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Senior Nutrition Program Meal Services Elements for Sustainability: 

Guide to Establishing a Fee-for-Service Private Pay System

August 2020
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Table of Contents

Page Number

Section 1: Overview ........................................................................................................................................... 3

Section 2: Payment Models ............................................................................................................................. 3

Section 3: Principles, Policies and Procedures ................................................................................................ 3

Section 4: Business Planning ............................................................................................................................ 5

Section 5: State Policy Examples .................... ................................................................................................ 7

Section 6: Meals on Wheels Organization Partnership Models ................................................................... 8

Section 7: Summary.............................................................................................................................................. 8

This resource was developed with support from Administration for Community Living (ACL) grant # 

90PPNU0001 and in cooperation with ACL.
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Overview

Senior Nutrition Programs (SNPs) have historically established fee-for-service private pay systems for 

meals, in addition to providing meals funded by the Older Americans Act (OAA). These payment systems 

can help expand services beyond existing OAA funding, thereby increasing resources for enhanced 

capacity and quality of operation. Individuals served by fee-for-service private pay meal services often 

include younger persons who are homebound, have cooking or shopping limitations due to illness or 

disability and individuals who require short-term assistance while transitioning from hospital to home. 

SNPs are challenged with implementing a fee-for-service private pay system that adheres to the 

requirements set forth by the OAA. OAA Section 315 prohibits cost-sharing (which typically involves 

implementation of a sliding scale fee based on the client’s income) for congregate and home-delivered 

meals and encourages voluntary, confidential and non-coercive contributions from participants. 

During the Covid-19 pandemic, additional funding was provided to SNPs through the Families First 

Coronavirus Response Act and the Coronavirus Aid Relief and Economic Security Act. This allowed for 

temporary service expansion beyond usual funding limitations. This brief is intended to assist SNPs with 

preparation for the future, including fee-for-service private pay systems that may be appropriate during 

times of more limited funding.

Although generally referred to as “private pay,” the term “fee-for-service private pay system” is used in 

this document since fee structures may vary across private pay systems. 

Payment Models

Establishing a fee-for-service private pay framework includes consideration of the fee charged to 

provide a meal:

• A cost-reimbursement system calculates the total cost of the meal including ingredients, labor 

and fixed or administrative costs. Most LSPs use a cost-reimbursement methodology to 

determine the “guest fee” price. 

• Another method to determine the price for a meal is fair market value. This methodology is

typically the total cost of the meal plus a “profit” or “surplus.”

The collection of “guest” payments and the development of fee-for-service private pay systems are not 

to be confused with voluntary contributions or cost-sharing for nutrition services (which is not 

permitted). 

One potential area for SNP contractual payment arrangements may include contractual agreements 

with healthcare/insurance organizations to provide medically tailored meals; SNPs interested in learning 

more may wish to consult The Food is Medicine Advocacy Toolkit or the National Resource Center on 

Nutrition and Aging’s convening: Nourishing Seniors Through Medically Tailored Meals.

Health care system transition to value-based care has increased opportunities to develop payment 

systems with SNPs and other aging network organizations. The Administration for Community Living

(ACL) is developing a Strategic Framework for Action: State Opportunities to Integrate Services and 

Improve Outcomes for Older Adults and People with Disabilities which includes examining the use of 
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financing strategies (e.g., blending and braiding) at the federal, state, and local levels to broaden the 

reach of aging network services.

For more information about existing SNP payment models, refer to the 2015 Process Evaluation of the 

Older Americans Act (OAA) Title III-C Nutrition Service Program.

Principles, Policies and Procedures

To ensure equity, fairness, inclusion and adherence to the requirements of the OAA, SUAs, AAAs and 

LSPs that provide meals and other services funded by the OAA, fee-for-service private pay system

policies and procedures must be established. A system of checks and balances is important when 

developing and implementing a fee-for-service private option. Some SUAs, AAAs and LSPs already have 

a system in place. For others, this is a new process. Regardless, these policies and procedures are 

required for a successful implementation that demonstrates consistency with the requirements of the 

OAA.

Before establishing a fee-for-service private pay system program, consider the following principles:

• Target population – Will the fee-for-service private pay option be available to anyone who

wants it or will eligibility be limited to target populations (e.g., homebound persons under 60

years)?

• Prioritization – Is there an existing prioritization system for OAA services or does one need to be

implemented? (See Senior Nutrition Program Meal Services Elements for Sustainability: Guide to

Prioritizing Clients)

• Adherence to requirements in the OAA - means-testing and cost-sharing are not permitted.

• Effective communications - includes cultural sensitivity, health literacy, partner organization

participation in communications, translated materials, etc.

• Education - of the AAA/LSP organization such as the board, staff, community, funders and the

public (including older adults).

• Additional food and meal programs – Food programs may include United States Department of

Agriculture Commodity Supplemental Food Program, emergency food distribution, food pantries

or grocery shopping assistance. Meal programs may include faith-based organizations, providers

of medically tailored meals, MOW programs, etc. Lastly, consider the fees and accessibility of

commercial meal delivery companies.

• Accessibility and consumer-friendly services1- Are phone, internet and/or home visits

available? Social media outreach? Staff representative of the population served?

In developing policies and procedures in adherence to the OAA, consider the following:

• SUA/AAA/LSP roles –

o Section 305 states that SUAs are required to be “primarily responsible for planning, policy

development, administration, coordination, priority setting and evaluation of all State

1 Adapted from National Center on Law and Elder Rights. 2018. Issue Brief: Targeting Older Americans Act Services 

Without Means Testing: Meeting the Challenge. https://ncler.acl.gov/pdf/Targeting-OAA%20-Services-WithoutMeans-Testing-Issue-Brief.pdf
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activities related to the objectives of the OAA.” SUAs should establish guidance, policies and

procedures and provide technical assistance in this process. 

o SUAs/AAAs are responsible for developing policies and procedures for implementation of

the SNP, including adherence to the purposes of the SNP, core OAA eligibility, targeting and

other OAA requirements. They are also responsible for developing monitoring tools,

training and providing technical assistance to assure appropriate implementation.

o SUAs/AAAs/LSPs may be responsible for prioritizing clients as well as waiting list

development and maintenance when need or demand exceeds available resources or

capacity.

• Financial coordination - When accepting funds for OAA programs, SUAs/AAAs/LSPs are

responsible for adhering to the requirements of the OAA. Program administrators should work

with their fiscal counterparts to develop and ensure compliance through grant or contract

terms.

• Eligibility for SNP - There must be a fair process prior to offering a fee-for-service private pay

option in order to ensure that no eligible individual (persons 60 and older) is pushed into a feefor-service private pay option or denied service due to the inability to pay for a meal. Also, clear

expectations must be set for offering OAA clients a position on a waiting list and moving them

up on the list.

• Distinction between donations/cost-sharing/fee-for-service private pay systems – Establish a

clear distinction between the fee-for-service private pay option and cost-sharing systems.

Voluntary, confidential and non-coercive contributions are essential to the OAA nutrition

services implementation.

• Appropriate pricing - Determine the price to be charged for a fee-for-service private pay option

(fair market value or total cost reimbursement method).

• Reporting – Establish a clear understanding that meals served to clients participating in a feefor-service private pay option may not be reported as Nutrition Services Incentive Program

(NSIP) meals in the State Program Report.

• Policies and contracting - SUAs and AAAs cannot prohibit contracted non-profit entities from

establishing and implementing a fee-for-service private pay system. However, SUAs and AAAs

are required to ensure through policies, procedures, guidance, contractual agreements,

monitoring and technical assistance that any fee-for-service private pay system is developed and

implemented without being subsidized by OAA funding. Fee-for-service private pay systems

cannot be supported with OAA funding.

Business Planning

To implement a fee-for-service private pay system, AAAs and/or LSPs need to develop marketing and 

business plans. A marketing plan includes customer profiles, wants, needs and expectations regarding 

price, quality and service. The National Resource Center on Nutrition and Aging has a set of issue briefs 

on marketing for the SNP and LSPs. The Aging and Disability Business Institute has a variety of resources 

to help aging and disability network entities establish their business models by providing technical 

assistance and referrals to a vetted consultant as appropriate. 

A detailed business plan should include the following: 
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• Accounting – There should be a separate accounting process for the fee-for-service private pay

system. This involves calculating the total cost of the meal (e.g., food, labor, administrative

costs, production costs and insurance) for cost-reimbursement and any surplus or profit for a

fair market value methodology. For additional information, The National Resource Center on

Nutrition and Aging has published a set of issue briefs on quality nutrition programs and the

process of calculating the cost of a meal.

• Monitoring - Procedures set forth by SUAs/AAAs must be developed to ensure LSP and/or AAA

(if the AAA is the direct service provider) services provided with OAA funding are aligned with

OAA intent. Are there mechanisms in place to avoid perceived bias? What protocols ensure the

SNP’s focus is on service to older adults and caregivers with the greatest economic and social

need? How does the AAA/LSP ensure that eligible clients are not improperly steered toward the

fee-for-service private pay option?

• Waitlist Development, Implementation and Guidance - Guidelines for waitlist development,

implementation and maintenance must be developed. Procedures, guidance and best practices

must adhere to SUA/AAA requirements and expectations. This includes targeting, procedures

for how to establish a waitlist, who to include on the waitlist including prioritization, screening,

re-screening or reassessment tools and intervals, procedures to notify participants about their

position on the waitlist, how often waitlists are updated and referrals to other programs

including fee-for-service private pay options.

• Financial – Management procedures including the organization’s payment structure for fee-for

service private pay meals, determination of a client payment deposit for initial meals, billing and

collection process, delinquent accounts, methodology of price charged to fee-for-service private

pay clients, and if using a fair market value system, how any profit/surplus will be spent. Private

non-profit AAAs/LSPS need to ensure proper expenditure of “profits” or “surpluses” to maintain

Internal Revenue Service (IRS) status; government AAAs/LSPs need to ensure proper

expenditure to assure accountability to the public and to the city or county.

• Reporting

o Ensure the ability to report meals to the appropriate funding source: OAA, city or county,

Medicaid Waiver, fee-for-service private pay, etc.

o Ensure that the computer technology will allow the programmatic and fiscal input to match.

o Ensure computer technology and systems can communicate with each other and allow

appropriate reporting and accounting.

o Ensure required technology is available and staff have been trained to utilize the

appropriate system for the different funding sources.

• Communication

o If the AAA/LSP is a private non-profit, request input and gain alignment from staff and the

Board of Directors. The fee-for-service private pay concept may be a “culture change” from

a first-come-first serve or charity-based approach and may require education and training

for staff and board of directors.

o If the AAA/LSP is a government entity, consider the “political” dynamics of the organization.

Some government entities view funded programs as “free” or a charitable initiative and

believe that services should be provided with public funds rather than private funding.

Other government entities encourage a social enterprise approach when confronted with

limited funding and capacity.
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o Obtain public input and educate all funders and stakeholders.

State Policy Examples

Examples of notable fee-for-service private pay programs include the New York Private Pay Initiative (NY 

PPI) and the Pennsylvania Department on Aging. Below is a brief summary of each of these models.

Example #1

The New York Private Pay Initiative (NY PPI) is an overarching and innovative re-investment model for 

the provision of nutrition and home care services. The NY PPI initiative clarifies that Area Agencies on 

Aging and service providers may enter in contractual, commercial or private pay relationships to 

generate additional revenue for the program provided. In addition, revenues will be reinvested into the 

program to serve eligible individuals and activities that do not disrupt or reduce services to individuals 

with the greatest need.

The NY PPI model, announced on January 31, 2020, was developed by New York State Office for the 

Aging (NYSOFA) in an effort to embed healthy aging and prevention policies into all aspects of state 

government. This collaboration with NY Area Agency on Aging Association (NY AAAA) developed the 

model and subsequent fiscal and reporting requirements.

The NY PPI model demonstrates fidelity to the Older Americans Act, and recognizes non-profit ventures 

must not utilize publicly financed infrastructure or resources to under-cut the market and provide a 

service at or below market rates (OAA, Sec 212). In addition, NYSOFA amended NY Elder Law (Sec. 203 

(12)(b)) to authorize the NYSOFA Director to implement a private pay model with protocols for program 

administration, recognizing local, state and federal funds as insufficient to meet the current demand for 

services.

Example #2

The Pennsylvania Department on Aging established a policy allowing AAAs to establish private pay meal 

service:

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IV.8 AAAs and/or centers may implement a ... meal program at the discretion of the AAA, 

providing fresh or frozen meals on a private pay basis. The monies earned from the sale of these 

meals may provide an additional revenue stream to the AAAs. Meals provided ... do not need to 

meet menu requirements for congregate or home delivered meals. 

IV.9 To ensure that private pay and other meal funds are not comingled, appropriate accounting 

procedures shall be put into place. Before implementing a private pay/fee for service meal 

program, AAAs and/or providers shall develop a business plan to assure appropriate accounting 

procedures and practices are followed. Private pay ... meals may not be recorded as [SNP] 

2 Aging Program Directive. Revised APD # 15-03-02. November 2014. REVISED - POLICIES AND STANDARDS FOR 

THE DEPARTMENT OF AGING NUTRITION SERVICES. https://www.aging.pa.gov/publications/aging-programdirectives/Program%20Area%2003%20%20Congregate%20Meals/ADP%2015-03-02%20Nutrition%20Servises.PDF

3 Policy language has been edited for clarity. Where breaks in actual language occur “....” Is inserted; where flow of 

a sentence is affected, transitional words have been added within “[ ].”
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meals even if it is the same menu as served in the congregate meal setting. Title III funds or SNP

funds shall not be used for [these] meals. 

VI. Meal Contributions and SNAP Benefits. VI.2, c. SNAP benefits may ... be utilized for private 

pay meals. 

Provision for Special Menu Needs: III.1 Special Meals, Individual Days – Meals provided by the 

AAA to increase participation or acknowledge a special holiday or event may be considered 

special meals. ... Special meals that do not meet nutrient requirements shall not be recorded as 

an SNP meal...these meals may be charged as a private pay meal ....

By establishing SUA policies, an SUA provides the basis for more expansive AAA policies and procedures, 

guidance and technical assistance for the development, implementation, monitoring and evaluation of a 

fee-for-service private pay system. 

Meals on Wheels Organization Partnership Models (organizations may vary)

Non-profit Meals on Wheels (MOW) programs include well-established providers throughout the U.S. 

These organizations establish their own participant eligibilities that are typically more expansive than 

the OAA e.g., younger individuals with disabilities, chronic illness, etc. Some MOWs do not directly 

accept OAA public or government funds and may function in the same or adjacent jurisdictions with 

nearby publicly funded LSPs. 

AAAs can contract with MOWs to provide meals and possibly additional SNP functions and services (e.g., 

assessments and reassessments, nutrition education) at a unit rate or flat fee. These AAA-MOW 

contract-based relationships provide meals on a contribution basis. MOWs may alternatively function as 

caterers for OAA funded programs or for other entities.

For non-OAA meals, MOW programs charge individuals directly for meals based on the total meal cost

and a sliding-scale fee (what the client can afford), and the difference is subsidized by fundraising, 

grants, etc. These programs rely heavily on donors, volunteers, organizations and community members

to provide in-kind supports and funding. 

Summary

SNPs expect client growth with the aging population and future emergencies, but it may or may not be 

associated with increased funding. Limited resources (e.g., financial, volunteer, community, capability

and capacity) will impact the ability of SNPs to respond to the increased client need. Part of the solution

may be the establishment of a fee-for-service private pay system by the AAA and/or LSP. The 

establishment of such a system needs to be carefully conceived, developed, implemented, monitored 

and evaluated to ensure that AAAs and/or LSPs are aligned with the targeting requirements, the intent 

of the SNP, possible prioritization and other OAA requirements. A fee-for-service private pay system 

needs to be developed and implemented with sound program, accounting, financial and reporting 

management practices. The system also needs to assure equitable, fair and inclusive service and help 

enable expansion of financial resources.