For Profit vs. Not For Profit

There are many reasons why a healthcare organization might prefer not-for-profit (NFP) status to for-profit (FP) status. NFP healthcare organizations are exempt from federal income taxes and state and local property taxes and have lower administrative costs (Kondilis et al., 2011), but they must conduct a community health needs assessments at least once every three years (Carlton & Singh, 2018; De Andrade Costa, 2014; Fischer, 2018; Wiley & Matthews, 2017), which must include implementation strategies to address those needs (Carlton & Singh) (Cho & Hong, 2018).

According to statistics, NFP facilities offer higher-quality care than private facilities, including lower mortality rates, better health outcomes, lower costs, and more charitable care (Almeida, 2017). (Kondilis et al., 2011). These elements have the potential to improve organizational efficiency and occupancy, which translates to greater profitability (Cho & Hong, 2018). The need for specific board votes for many decisions (Becker, 2014; Carlton & Singh, 2018) and higher patient costs as a result of overhead costs (Cheney, 2017), advertising (GWU, 2019), and taxes are a few difficulties faced by FP organizations (Becker, 2014). These justifications favor NFP over FP status.

How money is raised, spent, or divested often determines whether an organization is for-profit or not-for-profit. Focusing on these two topics, debates quickly turn to questions of whose pockets are being lined with money made by the healthcare sector. Every segment upholds the mandate and overarching objective of healthcare, namely the treatment of patients. According to Madden (2013), money invested back into the community through programs and services, such as free medical care, does support a greater good and impact.

While investments provide a significant portion of the for-profit sector’s funding, these sectors also experience some of the same challenges that not-for-profit organizations do in terms of lower reimbursements, higher expectations for the services to be provided, and rising costs for patient care technology (Materson,2017). The pros and cons must be balanced in order to decide on an organization’s proper tax status. Many detractors might argue that not-for-profit organizations have an advantage over for-profit ones because they can reinvest money more easily into human capital and the organization itself.

The not-for-profit sector has the best healthcare system overall. Most people’s right to healthcare, which is necessary for maintaining a minimum level of quality of life, is secured by non-profit healthcare provision. Those without access to healthcare and for-profit healthcare insurance would be forced to live a life of hardship and constant fear of dying. In terms of economics, the not-for-profit healthcare industry is not a business that maximizes profits. Medical professionals are motivated by the desire to provide excellent patient care rather than by financial incentives to perform well. Financial managers for not-for-profit organizations have a strong sense of discipline when it comes to sticking to a budget and allocating resources where they are most needed (Magill, 2016). The problem with for-profit healthcare is that people who are likely to get sick will be strongly urged to purchase health insurance. This causes health insurance premiums to rise, which deters young, healthy people from purchasing pricey policies and ultimately leaves insurers with a high percentage of sick people (Morgan, Ensor, & Waters,2016). Healthcare is a great accomplishment, and as humans, we should always appreciate its significance in the grand scheme of things.

Academic institutions that offer public education and promote healthcare innovation through the most recent research are typically considered non-profit organizations (Verulava, Jorbenadze & Dangadze, 2018). Such institutions are not subject to taxation, which relieves them of all federal and state tax obligations and burdens. This enables the healthcare facility to use the income to fund research initiatives, acquire new tools, and improve patient care. Because non-profit organizations do not have shareholders or investors, there is no profit distribution (Nation, 2010).

The organization relies on grants and donations from the government and donors, who also benefit financially from their contributions. Non-profit businesses are run for the benefit of the public and are not restricted to care triage. Such organizations treat patients regardless of their ability to pay for their services (Verulava, Jorbenadze, & Dangadze, 2018). Since they are exempt from state, local, and federal taxes, organizations may apply for non-profit status (Verulava, Jorbenadze & Dangadze, 2018). According to federal regulations, these organizations are regarded as dedicating themselves to charitable work and focusing on a particular community.

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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