Largest Long-Term-Care Nonprofit Lays Off 100+ Employees: What’s Going On?

Question” by Jan Tik

March 22, 2017; Argus Leader and KELO-TV

The Evangelical Lutheran Good Samaritan Society in America (GSS), often referred to as “Good Sam,” laid off more than 100 employees from its headquarters “national campus” in Sioux Falls, South Dakota over the last few days. Good Sam says the cuts represent approximately 15 percent of headquarters staff, but recent media reports indicate the actual proportion could be 20 percent or more.

Good Sam, founded in North Dakota in 1922, has a current annual budget of about $1 billion. It employs 27,500 people nationwide and, according to its 2015 annual report, operates more than 200 long-term care facilities in 24 states. The organization, like the long-term care industry as a whole, has been affected in recent years by several market forces that sometimes conflict. Providers are dealing with shrinking revenue margins for Medicaid-reimbursed services, competition for private-pay seniors involving both nonprofits and for-profit long-term care corporations, and increased demand for “age in place” solutions rather than traditional facility-based care. According to the latest available IRS Form 990 on its GuideStar page, Good Sam lost $4.6 million in 2014 after expenses jumped by $14 million.

In an interview with the CEO of another nonprofit long-term care provider, the CEO claimed, “A facility loses $32 to $33 a day [for Medicaid-paid residents]. That’s just covering your costs. That’s not making a profit.”

In a news release, GSS President and CEO David Horazdovsky said:

This change comes at an incredibly hard cost to good people who were affected by the staff reductions, and I deeply regret the impact it will have on their lives.

[…]

Our work is guided by a deep commitment to serve God, by serving people in need. Rather than letting financial pressure be a continuous distraction from what is most sacred to us, we have an obligation to innovate—to lead the way in doing more with less.

But the local media are not convinced by this facile explanation. Only a few months ago, Good Sam completed a $30 million headquarters construction and renovation project on its national campus, a project now being contrasted with the layoff announcement. Making the overall look even less attractive was the fact that the layoffs apparently did not include any senior GSS executives; no mention was made of reductions in senior executive pay, either.

The Argus Leader’s story included an embedded copy of a single page from the organization’s 2011 Form 990 documenting the disclosure of several relationships among key employees and family members also employed by Good Sam and two relationships between Good Sam executives and other corporations. When money is tight and employees’ lives are uprooted, such reports, regardless of their actual significance, are unsettling to stakeholders. Patrick Anderson at the Argus Leader writes:

The company regularly reported conflicts of interest in its tax forms, doing business with numerous family members and other companies associated with top officials. For instance, Good Samaritan paid $3.5 million in 2011 to WellAWARE Systems, a senior care technology company. Horazdovsky served on WellAWARE’s board of directors. Good Samaritan continued to send hundreds of thousands of dollars to the company in later years.

The news release made no mention of staffing changes at Good Sam facilities across the country, but it can be assumed that financial pressures at headquarters are also being felt locally where direct services are delivered. The key question for Good Sam is whether these recent layoffs will be sufficient to position it to innovate and do more with less, as government funders and market forces both demand. But a secondary question lies in the mess they have created for themselves in allowing the conflicts and nepotism to continue over any number of years. Even if this situation were entirely created from outside of the organization, the persistence of these issues will be sure to be seen as a factor in the situation.—Ruth McCambridge