June 5, 2020; Philadelphia Inquirer
Elwyn is a nonprofit human services organization that has been serving families with children with disabilities for over 168 years. Now operating in multiple states around the country, it served more than 24,000 people last year.
Recently, Elwyn has run into some financial struggles, particularly in New Jersey, where it operates more than 50 group homes. A report in the Philadelphia Inquirer suggests that the organization is in a period of “financial reckoning” as it struggles to keep up in challenging times. To put this in context, for 2018, according to the most recent IRS Form 990 on file at GuideStar, the nonprofit had more than $250 million in revenue, almost all of it earned through service delivery.
Essentially, the problem that Elwyn is running into is that many states where it does business have changed their reimbursement model. Elwyn operates group homes and provides wraparound services under contract with each state’s department of Health and Human Services. New Jersey is the latest state to change its reimbursement model, now requiring contractors to bill for individual services provided (sometimes in 15-minute increments). In the past, the organizations received funding up front.
Elwyn’s CEO, Charles McLister, is quoted as saying, “What’s happened is the market has evolved around Elwyn, but Elwyn hasn’t really evolved its practices, its technology, and we’re really feeling the impact of that.” McLister took the job in 2017, succeeding a person who had been in place for 26 years.
The changes Elwyn is now undergoing are quite large and moving swiftly across the entire organization. For example, it used to employ 28 occupational therapists in Philadelphia. This year, they will be moved to serving as contractors, presumably losing their benefits, or else try to land a job with one of Elwyn’s subcontractors. The organization is also selling off property.
This would appear on the surface to be offloading the problem onto the backs of individual employees, making them more unstable while attempting to achieve more stability for the organization, and it makes no sense on the larger level of workforce quality. It would also place the organization in a position of swimming against the tide, which favors a more stable, valued workforce among direct service providers.
McLister says his organization only realized the extent of its reimbursement system problems last year. By contrast, Community Options, which runs 150 group homes in the state, began preparing for the coming changes in 2013.
There are other instances of lack of foresight or oversight at the organization over the years. In 2006, for example, Elwyn was sued by a student and his family for sexual abuse. At least five other similar cases are cited in a finding by the court. In 2010, it was reported that the organization took an inordinate and ultimately damaging amount of time to provide state mandated services to a young boy. (It seems no one was paying attention to the subcontractor that had been given the case.) In 2016, complaints of discrimination by an employer went unanswered and ultimately led to another lawsuit. Most recently, in 2019. it was reported that as many as 41 employees were able to systematically overcharge the organization for overtime, siphoning off and sharing almost $1 million.
Of course, an organization of this size will face challenges—it’s almost inevitable. Perhaps size is one of the sources of Elwyn’s current problems. The large, multi-state organization’s structure is complex. For example, Elwyn New Jersey is listed on the IRS Form 990 as a “wholly owned subsidiary” of the Pennsylvania parent organization. McLister is identified as the CEO, although there is a chief staff officer at the subsidiary. Elwyn California is identified as a membership organization, but the sole member is Pennsylvania-based Elwyn. In this case, McLister is listed on the IRS Form 990 as board president, and therefore the leader of the subsidiary’s sole member. There are other paid staff at the California nonprofit, including a CEO and a COO.
There is nothing inherently wrong with any of these structures; in fact, in the case of New Jersey, it might be a way of saving the rest of the operations. Because it is an independent 501c3, there’s a firewall that means the local Elwyn can be closed down without putting assets of the rest of the organization at risk. But the fact that the organization, large as it is, could not see the reimbursement problem coming should give its stakeholders pause. After all, this is its life’s blood. And if it could not see a massive shift coming, what can be assumed now about its ability to oversee its business overall under this complicated, firewalled structure?
These are questions that will inevitably surface, and perhaps it is time to do more than simply sell off property and make reductions in staff.—Rob Meiksins