Nonprofit and for Profit Healthcare Organizations
Non-Profit and for-Profit Healthcare Organizations
healthcare system is in shambles. As a source of intense debate, it is clear that it is failing to provide adequate health care for millions of individuals. Both for-profit and non-profit hospitals have their strengths and weaknesses, yet it is clear that mixing business with health care is a dangerous mix.
First, the locations of the two different types help showcase some of their primary differences. For profit tend to serve a more affluent community that can pay high premiums for the specialty care many offer at high prices. Often, for-profit hospitals run very much like on-profit or government run hospitals, yet it is their location that allows them to focus on a for-profit business strategy. According to the research, "they differentially locate in areas with relatively well-insured patients" (Horwitz, 2005). Meanwhile, nonprofit hospitals are often much more geared towards serving a less affluent population. Thus, these medical facilities are most often found in larger, more urban areas compared to for-profit hospital facilities. In fact, "two-thirds of all U.S. urban hospitals are non-profit, with the remainder split between for-profit and government ownership," (Horwitz, 2005). Urban hospitals are often non-profit, because they aim to try to offer lower costs of non-specialty types of services. From this perspective, "non-profit hospitals are often the intermediate type in terms of balancing profit seeking and serving the poor through service choices" (Horwitz, 2005).
More importantly, however, for-profit hospital facilities operate much a much different set of legal regulations compared to non-profit facilities. For-profit facilities are set up to generate a bottom line for investors and share holders. Thus, as well as paying for physicians and
As such, "for-profits may distribute accounting profits to shareholders, whereas government and nonprofit hospitals enjoy income and property tax exemptions" (Horwitz, 2005). For-profit hospitals take any benefits they may receive from production of care and put it into private hands. Non-profit locations, however, inject any surplus funds back into the operations and infrastructure of the hospital and its care services. Thus, non-profits are constantly reinvesting potential profits into their health services, while for-profit services often have to rely on future investments to reinvest money back into the organization.
Finally, different types of hospitals often specialize in different types of medical care. Here, the research suggests that "medical service offerings vary markedly by ownership, likely because hospital types adopt to prioritize goals differently," and evidence illustrates that "for-profits are more likely to respond to profitability than the other types when making supply" and operating decisions" (Horwitz, 2005). The nature of the profit situation helps direct what types of specialties a hospital will focus on. Often times, non-profit hospitals are geared towards providing cheaper and more generic types of services. On the other hand, for-profit institutions gravitate towards more expensive specialties and procedures. For example, "open heart surgery is relatively profitable," and as such is often a specialty seen within for-profit healthcare facilities (Horwitz, 2005). Non-profits focus on…
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