BUSI 523 SPC Difference Between a For Profit & A Not For Profit Healthcare System Responses
Discussion: For-Profit And Not-For-Profit Healthcare
Compare and contrast the difference between a for-profit and a not-for-profit healthcare system from a financial perspective. In your answer, be sure to provide examples of both, and the implications of each on the health professionals, the patients, and the insurance companies.
first reply
For-Profit vs Not-for-Profit
COLLAPSE
For-profit and non profit health care organizations alike, they share the same end goal, and that's to provide the best health care services to the general population, as possible. However, even though both sides strive to reach the same end goal, there are various ways in which both non profit, and profit health care organizations , differ, especially financially. From personal experience, as a health care director for a dental corporation, we often interact with a good amount of profit and non profit hospitals, in New York State. For instance, non profit hospitals are seen more as a charity foundation, since they don't have to pay federal income or state taxes on their property. Whereas for-profit hospitals are typically always owned by investor groups, or shareholders who are apart of a listed company. Usually, the most common non-profit health care organizations are ran by religious groups, who are seeking to perform missionary work amongst poor or impoverished populations.
For-Profit and Not-for-Profit Similarities
For-profit and not-for-profit health care systems both provide premium specialty medical services, which include specialty services such as orthopedics, cardiology care, pulmonary services, dialysis, a plethora of wound treatments, diabetes care, and palliative care (Moon and Shugan 2020). In the scenarios that for-profit, and not-for-profit, health care organizations are competing with other for-profits, they both average higher prices and final profits. "Both nonprofits and for-profits produce greater output, and have higher average of prices and profits when competing with for-profits than when competing with nonprofits" (Moon and Shugan 2020).
For-Profit and Not-for-Profit Differences
For-profit health care systems aim to gain profit for their shareholders, whereas not-for-profit health care systems have no straightforward residual candidate, which makes their objectives quite vague (Moon and Shugan 2020). Non-profit hospitals have much higher prices, for medical services, and larger profits than for-profit hospitals, with a majority of the non-profits gaining their revenue from selling health care services in an uber competitive market. Moon and Shugan (2020) explain that "seven of the ten most profitable hospitals are nonprofit, representing 73% of their total profits; each earns over $163 million". 64%, of the top 90 most profitable hospitals in America, are all currently nonprofit, with six of them coming from Massachusetts. According to Moon and Shugan's (2020) findings, after considering all of the investment expenses, and non-profit tax advantages, on average, nonprofits have 29% greater profits, as compared to for-profits.
Rotarius, Trujillo, Liberman, and Ramirez (2005) explain that "due to the existence of asymmetric information between patients and providers in the market for health care services, patients may prefer to buy services from providers who are not exclusively motivated by profits". This ultimately suggests that health care organizations who are not solely motivated by profits, likely serve in the role of being chosen by the patient. For-profit health care systems are less likely to support medical education, public health preventive efforts, and research, due to the fact that their marginal costs more than likely outweigh the marginal revenues, thus leaving a lower desire for places of occupations for nurses and doctors. Insurance companies are more inclined to send their clients to for-profit health care settings, due to the fact that not-for-profit health care systems provide extremely expensive treatments for complex illnesses, with a higher risk of not being able to gather enough money to break even with the cost of care (Rotarius, Trujillo, Liberman, and Ramirez 2005).
Proverbs 17:22 says "A joyful heart is good medicine, but a crushed spirit dries up the bones".
second reply
COLLAPSE
When it comes to looking at the difference between a for-profit and a not-for-profit healthcare systems, there are many aspects that encompass the differences between these two different healthcare system types. When it comes to looking at for-profit organizations aspects that encompass it are that it is owned by investors in the organization, the main objective is to make profits for the shareholders within the organization (Horty & Mulholland, 1983). There can be differing budgets when it comes to what is available for marketing campaigns for the organization (Horty & Mulholland, 1983). These organizations are run more as a business organization, and usually are much larger than most independent hospitals (Horty & Mulholland, 1983). When conducting business in these organizations, shareholders hold a lot of the power when it comes electing boards of directors, making budget decisions for the health organization, and the overall conduct and mission for the organization (Horty & Mulholland, 1983). There are many financial aspects that can be beneficial at times for these types of organizations, this includes major fiscal and operational decisions being made by board members instead of having any kind of pressures that can be bought on by the community or the physicians. Management and employees are usually evaluated and hired by the board of directors (Horty & Mulholland, 1983).
On the other hand when it comes to non-profit healthcare organizations that have specific laws that they have to abide by when it comes to tax status and make sure to adhere to the rules and regulations that have be set forth (Eisenson & Mohta, 2020). Non-profit hospitals are seen as charities when it comes to the IRS, meaning that they don’t pay certain taxes and they have to keep up to date with maintain their mission of helping the community (Eisenson & Mohta, 2020). Most times they are set within the community and serve the local populations (Eisenson & Mohta, 2020). When it comes to looking at the financials exclusively for nonprofit healthcare facilities there is not always as big of a budget for marketing and advertising as there is for the big corporation healthcare facilities (Eisenson & Mohta, 2020). These organizations also have to prove that they are helping the community and meeting the needs of the locals, and they must offer charity care which is usually run by a fundraising community within the organization (Eisenson & Mohta, 2020). Another aspect is that these organizations sometimes have difficulties meeting the financial compensation goals that they have set for the organization, as well as these organizations do not have to answer to shareholders in the way that profit organizations have to(Eisenson & Mohta, 2020). Additionally, for the nonprofit organizations there can be more decision making from within the organization than from outside healthcare board members, meaning that the physicians and the administration have specific board members within the organization that help decide on decisions (Eisenson & Mohta, 2020).
Overall, when it comes to the financial aspects between these two different kinds of organizations there is a main difference with how their tax status is, how they interact with the community, and how decisions are made within the community (Harrington, 2021). Implications when it comes to the nonprofit organization are that there is a larger decision making impact from the community, and the healthcare providers that are working within the healthcare facility (Suh, et al., 2018). When it comes to the for-profit organizations there is more distance between the board that makes the decisions and the employees that work in the organization (Suh, et al., 2018). A verse that comes to mind when thinking of interacting as one to make a difference for all is, “And let us not grow weary of doing good, for in due season we will reap, if we do not give up” (Galations 6:9, New International Version). For when we work together to help others we can show the love of the Lord through service, and bring those who may not know Him to Christ.
Resources
Eisenson, H., & Mohta, N. (2020). Health Care Organizations Can and Must Incorporate Social Determinants. NEJM Catalyst Innovations in Care Delivery, 1(3). doi:https://doi.org/10.1056/CAT.20.0130 .
Harrington, M. (2021). Health care finance and the mechanics of insurance and reimbursement. Burlington, MA: Jones & Bartlett. ISBN: 9781284026122.
Horty, J., & Mulholland, D. (1983). The New Health Care for Profit: Doctors and Hospitals in a Competitive Environment. Institute of Medicine. https://www.ncbi.nlm.nih.gov/books/NBK216759/
Suh, J., Harrington, J., & Goodman, D. (2018). Understanding the Link Between Organizational Communication and Innovation: An Examination of Public, Nonprofit, and For-Profit Organizations in South Korea. Public Personnel Management, 47(2), 217–244. https://doi.org/10.1177/0091026018760930
The Holy Bible. New International Version.