attribute model, and one of the best-known is the Fishbein Model.

Each donor values different factors—organizational efficiency, transparency, alignment with personal values, or innovation. The same person might care about efficiency in one case and about mission and values in another. The key is for the organization to match its message to what matters most to its audience. Some organizations segment communications for different groups; others pick a primary motivator based on their supporters’ top concerns. One nonprofit can appeal to donors with different priorities by how it frames its message. For instance, a clean water organization might highlight “94% of funds go directly to water projects” to reach data-driven supporters, while telling the story of a transformed village for those motivated by values.

The Science of Successful Fundraising

Putting these ideas into practice means mapping your donor base—figuring out what drives your people, and how they decide where to give. Build campaigns that speak directly to those motivations. Where you can, segment your communications and tailor the message to match what matters to each group.

Fundraising doesn’t have to be a shot in the dark. Use behavioral science to create more targeted campaigns, speak to your donors’ real motivations, and build trust that actually leads to action.

This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

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Updated 8/13/25 to reflect provisions in the final bill.

The One Big Beautiful Act (OBBA) is a game-changer in many ways. Several provisions stand out as noteworthy for the nonprofit sector and have drawn attention from both nonprofit entities and taxpayers. While headlines focus on corporate tax cuts and changes to individual brackets, the nonprofit sector —particularly for schools and charities—could experience ripple effects that may impact revenue streams and reshape fundraising strategies.

The legislation addresses two significant areas for the nonprofit industry: education funding systems and charitable tax deductions.

Who will be the winners — or losers — when these tax changes are implemented? Below is a summary of the most relevant provisions impacting the nonprofit and charitable sectors and our thoughts on how they may play out.

Education and Scholarship Programs

Tax Credit for Contributions to Scholarship Organizations

The bill establishes a new non-refundable federal tax credit of up to $1,700 for individuals who donate to qualified Scholarship Granting Organizations (SGOs) in states that opt into the program.

To be eligible, SGOs must be 501(c)(3) nonprofits (not private foundations) and meet strict operational and reporting requirements, including allocating at least 90% of revenue to scholarships and ensuring scholarships go to at least 10 students per year. States must also designate eligible SGOs and submit them to the federal government.

Winners:

Individual donors benefit from a dollar-for-dollar federal tax credit—up to $1,700 per return—when giving to SGOs in participating states. The credit can be carried forward for up to five years if unused. Education-focused nonprofits that qualify as SGOs may see increased donations, especially in states that opt in. Most important to taxpayers, families receiving scholarships gain access to broader K–12 education options, with scholarships becoming tax-free starting in 2027.

Losers:

Non-education nonprofits may face increased competition for charitable dollars, as donors shift giving to SGOs to maximize tax savings. Donors in non-participating states cannot claim the credit unless they give to SGOs in states that have opted in, creating potential disparities in who benefits.

Tariffs Bite, But Push for Domestic Supply Gains Momentum

Friedman’s story is one of many playing out nationwide as compounding pharmacies grapple with new U.S. trade policies. In early 2025, President Donald Trump announced his intentions to impose sweeping tariffs on pharmaceutical imports to pressure drugmakers into moving production stateside. That threat quickly got the attention of Big Pharma. By March, Merck had opened a $1 billion vaccine plant in North Carolina. Eli Lilly announced plans to invest at least $27 billion to build four new U.S. manufacturing plants, and Pfizer said it might shift overseas production into its American factories. Merck committed to spending $8 billion domestically by 2028.

For compounders on the ground, these investments offer a glimmer of future relief. Over 80% of APIs used in U.S. drugs currently come from facilities in China and India, a reliance that leaves compounders vulnerable. “We’ve been uncomfortably dependent on overseas suppliers for years – COVID-19 made that clear,” Friedman says. Industry groups like the American Hospital Association have warned that blanket tariffs could inadvertently “jeopardize the availability of vital medications” if not carefully calibrated.

Friedman acknowledges the short-term pain: “When shipping and ingredient costs spike, we can’t immediately pass that on to patients or hospitals.” Long-term, though, he sees potential gain. The tariff-induced urgency is reinforcing calls to diversify and domesticate the drug supply chain. In Congressional hearings on chronic drug shortages this year, hospital leaders urged lawmakers to “identify essential drugs needing more domestic manufacturing capacity.”

For compounders like Indigo Health, such moves could be game changers. “If Pfizer starts making key ingredients here, we’d gladly buy American,” Friedman says. The caveat: it will take time for those new facilities to come online. In the interim, outsourcing facilities must navigate a tightrope, balancing higher import costs against fixed healthcare reimbursement rates.

A Regulatory Labyrinth — and Hopes for Reform in Washington

On a busy morning in Queens, New York, Samantha Koegel fields phone calls at ARX Specialty Pharmacy, a 503A facility she helps run as COO. ARX serves patients, compounding everything from custom hormone therapies to preservative-free topicals.

Koegel has witnessed regulations steadily mounting barriers for compounders. “Every time we turn around, there’s a new requirement,” she sighs. A prime example: The FDA recently ended its “interim” category for new bulk substances, preventing 503A pharmacies from using ingredients not yet formally approved. “If a patient needs something not on the FDA’s shortlist, our hands are tied for years.”

Now, however, she sees opportunity. With Trump’s administration prioritizing deregulation and Robert F. Kennedy Jr., leading HHS, Koegel feels unexpectedly optimistic. “I never thought I’d be cheering for an FDA shake-up like this,” she laughs. Her optimism is well-founded. Only days after our conversation, President Trump signed an Executive Order to reduce approval times for U.S. drug manufacturing plants by cutting “duplicative and unnecessary” requirements, streamlining reviews, and providing early support to manufacturers.

“Imagine if the FDA worked with us to fill drug gaps instead of boxing us out,” Koegel says, pointing to the current record of 323 active shortages. She recalls how, during COVID-19, the FDA temporarily allowed compounders to supply critical medications to hospitals. “Why not create an Emergency Authorization pathway for compounded drugs during shortages? With faster approvals or equipment funding, we could triple our output – that’s huge for supply resilience.”

The PBM Squeeze: Long-Term Care’s Unseen Cost Crisis

Even as tariffs and regulations dominate headlines, many pharmacists insist another force has a bigger impact: pharmacy benefit managers, or PBMs — the powerful middlemen who negotiate drug prices and reimbursements. “To be blunt, PBMs are the primary cost drivers in our world, not tariffs,” says John Maguire (a pseudonym), CEO of a large LTC pharmacy in the Midwest who requested anonymity.

Maguire’s critique comes down to basic math. An average long-term care pharmacy spends over $15 in labor and specialized packaging per prescription, but Medicare Part D plans — managed by PBMs — often pay only very low dispensing fees. “We lose money on most generics we dispense because the PBMs price generics too low,” he notes. According to the Senior Care Pharmacy Coalition, the Part D payment model is “broken,” forcing LTC pharmacies to fill prescriptions below cost while allowing PBMs to reap profits.

From his vantage point, tariffs on foreign APIs are a minor factor. The larger problem, Maguire argues, is that a handful of PBMs dominate the market, dictating terms to manufacturers, pharmacies, and payers alike. A recent Federal Trade Commission report highlighted that the six largest PBMs control nearly 95% of all U.S. prescriptions. “That’s basically oligopoly power,” Maguire says. “They decide how much we get paid for a medication, and we have zero say.”

Maguire welcomes Washington’s increasing scrutiny of PBMs, with lawmakers targeting practices like spread pricing and hidden rebate schemes. “It’s heartening to see Congress and the FTC finally shine a light on this,” he says, ranking PBM reform above even tariff relief in importance.

Despite his PBM concerns, Maguire finds hope elsewhere. “I’ll give credit where it’s due — companies like Lilly, Pfizer, and Merck pumping billions into U.S. facilities is a smart move,” he says. He believes domestic production will reduce supply disruptions that lead to price spikes. “When Big Pharma actually does something right — like bringing manufacturing back home — it deserves praise. But we need a system that passes those benefits along.”

Toward a Resilient Future

As America’s compounding pharmacies navigate these converging pressures, three solutions emerge from industry leaders: domestic manufacturing incentives to strengthen supply chains, streamlined regulatory frameworks that maintain safety while enabling swift responses to shortages, and meaningful PBM reforms to ensure sustainable economics.

The cautious optimism of these professionals stems from seeing their concerns finally acknowledged at the highest levels. With a president pushing for American pharmaceutical production, an HHS secretary challenging industry influence, and a Congress attentive to both patient costs and pharmacy viability, the pieces for meaningful reform appear to be aligning.

The narrative of America’s compounders in 2025 is one of friction yielding to hope. As Samantha Koegel aptly puts it: “The system is finally acknowledging what’s broken. Now we have a chance to fix it — to create a pharmacy supply chain that’s more local, a regulatory system that’s more agile, and a market that’s actually fair.” The road ahead remains uncertain, with tariffs, regulatory promises, and PBM oversight hanging in the balance. Yet for the first time in years, these specialized pharmacies can envision a path forward — one where resilience and innovation outweigh the longstanding burdens of foreign dependence, regulatory rigidity, and middleman economics.

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CMS’s unrealistic and contentious ‘Final Mandate’ governing nursing home staffing policies has been vacated by a US District Court judge.

A year ago, with the blessings of the Biden administration, the Centers for Medicare & Medicaid Services (CMS) finalized a staffing mandate that threw healthcare entities and nursing home owners into a frenzy. Fast forward to April 7, 2025, and a US District Court vacated the onerous federal mandate that held nursing home and healthcare facilities in a chokehold. The ruling concluded that CMS had exceeded its statutory authority by imposing federal staffing minimums at nursing homes—an important win for regulatory balance.

The mandate called for a minimum of 3.48 hours per resident per day (HPRD) of total staffing, allocating specific hourly requirements for registered nurses (RN) and nurse aides. It would have been phased in over three years, with rural communities getting an additional two-year grace period. But even with this phased-in approach, many in the industry argued that the requirements were logistically and financially impossible to meet.

Industry leaders fought the mandate tooth and nail. They maintained that they hadn’t yet recovered from the trials of COVID and were already burdened with severe, country-wide staffing shortages, specifically for nurses and support staff. They argued that the mandate’s staffing standards were unfeasible and threatened to shut down nursing homes and displace hundreds of thousands of residents in the process.

The American Health Care Association and the National Center for Assisted Living, an industry group, released an analysis citing the potential need to hire an estimated 102,000 nurses and nursing aides across the industry should they be forced to comply with the staffing regulations. To add insult to injury, the mandate did not provide financial support for recruitment or training for any of this potential additional staff—essentially mandating the impossible without offering a single tool to get it done.

“This unrealistic staffing mandate threatened to close nursing homes and displace vulnerable seniors.”

Clif Porter, CEO of the American Health Care Association/National Center for Assisted Living

US District Court Judge Matthew Kacsmaryk, a Trump appointee, stated in his ruling that, while the policy was “rooted in laudable goals, the Final Rule still must be consistent with Congress’s statutes.” This was a charitable statement as the staffing mandate was never broadly supported—even among healthcare advocates or lawmakers on either side of the aisle.

It faced bipartisan opposition in Congress back in 2023, with bills in both chambers trying to block the rule. Nearly 100 House members wrote to then-Health Secretary Xavier Becerra, urging him to reconsider the proposed rule. Lawmakers from rural states were especially opposed, as meeting the mandate’s minimum staffing requirements would have been particularly challenging, if not impossible, in underserved areas.

“It’s a major victory for seniors, their families, and certainly for us in rural America. I think this decision safeguards access to care. I also think it paves the way for a more thoughtful approach, one that enhances quality, supports caregivers and ensures the sustainability of rural providers.”

Good Samaritan Society, President and CEO Nate Schema

With a Republican majority in both chambers of Congress and some rural Democrats’ disagreement with the rule, it is unlikely that the staffing mandate will be reinstated through legislation anytime soon. But, in today’s highly litigious environment, there are proponents of the staffing rule—including unions, consumer groups, and some prominent Democrats in Congress—that may urge the Health and Human Services (HHS) to appeal the court’s decision or explore alternative regulatory approaches.

For now though, many in the healthcare industry are relieved. The termination of the staffing mandate acknowledges their realities on the ground and validates the issues they are struggling with. Providers are already under immense pressure, balancing the rising costs of care, workforce shortages, and the expectation of delivering high-quality services. This ruling brings some breathing room to healthcare entities that have been doing their best to stay viable while maintaining integrity and quality standards of care.

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Autism rates are skyrocketing across the country, reshaping the healthcare industry’s landscape for families, insurers, and providers. Does this surge in the autistic population make the ABA space a surefire investment opportunity? We believe there is great potential in this space, however, like any industry, a successful ABA agency comes with its own unique challenges and operational demands. To navigate these challenges and ensure long-term success, ABA agencies must focus on key performance indicators that drive both operational efficiency and profitability.

Escalating Demand

Applied Behavior Analysis or ABA has become widely known as the go-to therapy for treating individuals with autism spectrum disorders (ASD). Historically, insurers excluded ABA therapies, classifying them as educational rather than as medical services. However, the 2013 release of The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5) significantly broadened the definition of autism and today, Medicaid and most insurance plans are mandated under the 2014 Affordable Care Act (ACA) and state law to provide coverage for autism treatment, including ABA therapy.

In a study issued in October of 2024, the journal JAMA Network Open reported that data gathered from over 12 million patients enrolled in major U.S. health care systems determined that between 2011 and 2022 the number of people diagnosed with autism climbed to a shocking 175%. Autism rates stand highest among the very young; according to calculations issued by the U.S. Centers for Disease Control and Prevention, about 1 in 36 children were diagnosed with ASD in 2020.

Do the math – this could translate to an estimated 2.9 million autistic individuals by 2034.

Key performance indicators

Revenue per Client, Therapist Utilization Rate, and Accounts Receivable Turnover are essential key performance indicators. They provide measurable data that enables an agency to monitor cash flow, improve billing efficiency, and maximize revenue. They can help reduce delays in payments, thereby reducing a business’ working capital requirements and enabling appropriate cash flow. These metrics also serve to reflect whether an agency’s performance holds value to a potential investor.

Consider this fictional case scenario:

All-Smiles ABA Center is a friendly place and prides itself on its dedicated and professional staff.

The Accounts Receivables representative is often sick and behind in billing. She manages the agency’s finances by documenting when cash comes in and out, without keeping track of the revenue or expenses for each specific service or the date they are provided.

All-Smiles’ warmhearted therapists will often spend extra time with patients and understand occasional no-shows. The administrative staff is always ready to delay documentation until the client is comfortable with its services.

At the request of its clientele, the agency heavily promotes social skills groups, even though these sessions are reimbursed at much lower rates than direct one-on-one therapy. The majority of the agency’s clients are on Medicaid, which provides lower reimbursement rates, but the agency values its relationships and doesn’t want to make clients feel unwanted by focusing on a more diversified mix.

Accounts Receivable Turnover – All-Smiles billing and receivables processes are underperforming. Agencies must be able to consistently submit accurate and timely claims, in compliance with payor requirements to minimize rejected claims and payment delays. Timely collections are crucial to ensure that funds are available for salaries, and administrative and operational costs. Important metrics for accounts receivables include tracking average days in accounts receivable, collection rates by payor, and percentage of overdue accounts.

Therapist Utilization Rate – Compassionate and dedicated therapists may enhance services – but unbilled time translates directly into lost income. clients whose services earn lower reimbursements, or who take up extra, unbilled, therapy time are bringing in less revenue than it costs to serve them. Tracking an agency’s percentage of billable hours against total hours worked, the average caseload per therapist, and therapists’ cancellation rates maximizes therapist productivity and ensures operational efficiency. All-Smiles would also be wise to assess their client base and focus on clients with more robust coverage that yields reimbursements at higher rates.

Revenue per Client: Understanding how much revenue each client generates is essential in order to evaluate profitability, identify inefficiencies in billing, and ensure the business remains financially sustainable. Tracking revenue by service type helps the company assess which services yield the most profit. All-Smiles accounting and billing processes are so poor that it does not realize that its social skills sessions generate low revenues relative to therapist’s time. As a result, it fails to expand on therapy services or train additional staff and misses opportunities to boost profitability. Because All-Smiles operates on a cash basis and never reviews revenue and direct expenses on a date of service level, they are unable to properly track AR and know its accurate revenue, bad debt, and trends.

By analyzing the information revealed by these KPIs, an agency can track its revenues, scrutinize its performance, and use the data to create its own unique competitive advantage in the industry. It can evaluate profitability and identify opportunities to improve.

Working with our clients in the ABA space has proven that profitability in this industry is less about the volume of clients served and more about operational excellence and strategic management. For existing healthcare entities, the burgeoning autistic population offers promising opportunities to extend services and take advantage of this explosive growth. Established ABA agencies would be wise to analyze these key performance indicators to recognize red flags, maximize their returns, and set a value on their entity to attract potential investors.

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The Medicare Advantage Plan is an alternative to traditional Medicare that allows eligible participants to access their benefits through private insurance plans within Medicare. Medicare Advantage (MA) Plans have become an increasingly popular choice for participants because of the lower rates and added benefits offered. But for the skilled nursing homes responsible for delivering the services covered by MA plans, the fallout is far more unfavorable. Will MA plans irreparably damage the SNF industry?

Skilled nursing facilities generally receive lower reimbursement rates under MA plans than under traditional Medicare. The Federal government, through CMS, pays MA plans a fixed, or ‘capitated’, monthly amount per beneficiary – a per person, per month rate to cover health care services for each individual participant. Because the payments are fixed, there is the inherent risk that costs for a participant will exceed the capitated payment. If there’s a deficit, the SNF has to absorb it.

Managed care reduces the average revenue per patient day, but the staffing and administrative requirements to deliver the same level of care remain the same. The result? Tighter profit margins resulting from the shortfall put pressure on facilities to control expenses and avoid providing excess services. To effectively tackle this challenge, my colleague, Shulem Rosenbaum CPA/ABV, partner with Roth&Co’s Advisory division, shares that “SNFs must rethink their cost structures. Many SNFs have historically relied on a per-patient-day (PPD) variable cost model, where expenses fluctuate with occupancy and patient demand. This approach leaves facilities exposed to the instability of fixed or inconsistent reimbursement rates frequently seen with Medicare Advantage.”

One of our clients, a long-time SNF operator with over 50 facilities, shared his perspective about how MA plans have disrupted the financial landscape for skilled nursing facilities. “We’re left juggling to meet patient needs while navigating a system that doesn’t account for the real costs of care. It’s a challenge to stay financially viable.” The numbers prove him right. According to calculations made by Zimmet Healthcare, the dollar amount of SNF Medicare reimbursements lost this year to MA comes to over $10 billion nationally, with Pennsylvania losing almost $500 million and New York out by $634 million.

While SNFs revenues will always be restricted by federal and state requirements, there are ways to alleviate concerns about MA reimbursement and reduce volatility through strategic initiatives. SNF’s can maximize their revenues by building strong relationships with MA plan providers to negotiate better reimbursement rates or value-based contracts. They can work to reduce their reliance on MA plans and improve profitability by diversifying their patient base and attracting more self-pay and private insurance patients. As with any business operation, they can optimize efficiency by streamlining administrative practices, integrate technology, and brainstorm for additional cost-saving measures that won’t compromise the quality of care.

“A compelling solution is to adopt a fixed-expense model that reduces reliance on operational leverage,” Rosenbaum adds. “By reassessing and standardizing specific cost centers, SNFs can establish a more stable financial framework that is less affected by patient volume.” Another of our clients, a small, local SNF owner, had a different take on current challenges. “MA plan participation is growing, and we must learn to work with that. The evolution of the industry has made us take a hard look at how we manage our resources, pushing us to reassess and work smarter— which is something every operation needs to do from time to time.”

Ultimately, while Medicare Advantage plans may effectively help participants manage their healthcare costs, they restrict revenues and patient care options for SNFs. Will the rise in MA plans push the SNF industry to its breaking point? Times may be lean for SNF’s, but we believe that agile and creative facilities can effectively modify operations, maintain patient care, and adapt to working with MA plans to achieve a sustainable business model for the long term.

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Most not-for-profit entities are familiar with the hazards of excess benefit transactions, but this brief refresher may enhance vigilance and compliance. The stakes are high. 501(c)(3) organizations determined by the IRS to have violated the rules governing excess benefit transactions can be liable for penalties of 25% to 200% of the value of the benefit in question. They may also risk a revocation of their tax-exempt status — endangering both their donor base and community support.

Private inurement

To understand excess benefit transactions, you also need to comprehend the concept of private inurement. Private inurement refers to the prohibited use of a nonprofit’s income or assets to benefit an individual that has a close connection to the organization, rather than serving the public interest. A private benefit is defined as any payment or transfer of assets made, directly or indirectly, by your nonprofit that is:

• Beyond reasonable compensation for the services provided or goods sold to your organization, or

• For services or products that don’t further your tax-exempt purpose.

If any of your organization’s net earnings privately benefit an individual, the IRS won’t view your nonprofit as operating primarily to further its tax-exempt purpose.

Private inurement rules extend the private benefit prohibition to “insiders” or “disqualified persons” — generally any officer, director, individual or organization (including major donors and donor advised funds) in a position to exert significant influence over your nonprofit’s activities and finances. The rules also cover their family members and organizations they control. A violation occurs when a transaction that ultimately benefits the insider is approved.

Examples of violations could include a nonprofit director receiving an excessive salary, significantly higher than what is typical for similar positions in the industry; a nonprofit purchasing supplies at an inflated cost from a company owned by a trustee, or leasing office space from a board member at an above-market rate.

Be reasonable

The rules don’t prohibit all payments, such as salaries and wages, to an insider. You simply need to make sure that any payment is reasonable relative to the services or goods provided. In other words, the payment must be made with your nonprofit’s tax-exempt purpose in mind.

It is wise for an organization to ensure that, if challenged, it can prove that its transactions were reasonable, and made for valid exempt purposes, by formally documenting all payments made to insiders. Also, ensure that board members understand their duty of care. This refers to a board member’s responsibility to act in good faith; in your organization’s best interest; and with such care that proper inquiry, skill and diligence has been exercised in the performance of duties. One best practice is to ask all board members to review and sign a conflict-of-interest policy.

Appearance matters

Some states prohibit nonprofits from making loans to insiders, such as officers and directors, while others allow it. In general, you’re safer to avoid such transactions, regardless of your state’s law, because they often trigger IRS scrutiny. Contact your accounting professional to learn more about the best ways to avoid excess benefit transactions, or even the appearance of them, within your organization.

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In a May 24, 2024, press release the American Health Care Association (AHCA) announced that, in conjunction with the Texas Health Care Association (THCA) and several Texas long term care facilities, it has filed suit against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS). In June, trade association LeadingAge, which represents more than 5,400 nonprofit aging service providers, joined the fray and announced that it has joined as co-plaintiff with AHCA. No surprises here. Since CMS’ April 22 release of its final mandate establishing new requirements for nursing homes staffing, healthcare associations and operators have been gearing up for a fight.

“We had hoped it would not come to this; we repeatedly sought to work with the Administration on more productive ways to boost the nursing home workforce,” said Mark Parkinson, President and CEO of AHCA. “We cannot stand idly by when access to care is on the line and federal regulators are overstepping their authority. Hundreds of thousands of seniors could be displaced from their nursing home; someone has to stand up for them, and that’s what we’re here to do,”

AHCA’s complaint argues that the agencies’ decision to adopt the one-size-fits-all minimum staffing standards is “arbitrary, capricious, or otherwise unlawful in violation of the APA.” Further, the lawsuit argues that the rule exceeds CMS’s statutory authority and imposes unrealistic staffing requirements.

The final mandate demands a minimum of 3.48 hours per resident per day (HPRD) of total staffing, with specific allocations for registered nurses (RN) and nurse aides. The allocations call for significant HPRD of direct RN care, and direct nurse aide care, and require the presence of an RN in all facilities at all times. Nursing home operators around the country claim that these requirements are unattainable, unsustainable, and unlawful; they could lead to widespread closures that will put the country’s most vulnerable population at risk.

Partnering with Texas nursing home industry leaders was a fitting move by AHCA as more than two-thirds of Texas facilities cannot meet any of the new requirements and suffer from a nursing shortage that is not expected to abate. The lawsuit emphasizes that, “Texas simply does not have enough RNs and NAs to sustain these massive increases. On the other hand, Texas has a relatively high proportion of licensed vocational nurses (“LVNs”) but the Final Rule largely ignores their important contributions to resident care.”

LeadingAge, with a membership spanning more than 41 states, represents the aging services continuum, including assisted living, affordable housing, and nursing homes. Katie Smith Sloan, president and CEO of LeadingAge, was vociferous in LeadingAge’s stance on the mandate. “The entire profession is completely united against this rule,” she said in a statement. LeadingAge voiced its opposition to the proposed mandate back in 2022, at the outset of Biden’s administration, and now joins the legal battle against its implementation, claiming that, “it does not acknowledge the interdependence of funding, care, staffing, and quality.”

At inception, the new mandate triggered strong opposition from industry leaders and lawmakers. Industry leaders claim the rural areas will take a harder hit than urban areas. Rural facilities are grappling with an unprecedented and acute shortage of registered nurses (RNs), rising inflation, and insufficient reimbursement. Additionally, both Republican and Democratic Congressmen joined in protest of the mandate and threw their support behind the Protecting Rural Seniors’ Access to Care Act (H.R. 5796) which would have effectively suspended the proposal. Ultimately, the staffing mandate was finalized before the House of Representatives took it up.

On the other side of the courtroom, the Centers for Medicare & Medicaid Services’ (CMS) officials maintain that facilities will be able to comply with the mandate because the three phase plan will “allow all facilities the time needed to prepare and comply with the new requirements specifically to recruit, retain, and hire nurse staff as needed.” The lawsuit counters this assertion stating that a delay in deadlines will do nothing to fix the underlying problem.

“To be clear, all agree that nursing homes need an adequate supply of well-trained staff,” the lawsuit states. “But imposing a nationwide, multi-billion-dollar, unfunded mandate at a time when nursing homes are already struggling with staffing shortages and financial constraints will only make the situation worse.”

In conversations with our healthcare clients, the consensus that seems to be forming is that the new staffing mandate’s attempt to address healthcare staffing issues is simply not feasible. The mandate only exacerbates the post-Covid, turbulent environment of the healthcare industry. It is most likely that the legal assault against the mandate has only just begun as nursing home owners and healthcare companies turn to the courts to mitigate the effects of the mandate and to strongarm CMS into drafting a more equitable ruling. How the mandate will ultimately be implemented, which of its components may be reversed, and what adjustments and policy updates will arise, is yet to be seen. Stay ready for updates as the situation evolves.

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Healthcare entities regularly seek out merger and acquisition (M&A) opportunities to expand and diversify, but M&A becomes more expensive and less attractive when rising interest rates make the cost of borrowing prohibitive. Vacillating interest rates invite fluctuating costs of capital, disrupt valuations, and strain financing opportunities. Throw in the newly released staffing mandates and the combination of factors affects the overall volume of M&A transactions.

Interest rates and valuations generally work inversely. When interest rates climb, discount rates also rise. This brings on lower present values of future cash flows, which lowers valuations for companies. Fluctuating valuations affect the pricing of M&A transactions. Low valuations translate into potentially higher returns for investors and more M & A activity.

According to a recent report by Forbes, despite forecasts of reduced interest rates, the Federal Open Market Committee has not moved to cut them. Currently, it seems most likely that the FOMC will cut rates in September and December, according to the CME’s FedWatch tool. Lower rates will mean lower valuations and will lead to a higher volume of M&A activity.

Where do staffing mandates come in? The nursing home industry is in an uproar in reaction to the Centers for Medicare & Medicaid Services new staffing mandate that will demand that nursing homes provide residents with approximately 3.5 hours of nursing care per day, performed by both registered nurses and nurse aides. This is the first time nursing homes are looking at staffing requirements set by the federal government and they are none too pleased. The mandate has been widely opposed by the nursing home operators, claiming that it is unreasonable, and more importantly, unrealizable.

Over the next three to five years, as the mandate’s requirements are phased in, providers will be faced with threatening staffing costs. According to the American Healthcare Association (AHCA), the proposed mandate would require nursing homes to hire more than 100,000 additional nurses and nurse aides at an annual cost of $6.8 billion. This signals inevitable closures and sell-outs in the coming years. The new staffing mandates threaten the healthcare industry as a whole, especially the activity of mergers and acquisitions. The saving grace may come in the form of a marked lowering of interest rates which can more likely than not keep M&A activity active and even trigger a robust year for healthcare in general.

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Hard hit by the pandemic, the nursing home industry is still struggling to recover and rebuild its workforce. Standing in its way is the Biden Administration’s proposed federal staffing mandate. If passed, this mandate will cost nursing homes billions of dollars, compromise access to care for seniors, and increase the challenges already facing operators who are already responding to industry flux by limiting admissions and closing facilities.

According to a recent report by the American Health Care Association (AHCA), despite higher wages, the nursing home sector suffered the worst job losses out of all other health care sectors in the Covid period. In order to return to pre-pandemic levels, another 130,000 workers would still need to return to the industry.

The industry is up in arms and urging support for the Protecting Rural Seniors’ Access to Care Act, which would prohibit the Centers for Medicare and Medicaid Services (CMS) from finalizing its proposed federal staffing mandate for nursing homes, and would establish an advisory panel on nursing home staffing. The staffing mandate proposed by CMS would compel nursing homes to meet unjustified staffing minimums, without offering any resources or workforce development programs to soften the impact.

The proposed rule consists of 3 central staffing proposals:

The first calls for minimum nurse staffing standards of 0.55 hours per resident day for registered nurses and 2.45 for nurse aides.
The second rule mandates having an RN on site 24 hours a day, 7 days a week.
The final rule imposes additional facility assessment requirements.

According to a joint letter of protest written by the American Health Care Association and the National Center for Assisted Living, nearly 95% of nursing homes do not meet at least one or more of the three proposed requirements of the proposal. If the proposed rule is implemented, facilities would be forced to downsize or close down – displacing hundreds of thousands of nursing home residents.

The AHCA’s 2024 State of the Sector report asserted that if the staffing proposal is finalized, the sector will need to inject 100,000 more staff members into the workforce at an annual cost of $7 billion. An anticipated 280,000 residents would be displaced as facilities would be forced to downsize or close and the result would limit access to care for our most vulnerable population.

Ensuring that our nation’s sick and elderly population receives safe, reliable, and quality nursing home care is crucial. Further limiting the nursing home industry’s access to a competent workforce, without offering programs or funding to soften the blow, is untenable for both the industry and its beneficiaries.

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The end of one year and the beginning of the next is a great opportunity for reflection and planning. You have 12 months to look back on and another 12 ahead to look forward to. Here are five ways to strengthen your business for the new year by doing a little of both:

1. Compare 2019 financial performance to budget. Did you meet the financial goals you set at the beginning of the year? If not, why? Analyze variances between budget and actual results. Then, evaluate what changes you could make to get closer to achieving your objectives in 2020. And if you did meet your goals, identify precisely what you did right and build on those strategies.

2. Create a multiyear capital budget. Look around your offices or facilities at your equipment, software and people. What investments will you need to make to grow your business? Such investments can be both tangible (new equipment and technology) and intangible (employees’ technical and soft skills).

Equipment, software, furniture, vehicles and other types of assets inevitably wear out or become obsolete. You’ll need to regularly maintain, update and replace them. Lay out a long-term plan for doing so; this way, you won’t be caught off guard by a big expense.

3. Assess the competition. Identify your biggest rivals over the past year. Discuss with your partners, managers and advisors what those competitors did to make your life so “interesting.” Also, honestly appraise the quality of what your business sells versus what competitors offer. Are you doing everything you can to meet — or, better yet, exceed — customer expectations? Devise some responsive competitive strategies for the next 12 months.

4. Review insurance coverage. It’s important to stay on top of your property, casualty and liability coverage. Property values or risks may change — or you may add new assets or retire old ones — requiring you to increase or decrease your level of coverage. A fire, natural disaster, accident or out-of-the-blue lawsuit that you’re not fully protected against could devastate your business. Look at the policies you have in place and determine whether you’re adequately protected.

5. Analyze market trends. Recognize the major events and trends in your industry over the past year. Consider areas such as economic drivers or detractors, technology, the regulatory environment and customer demographics. In what direction is your industry heading over the next five or ten years? Anticipating and quickly reacting to trends are the keys to a company’s long-term success.

These are just a few ideas for looking back and ahead to set a successful course forward. We can help you review the past year’s tax, accounting and financial strategies, and implement savvy moves toward a secure and profitable 2020 for your business.

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Whole Foods Market is now famous as the upscale supermarket chain that was acquired by Amazon for close to $14 billion. However, Whole Foods Market began with humble beginnings. In 1978, John Mackey and Renee Lawson borrowed money from friends and family to open a small natural food store in Austin, Texas. As the store expanded to open more locations and Mackey and Lawson admitted two additional partners and designated specific tasks to each partner, such as finance, human resources, and sales. This process continues today where, although Whole Foods Market is a multinational food chain with 500 locations, each regional manager has the autonomy and flexibility to decide on suppliers and pricing.

The proverb “too many cooks spoil the broth” applies to the management of a business. Thus, establishing the sequence of control as part of a succession plan ensures that the company continues to operate effectively and efficiently – especially if the business is bequeathed to children who do not work in the family business.

The sequence of control of a business succession plan outlines the decision-making process of a closely-held, family business once the owner is determined to be incapacitated or deceased. Although this can be emotionally tolling, the sequence of control is essential for the continuity of the business. The following are questions that arise when planning the sequence of control.

What is the definition of incapacitated?

You undoubtedly know of instances in which the patriarch of a family suffered from dementia or a form of memory loss. You are probably familiar with cases in which people took advantage of individuals suffering from Alzheimer’s disease. Such undue influence can arise if a business owner can no longer exercise prudent business reasoning and judgment. Accordingly, the business succession plan should define “capacity” and specify who makes the determination, which can be a physician or a member of the clergy.

Who assumes control?

It may seem irresponsible to vest absolute control to the child or children who work(s) in the business; however, it may be imprudent to allow children who do not work in the company to be involved in the decision-making process of the business. A business administrator who requires approval for the day-to-day operational decisions in the ordinary course of business may be unable to perform basic administrative duties of the company, especially if consent is needed from an adverse party. Nevertheless, a proper business plan may require a vote of all members for significant business decisions, or decisions that may alter the business structure or significantly impact the business.

How can I secure oversight over the business administrator?

Proper internal controls are always recommended to promote accountability and prevent fraud, but it is even more critical when one heir controls the family business. The business succession plan can provide for a salary and fringe benefits or performance-based compensation, methods for removing or replacing the administrator, an arbitrator to adjudicate disagreements or disputes among family members, and an exit strategy or process of dissolving the business or partnership.

How can I provide for myself and my spouse while incapacitated?

If you are considered an owner of the business during your lifetime or so long that your spouse is alive, your succession plan can stipulate that you receive periodic distributions. However, a fixed withdrawal may prove to be insufficient for your medical needs or general cost of living. Conversely, the business may be dependent on its working capital that is now being distributed and accumulated in your personal checking account.

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Do you want to control costs and improve delivery of your not-for-profit’s programs and services? It may not be as difficult as you think. First, you need to know how much of your nonprofit’s expenditures go toward programs, as opposed to administrative and fundraising costs. Then you must determine how much you need to fund your budget and weather temporary cash crunches.

4 key numbers

These key ratios can help your organization measure and monitor efficiency:

Percentage spent on program activities. This ratio offers insights into how much of your total budget is used to provide direct services. To calculate this measure, divide your total program service expenses by total expenses. Many watchdog groups are satisfied with 65%.

Percentage spent on fundraising. To calculate this number, divide total fundraising expenses by contributions. The standard benchmark for fundraising and admin expenses is 35%.

Current ratio. This measure represents your nonprofit’s ability to pay its bills. It’s worth monitoring because it provides a snapshot of financial conditions at any given time. To calculate, divide current assets by current liabilities. Generally, this ratio shouldn’t be less than 1:1.

Reserve ratio.Is your organization able to sustain programs and services during temporary revenue and expense fluctuations? The key is having sufficient expendable net assets and related cash or short-term securities.

To calculate the reserve ratio, divide expendable net assets (unrestricted and temporarily restricted net assets less net investment in property and equipment and less any nonexpendable components) by one day’s expenses (total annual expenses divided by 365). For most nonprofits, this number should be between three and six months. Base your target on the nature of your operations, your program commitments and the predictability of funding sources.

Orient toward outcomes

Looking at the right numbers is only the start. To ensure you’re achieving your mission cost-effectively, make sure everyone in your organization is “outcome” focused. This means that you focus on results that relate directly to your mission. Contact us for help calculating financial ratios and using them to evaluate outcomes.

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Your not-for-profit’s ability to pursue its mission depends greatly on its financial health and integrity. If your nonprofit is growing and your executives are struggling to juggle financial responsibilities, it may be time to hire a chief financial officer (CFO).

Core responsibilities

Generally, the nonprofit CFO (also known as the director of finance) is a senior-level position charged with oversight of accounting and finances. He or she works closely with the executive director, finance committee and treasurer and serves as a business partner to your program heads. A CFO reports to the executive director or board of directors on the organization’s finances. He or she analyzes investments and capital, develops budgets and devises financial strategies.

The CFO’s role and responsibilities vary significantly based on the organization’s size, as well as the complexity of its revenue sources. In smaller nonprofits, CFOs often have wide responsibilities — possibly for accounting, human resources, facilities, legal affairs, administration and IT. In larger nonprofits, CFOs usually have a narrower focus. They train their attention on accounting and finance issues, including risk management, investments and financial reporting.

Making the decision

How do you know if you need a CFO? Weigh the following factors:

Size of your organization,
Complexity and types of revenue sources,
Number of programs that require funding, and
Strategic growth plans.

Static organizations are less likely to need a CFO than not-for-profits with evolving programs and long-term plans that rely on investment growth, financing and major capital expenditures.

The right candidate

At a minimum, you want a CFO with in-depth knowledge of the finance, accounting and tax rules particular to nonprofits. Someone who has worked only in the for-profit sector may find the differences difficult to navigate. Nonprofit CFOs also need a familiarity with funding sources, grant management and, if your nonprofit expends $750,000 or more of federal assistance, single audit requirements. The ideal candidate should have a certified public accountant (CPA) designation and, optimally, an MBA.

In addition, the position requires strong communication skills, strategic thinking, financial reporting expertise and the creativity to deal with resource restraints. Finally, you’d probably like the CFO to have a genuine passion for your mission — nothing motivates employees like a belief in the cause.

Consider outsourcing

If your budget is growing and financial matters are becoming more complicated, you may want to add a CFO to the mix. Otherwise, consider outsourcing CFO responsibilities to a CPA firm. Contact us for more information.

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Most not-for-profits are intensely focused on present needs, not the possibility that disaster will strike sometime in the distant future. But because a fire, flood or other natural or man-made disaster could strike at any time, the time to plan for it is now.

You likely already have many of the necessary processes in place — such as evacuating your office. A disaster or continuity plan simply organizes and documents your processes.

Identify specific risks

No organization can anticipate or eliminate all possible risks, but you can limit the damage of potential risks specific to your nonprofit. The first step in creating a disaster plan is to identify the specific threats you face when it comes to your people, processes and technology. For example, if you work with vulnerable populations such as children and the disabled, you may need to take extra precautions to protect your clients.

Also assess what the damages would be if your operations were interrupted. For example, if you had an office fire — or even a long-lasting power outage — what would be the possible outcomes regarding property damage and financial losses?

Make your plan

Designate a lead person to oversee the creation and implementation of your continuity plan. Then assemble teams to handle different duties. For example, a communications team could be responsible for contacting and updating staff, volunteers and other stakeholders, and updating your website and social media accounts. Other teams might focus on:

Safety and evacuation procedures,
IT issues, including backing up data offsite,
Insurance and financial needs, and
Recovery — getting your office and services back up and running.

Planning pays off

All organizations — nonprofit and for-profit alike — need to think about potential disasters. But plans are critical for some nonprofits. If you provide basic human services (such as medical care and food) or are a disaster-related charity, you must be ready to support victims and their families. This could mean mobilizing quickly, perhaps without full staffing, working computers or safe facilities. You don’t want to be caught without a plan. Contact us for more information.

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It’s a well-known truism in the corporate world: Organizations that don’t evolve run the risk of becoming obsolete. But instead of anticipating and reacting to market demands like their for-profit counterparts, many not-for-profits hold on to old ideas about how their organizations should be run. Here are a few things your nonprofit can learn from the business world.

Thinking strategically

The strategic plan — a map of near- and long-term goals and how to reach them — lies at the core of most for-profit companies. If your nonprofit doesn’t have a strategic plan or has been lax about revisiting and revising an existing plan, this should be a top priority.

Although the scope of your plan will be specific to the size and nature of your organization, basic principles apply to most. For example, you should set objectives for several time periods, such as one year, five years and 10 years out. Pay particular attention to each strategic goal’s return on investment. For example, consider the resources required to implement a new contact database relative to the time and money you’ll save in the future.

Spending differently

You probably already develop an annual budget, but how closely does it follow your strategic plan? For-profit businesses use budgets to support strategic priorities, putting greater resources behind higher priority projects.

Businesses also routinely carry debt on their balance sheets in the belief that it takes money to make money. Nonprofits, by contrast, typically avoid operating deficits. Unfortunately, it’s possible to operate so lean that you no longer meet your mission. Applying for a loan or even creating a for-profit subsidiary could provide your nonprofit with the funds to grow. Building up your endowment also may help provide the discretionary cash essential to pursue strategic opportunities.

Promoting transparency

Although nonprofits must disclose financial, operational and governance-related information on their Form 990s, public companies subject to the Sarbanes-Oxley Act and other regulations are held to higher standards. Consider going the extra mile to promote transparency.

If you don’t already, engage an outside expert to perform annual audits, and make your audited financial statements available upon request. Outside audits help assure stakeholders that your financial data is accurate and that you’re following correct accounting practices and internal controls.

We can help with your audit needs and assist you in adopting for-profit business practices that make sense given your organization’s needs. Reach out to learn more.

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Competition is as fierce as it has ever been for private and public grants to not-for-profits. If your funding model depends on receiving adequate grant money, you can’t afford to submit sloppy, unprofessional grant proposals. Here are some tips on writing a winner.

Do your research

Just as you’d research potential employers before applying for a job, you should get to know grant-making organizations before asking for their support. Familiarize yourself with the grant-maker’s primary goals and objectives, the types of projects it has funded in the past, and its grant-making processes and procedures.

Performing research enables you to determine whether your programs are a good fit with the grant-maker’s mission. If they aren’t, you’ll save yourself time and effort in preparing a proposal. If they are, you’ll be better able to tailor your proposal to your audience.

Support your request

Every grant proposal has several essential elements, starting with a single-page executive summary. Your summary should be succinct, using only the number of words necessary to define your organization and its needs. You also should include a short statement of need that provides an overview of the program you’re seeking to fund and explains why you need the money for your program. Other pieces include a detailed project description and budget, an explanation of your organization’s unique ability to run this program, and a conclusion that briefly restates your case.

Support your proposal with facts and figures but don’t forget to include a human touch by telling the story behind the numbers. Augment statistics with a glimpse of the population you serve, including descriptions of typical clients or community testimonials.

Follow the rules

Review the grant-maker’s guidelines as soon as you receive them so that if you have any questions you can contact the organization in advance of the submission deadline. Then, be sure to follow application instructions to the letter. This includes submitting all required documentation on time and error-free. Double-check your proposal for common mistakes such as:

Excessive length,
Math errors,
Overuse of industry jargon, and
Missing signatures.

Take the time

To produce a winning proposal, you need to give yourself a generous time budget. Researching the grant-maker, collecting current facts and statistics about your organization, composing a compelling story about your work and proofreading your proposal all take more time than you probably think they do. Above all, don’t leave grant proposal writing to the last minute.

Beyond the Ask: The Real Science of Fundraising

Donors, Deductions & Dollars: How Will The Big Beautiful Bill Reshape Non-Profits? [Update: Passed Into Law]

How My Client Almost Landed in Prison—and the Little-Known Tax Rule That Saved Him

Tariffs, Red Tape, and Middlemen: White House Puts Big Spotlight on Small Pharma

Tariffs Bite, But Push for Domestic Supply Gains Momentum

A Regulatory Labyrinth — and Hopes for Reform in Washington

The PBM Squeeze: Long-Term Care’s Unseen Cost Crisis

Toward a Resilient Future

Court Hits the Brakes on Healthcare Staffing Mandate

Sky-rocketing Demand for ABA Services Offers Vast Opportunities: Here are the Key Metrics for Success

Medicare Advantage Plans: Are They Sabotaging the Skilled Nursing Home Industry?

Excess Benefit Transactions and How They Can Undermine Your Nonprofit

AHCA Goes to Court

Will M&A Survive Crushing Interest Rates and Government Staffing?

Federal Staffing Mandate For Nursing Homes Means Trouble For Staffing

5 Ways to Strengthen Your Business for the New Year

Business Succession Planning: Sequence of Control

Is your nonprofit monitoring the measures that matter?

Does your nonprofit need a CFO?

Don’t let a disaster defeat your nonprofit

Why you should run your nonprofit like a business

Writing a Winning Grant Proposal