Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

 

AHealth Affairs report last year caused waves when it found that seven of the top 10 most profitable U.S. hospitals were nonprofits. In announcing the report, study leader Gerard F. Anderson, professor in the Department of Health Policy and Management at the Bloomberg School, wondered what the nonprofits are doing with their — well, profits.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

The report had people questioning nonprofit hospitals and whether those huge profits are common for nonprofit health systems. At least one of the mentioned hospitals, however, disputed the study’s finding and said it did not consider some types of normal operating expenses.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

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However, for every hospital posting a profit, there are many nonprofit community hospitals struggling to reach profitability. In that same study, the majority of 3,000 health systems profiled lost money on patient services.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

Healthcare leaders say a hospital or health system’s nonprofit or for-profit status isn’t what leads it to profitability. Instead, it’s the health system’s location, size, ability to scale and share of the local market. Nonprofits are in many ways facing the same struggles that for-profits are.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

“Being nonprofit or for-profit on its nose does not determine performance,” Amy Knight, chief operating officer at Children’s Hospital Association, told Healthcare Dive. Instead, the system’s mission and business goal often influence market location, the scope of services and payer mix, she added.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

A few key differences in how financials are handled

There are nearly three times as many nonprofit hospitals as for-profit hospitals in the U.S. — 2,845 nonprofit community hospitals and 1,034 for-profit community hospitals, according to the American Hospital Association.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

The main differences between the two types of systems are how each accesses capital, which one pays taxes and which one must offer community benefits. Nonprofits must “serve the healthcare needs of the community.” In return, nonprofit hospitals don’t pay taxes. For-profit systems benefit from investors’ money and have more flexibility about which services they offer, often seeking more profitable ones.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

Nonprofits need to prove a community benefit through their tax forms to maintain their status and exemption from federal, state and county taxes. Both nonprofits and for-profits must offer charity care.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper

A for-profit’s ability to raise capital through investors gives them “more latitude to have more access to capital” than a nonprofit hospital, Richard Gundling, senior vice president of healthcare financial practices at the Healthcare Financial Management Association told Healthcare Dive. Plus, a for-profit can return profits to investors, as well as invest in the healthcare system. A nonprofit must invest profits back into the organization.Nonprofit, For-Profit Hospitals Play Different Roles Assignment Paper