For Profit vs. Not For Profit

A health care organization may seek not-for-profit (NFP) status over for-profit (FP) status for many reasons. NFP health care organizations are exempt from federal income taxes and state and local property taxes (GWU, 2019; Horwitz, 2005; Kondilis et al., 2011) and have lower administrative costs (Kondilis et al., 2011), but they are mandated to conduct community health needs assessments at least once every three years (Carlton & Singh, 2018; De Andrade Costa, 2014; Fischer, 2018; Wiley & Matthews, 2017), including implementation strategies to address those needs (Carlton & Singh, 2018), and are obligated to invest all profits back into the organization (Cho & Hong, 2018).

NFP institutions statistically provide higher quality care than private facilities (Almeida, 2017), such as lower mortality rates, better health outcomes, lower cost, and increase charitable care (Kondilis et al., 2011). These factors create the potential for better organizational efficiency and occupancy (Cho & Hong, 2018), which translates to higher profitability. Some challenges faced by FP organizations include requiring specific board votes for many decisions (Becker, 2014; Carlton & Singh, 2018) and higher patient costs secondary to overhead costs (Cheney, 2017), advertising (GWU, 2019), and taxes (Becker, 2014). These reasons support NFP status over FP status.

The differentiation of for-profit and not-for-profit often is boiled down to how the dollars are funded and where they are spent or divested. Focusing upon these two areas, many opinions are centered quickly around whose pockets are getting lined with the revenue generated through health care as an industry. Each segmentation uphold the mandate and overarching goal of health care which is to treat patients. Madden (2013) shared that the reinvestment of dollars back into the community through programs and services, including charity health care, does support a greater good and impact.

While much funding for the for-profit sector comes from investment dollars, these industries also see similar struggles that not-for-profit entities face in regards to lower reimbursements, expanded expectations of services to be offered, and increased costs in technology for patient care (Materson,2017). The benefits, and negatives, must be balanced in order to determine the appropriate tax status for an organization. With the ability to reinvest dollars more readily into human capital and the organization itself, many critics may suggest not-for-profit entities hold an advantage over for-profit due to the ability to reinvest.

The overall optimal healthcare system is the not-for-profit sector. Not-for-profit healthcare provision secures the right to healthcare for most which is essential in living a standard of quality of life. Those without healthcare provision and the means of for-profit healthcare insurance would be left to suffer a difficult way of life with the burden of death. In economics, healthcare in the not-for-profit sector is not a revenue maximizing business. Medical professionals are unmoved by financial incentives to perform well but are driven by aims of job satisfaction and exemplary patient care. Not-for-profit financial officers have great discipline working within the parameters of a budget and allocating funds to where it is needed most (Magill, 2016). The issue with for-profit healthcare is that individuals who are likely to become unhealthy will be greatly encouraged to get healthcare insurance. This leads to increased health insurance premiums which discourages young healthy individuals from purchasing expensive policies ultimately leaving insurers with large percentage of unhealthy people (Morgan, Ensor, & Waters,2016). Healthcare is a merit of greatness in which we as humans should never underestimate its precious value in the scope of life.

Non-profit organizations generally entail academic institutions that provide education to the public and health care innovation through most updated research (Verulava, Jorbenadze & Dangadze, 2018). Such institutions are exempt from taxation that frees the organization from any tax liabilities or burdens from the Federal and State governments. This allows the health care institution to invest revenue in research programs and equipment and enhancement of their care. Non-profit organizations do not have investors or shareholders involved therefore, there are no distribution of profits (Nation, 2010).

The entity operates on donations and grants that it receives from the government and donors who also receive tax benefits for their donations. Non-profit organizations operate for the benefit of the consumers and are not limited to triage of care. Such organizations do not turn patients away and provide care regardless of its capability to generate revenue (Verulava, Jorbenadze & Dangadze,2018) . Organizations may seek nonprofit status due to the fact that they do not have pay local, federal or states taxes (Verulava, Jorbenadze & Dangadze, 2018). These organizations are considered to commit to charitable work and target a specific community per the federal guidelines.

References:

Almeida, A. S. (2017). The role of private non-profit healthcare organizations in NHS systems: Implications for the Portuguese hospital devolution program. Health Policy, 121(6), 699-707. doi:10.1016/j.healthpol.2017.03.016 Becker, A. L. (2014, April 25). How different are for-profit and nonprofit hospitals? Retrieved from https://ctmirror.org/2014/04/25/how-different-are-for-profit-and-nonprofit-hospitals/

Carlton, E. L. & Singh, S. R. (2018). Joint community health needs assessments as a path for coordinating community-wide health improvement efforts between hospitals and local health departments. American Journal of Public Health, 108(5), 676-682. doi:10.2105/AJPH.2018.304339

Cheney, C. (2017, June 20). Top 5 differences between NFPs and for-profit hospitals. Retrieved from https://www.healthleadersmedia.com/finance/top-5-differences-between-nfps-and-profit-hospitals Cho, N.-E. & Hong, K. (2018). A kitchen with too many cooks: Factors associated with hospital profitability. Sustainability, 10(2), 323-337. doi:10.3390/su10020323

De Andrade Costa, L. (2014). The effect of physician board membership on uncompensated care provision. Applied Economics, 46(19), 2290–2300. doi:10.1080/00036846.2014.899671

Fischer, K. R., Schwimmer, H., Purtle, J., Roman, D., Cosgrove, S., Current, J. J., & Greene, M. B. (2018). A content analysis of hospitals’ community health needs assessments in the most violent U.S. cities. Journal of Community Health, 43(2), 259–262. doi:10.1007/s10900-017-0413-9

George Washington University (GWU). (2019). Profit vs. nonprofit hospital administration. Retrieved from https://healthcaremba.gwu.edu/blog/profit-vs-nonprofit-hospital-administration/

Horwitz, J. R. (2005). Making profits and providing care: comparing nonprofit, for-profit, and government hospitals. Health Affairs, 24(3), 790–801. doi:10.1377/hlthaff.24.3.790

Kondilis, E., Gavana, M., Giannakopoulos, S., Smyrnakis, E., Dombros, N., & Benos, A. (2011). Payments and quality of care in private for-profit and public hospitals in Greece. BMC Health Services Research, 11(1), 234-245. https://doi.org/10.1186/1472-6963-11-234

Wiley, L. F., & Matthews, G. W. (2017). Health care system transformation and integration: A call to action for public health. Journal of Law, Medicine & Ethics, 45 S1, 94-97. https://doi.org/10.1177/1073110517703335

Madden, S. (2013). Did You Know: For-Profit Versus Nonprofit Hospitals. Retrieved from http://healthnetpulse.com/broker/2013/10/11/did-you-know-for-profit-versus-nonprofit-hospitals/ Materson, L. (2017). Nonprofit, for-profit hospitals play different roles but see similar financial struggles. Retrieved from https://www.healthcaredive.com/news/nonprofit-for-profit-hospitals-play- different-roles-but-see-similar-financ/442425/

Nation III, G. A. (2010). Non-profit charitable tax-exempt hospitals–Wolves in sheep’s clothing: To increase fairness and enhance competition in health care all hospitals should be for-profit and taxable. Rutgers Law Journal, 42(1), 141-211.

Verulava, T., Jorbenadze, R., & Dangadze, B. (2018). The role of non-profit organizations in health care system: World practice and Georgia (review).

Magill, G. (2016). Universal Health Care as a Human Right: The Argument of Dietrich Bonhoeffer. Journal of Church and State, 58(3), 564–566. https://doi- org.lopes.idm.oclc.org/10.1093/jcs/csw044

Morgan, R., Ensor, T., & Waters, H. (2016). Performance of private sector health care: implications for universal health coverage. The Lancet, (10044), 606. https://doi- org.lopes.idm.oclc.org/10.1016/S0140-6736(16)00343-3

Verulava, T., Jorbenadze, R., & Dangadze, B. (2018). The role of non-profit organizations in health care system: World practice and Georgia (review).

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Question

Private, nongovernmental healthcare organizations may be either for profit (FP) or not for profit (NFP).

For Profit vs. Not For Profit

Discuss the difference between not-for-profit and for-profit organizations.
What happens if an NFP organization makes a profit?
What are the advantages and disadvantages of each type of organization?
Describe two specific examples of how risk management has influenced nursing documentation.

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