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Bob serves as President and CEO of GuideStar and serves on the boards of Vision TV, Grameen Foundation USA, and the AAFRC Trust for Philanthropy. More...

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More Questions about Nonprofit Health Care Cooperatives

Posted By on September 25th, 2009, in these categories: Health Care | Public Policy

I’m still trying to decide how health care cooperatives work and whether they can reach the scope and scale that our health care system needs to introduce some of the reforms that are being discussed.

Last week I interviewed Steve Delfin, executive director of the National Credit Union Foundation, who told me about how credit unions work. His blog on this issue is interesting. We learned from him that cooperatives are owned and controlled by their members—the people who use the co-op’s services or buy its goods. Any surplus revenues are reinvested in the business.

Steve also recommended an interesting Web site, the National Cooperative Business Association, or NCBA. Here’s a link: http://www.ncba.coop/abcoop_health.cfm. The site has a lot of interesting information on why NCBA thinks cooperatives can work for health care delivery. On it I learned that there are about 30,000 cooperatives in all, and that they have a significant impact in four sectors of the U.S. economy: agriculture and food, credit unions, mutual insurance, and rural electric. But not health care!

NCBA reports that there are four kinds of co-ops. Every model has at least a few examples of health care services.

  • consumer-owned co-ops (credit unions and rural electric co-ops)
  • purchasing cooperatives (hospitals buying equipment together)
  • worked owned cooperatives (there are several in home health care)
  • producer cooperatives (such as Land O’Lakes)

Unfortunately, the impact of consumer-owned health cooperatives today is relatively small. The NCBA estimates that approximately 2 million Americans are member owners of consumer-owned health-care cooperatives.

The NCBA identifies some important unanswered questions that policy makers will need to address:

  1. Will the co-ops be seeded by government grants or will they be loans?
  2. How much control will the government exert?
  3. How much time will the government give to get health care co-ops started?
  4. Will the co-ops be allowed to form into a federated co-op on a national scale?
  5. Will there be minimum federal standards that supersede state law?
  6. What laws would regulate regional co-ops?

These seem like pretty difficult and complicated issues to solve. What do you think?

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More on the Nonprofit Cooperative Option for Health Care

Posted By on September 18th, 2009, in these categories: Health Care | Public Policy

Nonprofit medical cooperatives still seem to be in the picture as an alternative to the so-called public option as part of the medical reforms being discussed.

In my last blog on this issue, I mentioned there are very few co-ops in the GuideStar database, and I expressed some doubts about the capabilities and scalability of creating new nonprofit co-ops to provide health services. To learn more about how co-ops work, I contacted a friend, Stephen Delfin, who serves as the executive director of the National Credit Union Foundation. Steve says that "credit unions are not-for-profit, member-owned financial service cooperatives. The thread between different types of coops is the non-profit, member-ownership stature and commitment to social responsibility."

He says they all operate with a commitment to the following principles:

  • Open and voluntary membership
  • Democratic control
  • Non-discrimination
  • Service to members
  • Distribution to members
  • Building financial stability
  • Ongoing education (financial)
  • Cooperation among cooperatives
  • Social responsibility

Steve also told me that the co-op is a "business model uniquely positioned to tap into the post-economic melt-down psyche of Americans. Whether in health care or financial services, the business motives of cooperatives are not profit, but service to members." He discusses the cooperative model in a recent blog.

After talking to Steve, the concept of a nonprofit health co-op sounds a little more intriguing to me. Wouldn’t it be great to be a member of an organization focused solely on providing me and my family with excellent health care, rather than fighting through all the paperwork and bureaucracies that exist in health care today?

In my next post, I’ll take a closer look at how current health co-ops work.

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Nonprofit Cooperatives and the Health Care Debate

Posted By on August 21st, 2009, in these categories: Public Policy

This week’s debate about the Obama administration’s health plan has focused on a "nonprofit co-op" alternative to a government-owned insurance plan.

I started to wonder, what exactly are nonprofit cooperatives? Tuesday’s New York Times describes them as private, nonprofit, consumer-owned providers of health care, much like the co-ops that offer telephone, electric, and other utility services in rural areas. My understanding of co-ops is that one of the key characteristics is that they are owned and governed by the customers.

The Times article reports a study done by University of Wisconsin professor Ann Hoyt "that there are nearly 30,000 cooperatives with revenues of more than $650 billion a year. They include farm co-ops, retail food co-ops, rural telephone and electric co-ops and credit unions—entities as diverse as Ace Hardware, The Associated Press, Blue Diamond Growers and Ocean Spray."

I asked Chuck McLean, GuideStar’s VP of Research, what we could learn from GuideStar’s database about nonprofit co-ops. Chuck points out that many cooperatives are not tax-exempt and thus not in our database. In fact some co-ops are even for-profit, so it gets even more confusing. Furthermore, there’s a big challenge with assigning the correct NTEE taxonomy code to a nonprofit co-op, which makes finding it on GuideStar more difficult.

Chuck’s research finds that there are currently about 1,300 tax-exempt nonprofits coded as cooperatives in the IRS Business Master File. About half of them are telephone and electric co-ops, and these organizations account for the overwhelming majority of nonprofit co-ops’ revenue and assets. Only 16 of the organizations are involved in providing local health care.

I have a hunch that if this idea about nonprofit co-ops continues, it will also spill over into the already heated debate about describing what is a "nonprofit health organization" and how they differ from for-profit hospitals in service and price. Soon to follow, I’m sure, will be more debates about the appropriate levels of compensation, transparency, and accountability for nonprofit co-ops.

I’d like to hear more, too, about how officials expect to create nonprofit organizations capable of providing health services to a large number of people. I don’t know much about how health services operate, but I do know that starting and operating sophisticated nonprofit organizations is hard work—and expensive, too. And it takes time to do it well!

Stay tuned as the nonprofit sector gets more involved in the health care debate. Here at GuideStar, we’ll try to add some light to a discussion that has been all too short of solid information.

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