This paper examines the key factors influencing an executive team's decision to transition a healthcare organization from non-profit to for-profit status. Drawing on two major trends — sustainable patient mix and new public management frameworks — the paper identifies both internal and external drivers of the decision. It also outlines the marketing data collection strategies needed to support informed decision-making, analyzes the effects of the transition on four distinct market segments (senior citizens, entry workers, adolescents, and families), and presents the findings in the form of a memo addressed to a Board of Directors.
Two important business trends have proliferated in healthcare organizations, and either could have influenced an executive team's decision to transition a healthcare organization from non-profit to for-profit status. These trends are determined internally and externally, respectively, through a sustainable and in-demand patient mix and through the new public management of healthcare organizations along a non-profit/for-profit divide.
The first trend, patient mix, refers to providing more in-demand services to patients for profit, compared to providing fewer and less in-demand services to a specific patient group only. This is, in fact, a key difference between non-profit and for-profit organizations: the former, because of limited budgets, provides limited in-demand patient services and therefore serves only a specific group of patients in a locality or community; the latter, supported by a business model that encourages profitability, has more funds and is able to provide a wider range of services — both in-demand and rare — to its target community (Horwitz, 2005, p. 790). Transitioning to a for-profit model is therefore a practical and civically responsible move. By expanding in-demand patient services, the organization increases its potential for profitability while simultaneously serving more people in the community.
Another important trend in healthcare management is the promotion of a "new public management" system in which healthcare organizations adopt a hybrid structure — one positioned between non-profit and for-profit (Bode, 2006, p. 552). This structure does not imply an equal division between the two organization types; rather, it means that a for-profit organization retains a non-profit component through its corporate social responsibility (CSR) programs. What this new public management system provides is the "potential for efficiency": management and staff maintain quality healthcare practices and services in a highly competitive industry and also justify the relatively higher cost of patient services compared to the free or lower-priced services typically offered by non-profit organizations.
Thus, the internal factor that prompted the executive team's decision to pursue for-profit status is the ability to deliver more in-demand, high-quality patient services to a wider population. Externally, the executive team is also influenced by an increasing trend within healthcare organizations toward hybrid models that allow them to continue promoting social goals through CSR programs while maintaining profitability. Combining these two factors, the best route for the healthcare organization is to transition from non-profit to for-profit. The transition represents a "win-win" outcome: patients gain access to more in-demand, quality services, and the organization secures its viability and long-term sustainability through a for-profit business model.
One of the critical aspects of transitioning from a non-profit to a for-profit organization is creating both an extensive and intensive patient records system to help management make informed decisions about critical business matters — such as determining the service and patient mix the organization will offer. The best asset the organization can develop is an organized, up-to-date patient record database management system that makes access to patient and service records faster, easier, and suitable for further analyses.
An equally important aspect of the database management system is a feedback mechanism through which the organization's management can quantitatively and objectively assess the quality of service provided to patients, as reported from the patient's point of view. To maintain organizational effectiveness, a regular patient feedback system must be developed, consistently conducted, and properly recorded for easy access and analysis whenever management requires information about service quality. To implement this system, patients or their relatives will be surveyed using self-completed feedback forms, returned sealed through a drop box to ensure both the confidentiality of respondents and the authenticity of the answers provided.
The key to effectively implementing the transition from non-profit to for-profit is to gradually introduce target patient groups to the new services the organization will offer as a result of this change. There must also be a conscious effort to communicate to existing patients that previously offered services will be retained, and that lower-priced services will remain available through the organization's CSR programs. Inevitably, the organization's services will be segmented to address the needs of patients with different demographic characteristics.
Senior citizens and families will most likely gravitate toward lower-cost, in-demand patient services, and the organization must work to project the image that patients receiving these more affordable, "charity-type" services are not receiving lower-quality or mediocre care. Similarly, the organization must project a different image — one that is patient-friendly, highly convenient, and engaging — to entry workers (twenty-somethings) and adolescent groups, who visit healthcare facilities less frequently but tend to spend more on patient services when they do. Thus, depending on the market segment being addressed, the organization must adapt and communicate different positioning strategies to maintain its profitability and viability as a for-profit entity.
MEMORANDUM
"Transition effects across four demographic groups"
"Formal memo summarizing transition project progress"
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