A declaration of the health affair report created a major wave of turbulence when announced alist of 10 most profitable US hospitals that were actually nonprofits. In this regard, experts have started raising a question as to what these nonprofits are doing with the profits they are receiving and is it quite common toprofitfrom a nonprofit healthcare system. Whereas some of them strongly believe that in this dispute between Nonprofit vs. for-profit healthcare services, we need to understand the basic difference between them.
Difference between nonprofit and for-profit healthcare providers
Whether nonprofit or for-profit, the two fundamentally similar organizations are dedicated to serving patients by teaming up with doctors, nurses,and other paramedical professionals. Since patient’s health and safety is the priority, these organizations have to maintain strict regulatory compliance for better clinical services.
Although both of them are functionally similar, there exists a thin line of difference as for-profit organizations always have to generate returns on their investments. Accordingly, research carried out in order to establish a difference between both for-profits as well as not for profit healthcare sectors and to understand what are the factors determining the quality of hospitals. Thus, experts are suggesting that both the organizations are operational with five primary differences that can be noted as follows:
Tax Status
Tax status can be placed at the forefront while figuring out the differences between nonprofit vs. for-profit healthcare services, with a major impact on financials and thereby the services that are being provided.
As a matter of fact, financial experts believe that the tax that is being paid by these for-profit hospitals is a huge benefit for state government or municipal corporations. The money can be primarily utilized for infrastructure, like local schools, road developments, business recruitments etc.
On the other hand, the financial burden of paying taxes may influence the hospital culture by generating cost-consciousness as well as disciplinary operations. Contrary to which, nonprofit organizations don’t have to bear the extra burden of taxation.
However, experts are suggesting that instead of incorporating cultural navigations, operational analysis can be helpful in reducing the burden on for-profit organizations. The survey conducted in this regard has clarified that elimination of duplicative costs; prevention of investments in the nonproductive operations can be helpful in managing the expenses.
Thus, financial burden due to taxations can be the leading factor between nonprofit vs. for-profit healthcare services.
Operations
Discipline in the context of operations is one of the distinguishing characteristics important for a shift from nonprofit to for-profit healthcareservices in 2018. Better financial performance for better returns on investment is among the primary drivers of top management and the same can be achieved through an understanding of financial accountability, responsibility, as well as predictability and, have to be incorporated in the routine operational practices.
Scale
It is important to understand that currently a large percentage of the healthcare segment is being occupied by the for-profits. The statistical analysis has confirmed that only in the developed countries like the US, 4862 community hospitals are working for-profits. Besides, 1034 hospitals are operating for-profits. Contrary to which, 2,845 hospitals are being funded by trustees and are being categorized under not for profit healthcare services.
A large number of for-profits healthcare services plays a crucial role in establishing a consolidated healthcare market that in turn is helpful in gaining a quick access to ready capital. Thus, in the race against nonprofit vs. for-profit healthcare services, the latter is positioned ahead due to its quick access to financials allowing its rapid growth in terms of expansion, investment,and quality.
Financial Pressure
Accountability for returns on investments becomes the top priority of for-profit healthcare services. It is very important to maintain the performance indicator of upper management at par, in case of a for-profit organization. As the ultimate focus in case of a for-profit organization is to meet financial goals and the workers should not be ashamed to work odd hours, to achieve the same. In case the financial performance slips out of control, various methods are being incorporated to by for-profit to support the revenue collapse. It has been a common strategy of for-profits to do maximum cost cutting in lean times. On the other hand, all nonprofit organizations being under charitable obligations cannot strictly adhere to financials. In fact, they have to maintain strict policies to support patients in any case. Moreover, any surplus fund if generated in the hospital premises should strictly be used in facility improvements, equipment,and training purpose.
Thus, the rigor around financials is more intense in case of for-profits healthcare organizations vs. not for profit healthcare organizations.
Competition
On the basis of some important lessons, a tremendous shift from nonprofit to for-profit healthcare 2018 has been experienced in order to add the value.
In terms of negotiation, expansion, as well as association with the managed care contracts, for-profit healthcare systems are ahead due to palatable appetite.
Legislation
With the current understanding of the basic difference between non-profit and for-profit healthcare organizations, the government is ready to put a moratorium on hospitals to be for-profits. Accordingly, the legislators are trying to propose a draft to address conversion of nonprofit to for-profit healthcare sector; although authorities of nonprofit organizations are actively looking for exact guidelines from the government officials to do so.
The Bottom Line
Although, the government authorities are trying to figure out the rate of conversion from nonprofit to for-profit organizations to resolve many healthcare-associated issues, such as quality, financials, expertise, etc.; still many concerns require attention and scrutiny from legislative authorities.
The issue has risen against the consolidation of hospitals as well as privately practiced physicians that are being associated with nonprofit healthcare organizations. Some experts have also expressed rising concerns about the survival ability of small, independently practiced medical facilities in the developed countries. Accordingly, legislative authorities are trying to propose another mandate requiring a more transparent picture of mergers, affiliations and other transactions associated with hospitals and other healthcare providers. The same is intended to get the bigger picture of their financials.
Accordingly, higher authorities of hospital officials have declared that these changes in the healthcare system are advantageous for establishing better payment models.
