Health service not-for-profits in Iowa feel strain of minimum-wage increases

On the first floor of the Arc of Southeast Iowa in Iowa City, Mariah Simmons prepares Halloween decorations to hang on the wall. Next to her sits Jonathan Fountain, 9, in his wheelchair. He happily grips thin, gray plastic sheeting cut to look like a spider web.

Simmons, a supervisor, and three direct care providers have an afternoon of specialized activities planned for the handful of children and teens with intellectual or physical disabilities who ride a bus to the Arc after Thursday afternoon early dismissals from school.

A senior at the University of Iowa studying to become a special-education teacher, Simmons has worked at the Arc for the past two and a half years and led last summer's camp for children with disabilities.

But come Jan. 1, the minimum wage in Johnson County will rise to $10.10 an hour. With the minimum wage also increasing in Linn County, some Corridor not-for-profits reimbursed by Iowa Medicaid say they are concerned about how they can recruit and retain employees such as Simmons.

'They're pretty hamstrung'

Johnson County supervisors passed an ordinance in September 2015 that will boost the minimum wage in increments. The wage in Johnson County rose to $9.15 in May.

The Linn County Board of Supervisors passed a similar ordinance to increase minimum wage to $10.25 by Jan. 1, 2019.

The Arc was one of six not-for-profits in Johnson County reimbursed through Medicaid that sent a letter to the Johnson County Board of Supervisors in August 2015 detailing their concerns with the supervisors' plan to increase the county's minimum wage and asking for a delay in the increases' timeline.

Though the not-for-profit presidents or directors spoken with for this story said all or the majority of their employees already made more than $10.25 an hour, they believe the wage increase will exacerbate their problems in attracting and retaining employees.

At the Arc, about 90 percent of its budget comes from Medicaid reimbursements. The organization always has aimed to pay employees about $2 over the minimum wage, said Karen DeGroot, president and CEO. But it no longer can do that.

'I would be so happy if I could pay our staff $25 an hour,' DeGroot said. 'Because our (reimbursement) rates are set by the state, we're not in a situation where we can (increase employee pay) any more. We're not getting reimbursed' more.

Ron Schieffer, executive director at Reach For Your Potential in Iowa City, which also helps people with disabilities, said the agency's payroll budget increased about $150,000 last fiscal year.

Reach For Your Potential has about 30 homes with three or four clients per home. Overnight staff are paid to sleep at the homes.

Since he had to increase pay for overnight employees, who were making close to the minimum wage, Schieffer said he had to increase pay for daytime employees who provide higher levels of care than overnight staff.

'We all believe direct-care staff should be paid more,' Schieffer said. But 'we're not getting paid more (from Medicaid) to be able to pay our employees more. For every 95 cent increase, it increases our payroll about $75,000 a year.'

Medicaid reimbursement has added some further challenges for some health care not-for-profits.

Since the April 1 transition of Medicaid from the state to three out-of-state, private managed-care organizations, a number of Medicaid recipients and health care providers have complained to state legislators of late, partial or missing payments. Some agencies have reported dropping certain services.

Linn County Supervisor Ben Rogers said he understands the organizations' struggles.

'They're pretty hamstrung in what they can do,' he said.

'Wal-Mart and Target and Hy-Vee'

Direct service providers require high levels of training, said Roger Goedken, executive director of Successful Living, which assists those with chronic mental illness. Though general base pay for part-time employees at Successful Living is $11.05, he still struggles to attract qualified candidates.

'Most have wanted to negotiate higher,' Goedken said. 'If you have some specialization, that means more cost.'

Goedken noted advertising costs for open positions used to be around $1,000, but now add up to as much as $4,000. In the past year, he has had to hire a full-time human resources staff member to cope with of high employee turnover.

'That person doesn't generate any revenue, so it's just another added cost of maintaining business operations,' he said. 'Now it's as if we're going to lose one (other) staff person within the period of time it takes to staff somebody.'

DeGroot said hiring for these kinds of potentially stressful jobs always has been difficult, but the wage increases are exacerbating the problem.

'Most people would prefer to work at a craft store or restaurant or retail than to change adult briefs for the same amount of money,' she said. 'It's a tough job.'

Brad Thatcher, vice president of finance for Tanager Place, which provides mental health care in Cedar Rapids, said the agency has not yet determined how it will handle the increase.

'We're not competing against Four Oaks or Abbe Center (for Community Mental Health),' Thatcher said. 'We're competing against Wal-Mart and Target and Hy-Vee. We're having trouble keeping staff under how it works now. If minimum wage increases, and I'm going to generically say Targets and Wal-Marts of the world have a philosophy of 'We pay more than $2 over the minimum' because they can change their prices, I'm going to be able to go to Wal-Mart for $12 an hour and Tanager is hiring at $11. We'll struggle to find quality candidates with the rate we're getting.'

Thatcher said in the past year, Tanager Place had 17 open positions in the residential inpatient program for children with mental health needs. Remaining employees have to work more hours to pickup open shifts because the state requires Tanager Place to have a set ratio of staff to patients. Working more hours exhausts already underpaid employees, leading them to quit so remaining employees are even more strained, he said.

'The kids end up paying the price'

DeGroot said the Arc of Southeast Iowa has a waiting list for the first time — an average of 10 people. They do not have enough qualified staff to provide services at the one-on-one ratio they're required to maintain to be reimbursed by the state.

Though minimum wage has not yet increased in Linn County, Tanager has a waiting list, too, with about 25 children each month.

'The kids end up paying the price, and we can't fulfill our mission,' Thatcher said. 'You have to increase minimum wage and the state also has to give me more money so I can pass that to the employees. My only lever I can pull is to reduce the number of kids served or shut down a program.'

DeGroot and Thatcher said they could apply for more grants, but they can't count on receiving them. Thatcher added his agency doesn't have much room to tighten up operational costs.

'We've been squeezed for so long, we're as efficient as it gets,' he said. 'All the non-profits are hitting up the community ...

and we're tapping out.'

'Look at the overall impact'

Rod Sullivan, Johnson County supervisor who saw the not-for-profits' August 2015 letter to Johnson County supervisors, said he understands these not-for-profits already are at the mercy of Medicaid reimbursement rates. But, he added, raising the minimum wage helps the majority of Johnson County residents.

Sullivan worked after graduating from college at Systems Unlimited in Iowa City, which provides living facilities for adults and children with disabilities and was one of the organizations that signed the letter to supervisors. He said many of these issues already existed for the not-for-profits.

'The feds aren't (increasing the minimum wage) and the state's not doing it,' he said. 'You have to look at the overall impact. If I can help 50,000 people potentially at the expense of a few thousand jobs, that's a pretty good deal.

'The fault of us as a society is that we're not willing to pay a little more for the people who take care of our loved ones.'

Linn County Supervisor Rogers said not-for-profits in Linn County did not share concerns with the Linn County Board of Supervisors during the decision-making process. The board decided on incremental increases that take place over the next three years to give businesses time to adjust.

Rogers, who is on the board of directors for the Arc of East Central Iowa and another board for Regional Governance for Mental Health and Disabilities Services, said he was sympathetic to not-for-profits concerns. He suggested not-for-profits consider 401(k) programs or offer more paid time off.

'When we made the ordinance, it wasn't to benefit or single out a particular industry,' Rogers said. 'They'd be impacted if we did this or we didn't. Outside of grants and donations, which are not stable and not predictable, they can be incentivizing people to stay.'

But, in the end, DeGroot said, 'People are not in the non-profit industry because they want to take advantage of people. If we wanted to be rich, we would not be in this business. If we're concerned about the quality of service we can give, hear us out.'