View this post in ASL in a new tab, or scroll to the bottom of the page for the video.

Where Does the Money Come From?

Welcome to Part 2 of our series exploring answers to some big questions in the financial lives of nonprofits. If you missed “Part 1: Our Approach,” you can find it here.

In this installment, we’ll look at where our funding comes from.

WellPower (WellPower) is the community mental health center (CMHC) for the people of the City and County of Denver. We serve people from a wide variety of backgrounds with a diverse set of needs, with a particular focus on those who receive insurance through Medicaid. Thus, the majority of our funding at WellPower comes from Medicaid, which makes up about 66% of our total funding. The remaining 34% comes from Medicare, state and local government, contracts, grants, donations and service income.

Medicaid (66% of our total funding)

We receive monthly Medicaid payments to provide services that meet the needs of our community. These monthly payments are determined through a complex formula set by the state that involves our base unit cost, or “cost per relative value unit (RVU)”– in short, the total costs related to billable services divided by the total weighted units of service delivered by the organization.

Quick side note: Comparing unit costs

It can be tempting to try to compare the costs of doing business, or “unit costs,” between WellPower and private practitioners. Clinicians in private practice often have a lower per-unit cost of providing services because they are able to choose services that have a higher reimbursement rate, like 50 minutes of one-on-one therapy. These higher-RVU services leave fewer costs uncovered, which reduces the practitioner’s overall unit cost.

WellPower, on the other hand, provides a full range of services based on what the community needs, including those that do not generate enough revenue on their own to be profitable. Some of these have significant costs that are not covered by Medicaid, such as driving to meet people we serve at their homes or seeking them out in the community if they miss their appointment. This drive and search time can often take hours.

We also have several programs like our walk-in crisis center that are open and staffed 24/7/365, regardless of how many people access services at any given time. A private practice cannot have a program fully staffed that does not provide enough services to support the cost. Our unit cost reflects how expensive it is to operate not only the programs that bring in revenue, but also the full range of programs that do not.

WellPower Café?

Here’s one way to think about how expenses are covered by our unit cost: When you eat at a restaurant, you’ll notice that the price of your meal is higher than the cost of the ingredients. This is because the restaurant needs to cover all of its expenses – staff wages, building rent and utilities, printing new menus, restocking to-go containers and much more – with this one source of income.

Similarly, WellPower has one core way of generating revenue to cover our costs: providing a range of services that support and improve the well-being of our community. And in addition to paying for our building expenses and staff salaries, we need to cover the cost of the services that are vital but that aren’t financially viable on their own. Put simply, we fund services that lose money with the revenue from services that (barely) make money; it takes both to fulfill our mission to the community and cover the costs of doing so.

Three programs that depend on revenue from other services:

1. Psychosocial rehabilitation programs – Our NextChapter in Education and Employment programs, which help people we serve build independence, and our two Resource Centers, which help people meet basic needs for themselves and their families. These evidence-based services are essential for the recovery, community integration and improved quality of life for the people we serve.
2. Pharmacy program – Our in-house pharmacy fills prescriptions to ensure access to medications that keep people well and decrease emergency department visits, hospital stays and other high-cost public services. Having pharmacy services onsite in a safe, familiar environment reduces barriers that can make it harder to maintain an uninterrupted medication routine.
3. Residential programs – As one of the foundational social determinants of health, housing is essential to people’s recovery and long-term well-being; you can’t get well if you don’t have a safe, stable place to live.

Other sources (34% of our total funding)

The remainder of our funding comes from a variety of public and private sources, including:

• The Colorado Office of Behavioral Health (OBH), which funds services for people who are experiencing homelessness or are not insured at all;
• Medicare for services specially designed for older adults;
• Contracts with the City of Denver to operate specific programs according to the priorities set by the city government;
• Grants from local and federal entities like the Substance Abuse and Mental Health Administration (SAMHSA);
• Revenue from our Pharmacy program (though not enough to cover all costs; see above);
• Modest rent income from some of our residential programs (again, see above);
• Donations from individuals, businesses, local and family foundations, donor advised funds, and many others. Contributions from donors help fill gaps and support innovation in developing better ways of serving people in our community more efficiently.

Time-limited funding

Some sources of funding are time-limited and focused on getting a program off the ground. After the initial funding period – anywhere from a few months to a few years – it is up to us to figure out how to continue making that program work financially. This is particularly challenging when there aren’t natural sources of funding already identified, or if the program happens to cost more than what can be funded by any existing source.

Reimbursement

Other sources distribute funding to make up for expenses incurred while providing services in the past. Sometimes this reimbursement comes in several months after we use whatever funding is available at the time to provide these services when they’re needed. In this case, we cover all costs up front and hope to be reimbursed in full afterwards, which does not always happen. This can be tricky – with monthly costs of around $9 million, WellPower depends on our operating reserve to maintain this intricate balance of payments (we’ll talk more about this next time).

This concludes our brief overview of where our funding comes from. You might be wondering, “What does all of this pay for?” You’re in luck – next time, we’ll look at the full range of services we and other CMHCs provide (some of them might surprise you). We’ll also answer the question, “Does WellPower have a rainy-day fund?”

---