More Nonprofits Are Taking Over Health Functions for Cities

by Linda M. Lampkin, Senior Nonprofit Compensation Specialist 15. October 2012 08:43

As state and local governments struggle with budget gaps, there are an increasing number of agencies deciding to contract out services previously provided by public employees to the nonprofit sector. 

A recent article in the Detroit News reported the impending changeover of the management and operation of the city’s Health and Wellness Promotion programs (including substance abuse treatment, HIV testing, immunizations, and food safety) to a new nonprofit.  The move was mandated by an agreement with the state to cut the city’s budget.

Until this change, Detroit was the only remaining city-run health department in Michigan.  But this is not just a Michigan phenomenon. Detroit is reported to be the fifth major city to shift health department functions to nonprofits. The cities of New York, New Orleans, Philadelphia, and Chicago have already made the change to providing these services through “public health institutes.” There are actually 37 of these public health institutes across the U.S., but the shift to nonprofit services in Detroit is unique because of the broad scope of the transfer. 

With this changeover in Detroit, about 200 contractors and 100 city workers will be laid off. The new nonprofit will employ 190, including 70 former health department employees. While Detroit officials say the nonprofit will be better able to secure grants and provide services to residents, city union representatives are skeptical, along with some city council members. The city will maintain some staff to allow continued enforcement of regulations and a few other programs, such as declaring a health threat, if necessary. The city also will continue with some programs such as vital records and helping to find housing for people with HIV.

Will this transfer bring greater efficiency to the provision of these services?  This is a discussion that has been ongoing for decades, and interested parties, such as good government advocates and public sector labor unions, will continue the research.

One essential component of this calculation is wage costs, as the major component of the costs of these services is labor.  What should the executive director be paid?  What should the outreach staff be paid?  Elected officials need real compensation data to determine market salary levels for the new public health institutes to ensure that taxpayer and client resources are used efficiently and effectively.  ERI’s Nonprofit Comparable Assessor and Salary Assessor can be used to determine salaries that will attract and retain employees, reflecting the market rates for jobs moved from the public to the nonprofit sector.