Fee-For-Service Opportunities and Challenges

by Michele Martin on January 15, 2016

Over the next several weeks, we will be doing a series of posts featuring material drawn from the CIL-Net self-study manual, Establishing and Managing Fees for Service in Centers for Independent Living. This week we’ll talk about some of the opportunities and challenge in fee-for-service.

In the context of Centers for Independent Living (CILs), developing a fee-for-service revenue stream is a complex area that presents both practical and philosophical challenges. However, the reality is that the future for continued, expanding government funding (at the federal and state level) might be problematic.

We have all seen the cutbacks, rescissions, and the dissolution of certain funding programs and streams. We live in uncertain times and relying on what has historically worked for your center may not be realistic in the near future.

From a philosophical viewpoint, some CILs may have a distrust of providing direct services. Although many CILs successfully manage direct service programs and also have strong system advocacy, it does present dilemmas for some CILs. One way to consider the idea is that the concept of self-reliance is hardwired into IL philosophy. And fees-for-service can add, in a significant way, to the ability of the CIL to chart its own course and not be totally dependent on government funding programs which can and do shift over time.

Government funding is important and critical to a CIL’s work, but it can also be immensely helpful to have other funds to further the core services and more effectively reach the many individuals with disabilities who cannot access the limited services currently provided by CILs. In order to ensure that any business (and CILs are a business) can sustain and achieve their mission, new revenue sources and new service opportunities must be carefully and thoughtfully explored and developed. Successful strategies and practical solutions will be addressed in this guide as well as some basic assumptions about integrating this business model into the ongoing operations of a CIL.

An option for CILs to explore is fees-for-service (FFS). Simply, fees-for-service are earned income received for services delivered that can provide revenue to the CIL over a long term. Fee-based services can increase CIL financial sustainability, confirm the value of services, and make financial and programmatic planning easier. Even more importantly, income derived from the FFS can be legitimately used to further the CIL’s mission. Of course, the CIL needs to cover the costs of providing the service, but the profit from FFS can be used for operating expenses, cash reserve, capital outlays, etc. within the limits of regulations.

However, there are several challenges to FFS:

FFS cannot be simply layered on to the existing financial management structure. FFS is a different fiscal animal that involves some additional budgeting, accounting, and billing policies and procedures.

FFS also requires special diligence regarding regulations and requirements of some of your existing funders to ensure that the expanded responsibilities of FFS are not a barrier to maintaining core services and objectives.

While Title VII regulations require resource development, the use of grant funds to start a new project then restricts the income to the same goals and scope in time of the grant project. (For example, the funds could not cover non-allowable costs like lobbying.) Consider a business model that does not require the use of grant funds for the staff time and other costs to get the program started.

The CIL is working for the purchasers of service or goods and must play by their rules, which means that the staff involved must be oriented and trained on what those rules are and how to apply them.

FFS also requires developing and implementing targeted marketing strategies that are beyond what most CILs typically employ to have a presence in the community.

Foundational Principles

In any fee-for-service environment, there are some foundational principles that are relevant for CILs to consider:

Title VII of the Rehabilitation Act requires that CILs conduct resource development.

Making money is not a bad thing for a nonprofit if done ethically and legally, with the proceeds reinvested to support the community. If there is no margin (profit), the CIL can’t meet its mission effectively. An expanded revenue stream means more opportunities for services to constituents.

All funds earned must remain in the nonprofit to further its mission. All shared or indirect costs must be tracked and shared across the new programs in addition to the old.

If someone is going to make revenue providing goods or services to people with disabilities, why shouldn’t it be a CIL? Who knows the needs of individuals with disabilities better than a CIL? The mission of a CIL and its core services require knowing disabilities from multiple perspectives. The CIL’s staff members are walking the walk and have proven expertise that buyers need.

Any successful business utilizes its capacity to acquire new services. CILs can use what it knows and employ the lessons of living with a disability.

So as you can see, while there may be some challenges to implementing fee-for-service in CILs, there are also some great benefits to FFS activities.

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