Healthcare organizations -- whether they be for-profit or nonprofit -- are a vital component of American society, and as such need to be performing their duties and living up to their missions in order to provide the best healthcare services to the public that is possible. This essay covers many of the issues and points that are important to of any healthcare organization.
What are the advantages and disadvantages of the different forms of ownership of Healthcare Organizations (HCOs)? In the book Jonas and Kovner's Health Care Delivery in the United States, the authors assert that "…it is commonly acknowledged that the weakness of nonprofit organizations" -- when compared with for-profit and governmental organizations -- is that they "lack formal accountability either to voters or shareholders" (Kovner, et al., 2011, p. 299).
In the first place, whether a healthcare facility is for profit or a nonprofit organization, the pivotal point has to do with "governance" -- the process nonprofits and for-profits use to make what Kovner calls "important decisions… about mission, goals, budget, capital financing, mergers, and quality improvement" (299). In the case of public HCOs, they are accountable to elected officials, which may add some complications to the governance therein. For-profit HCOs are accountable to shareholders -- which on the face of it seems like a more direct link to governance (no political implications as with public HCOs) -- and nonprofits are accountable to a board that may be made up of key figures in the community, and ultimately nonprofits are accountable to the community they seek to serve.
Kovner (302) mentions that "most nonprofit boards members are not paid," and in fact these board members are likely to have full time jobs in the community and just volunteer their time because of their specific interest in the healthcare services provided by the nonprofit.
One obvious advantage for a nonprofit healthcare organization is that because it is not interested in a goal of "maximizing profits" -- it can concentrate on how to best provide "service the community in which it operates through the healthcare it provides" (Cleverley, et al., 2010, p. 8). Moreover, nonprofits are (in most cases) exempt from local property taxes and federal income taxes. The trade-off for being exempt from taxation is that nonprofits, according to Cleverley's book, are expected to provide: a) "more uncompensated care"; b) lower prices for their services; and c) services that "might not be viable" in for-profit HCOs (8). Other advantages for nonprofit HCOs is one, that they can solicit funds from other nonprofits or foundations through grants that are also tax-exempt, and two, nonprofits typically "enjoy a lower cost of equity capital compared with for-profit HCOs. (Cleverly, 8).
One disadvantage for nonprofit HCOs is that they "have… limited access to capital… [And] cannot raise capital in the equity markets" (Cleverly, 8). Also, on page 309 Kovner explains, "A basic flaw with the not-for-profit form is the lack of accountability of governing boards to any outside body, such as legislatures or stockholders." What happens as a result of this lack of accountability to outside interests, Kovner continues, is that there can be difficulty "in specifying the outputs of HCOs in general, conflicting goals, and [a] frequent lack of agreement among board members as to…" the actual mission of the healthcare organization (309).
The stated mission of the HCO is generally the "driving force" behind the original purpose and existence of the HCO. But, for example, if the mission is to serve low-income people who cannot come up with the money for their healthcare, and some board members (perhaps recently added) believe that mission puts the HCO in "financial jeopardy," that is a serious issue. Boards of nonprofits (not just HCOs) are notoriously cantankerous and need constant soothing by management to assure seamless administration of their duties.
Advantages enjoyed by publicly traded for-profit HCOs include: a) they can raise equity capital "through the sale of stocks"; b) as an investor-owned firm they can raise funding through "risk-based equity capital"; c) if privately held, there are "far fewer reporting requirements by the Securities and Exchange Commission"; and d) they "enjoy limited liability" (Cleverly, 9). Disadvantages of for-profit HCOs: a) they are not tax-exempt; b) investors must pay corporate income tax, as well as tax on earnings from stocks; and c)
TWO: What are some of the ways to measure the performance of HCOs? Kovner's book suggests that it can be "tricky" to measure the performance of a nonprofit HCO. This is because while the essential goal of a nonprofit is identical as the for-profit HCO in the same community -- improving the healthcare services for the citizens -- how is "quality of care" defined? (Kovner, 303). The issue may be providing healthcare at a lower cost, but what if the volunteer board members sense that the board isn't measuring up to the mission of the nonprofit, what should the board do? If not satisfied with the performance of the organization, what can one or two concerned board member do about it? a) Nothing, since others don't seem concerned; b) raise the concern showing data to illustrate the problem; c) survey the other board members by requesting the CEO or board chair formally survey them; d) "engage" the members of a sub-committee to closely examine finances, etc.; and e) offer to resign because accountability can't be brought up to expected levels of governance (Kovner, 303).
One tried and true way to measure performance is first and foremost to have "measurable objectives" to respond to (Kovner, 304). Deciding what those measurable objectives are can be contentious because "which services" are to be monitored and measured is the nuts and bolts of the criteria for this kind of evaluation.
THREE: What skills and experience are required to own and manage Healthcare Organizations? Kovner and colleagues list a number of skills that managers need, including "emotional intelligence… the ability to think before acting" (motivation, empathy, social skills, self-awareness and self-regulation) (307). Also on the list of skills and experience (presumably to own as well as manage) needed for success in the healthcare service environment, are three pivotal sets of "managerial competencies": a) good "people skills" (including attention to detail, empathy, persuasiveness, negotiating, oral communication, planning, initiative, flexibility, self-confidence and the ability to train and develop others); b) use of "concepts, systems thinking, building creative theories, using technology, doing quantitative analysis, and "social objectivity"; and c) well-honed skills at written communication and analytical reasoning (Kovner, 307).
The skills a particular manager must have should mesh nicely with the requirements of that particular organizational position -- that goes without saying. Moreover, the needs of a particular job in any given healthcare organization are going to change with time, "so that one set of skills and experience may be important" early in the job, but as the healthcare organization goes through restructuring or just the natural changes it is expected to go through as needs of the community evolve, the managers and owners have to be able to make any needed adjustments. In the 2005 version of Jonas and Kovner's Health Care Delivery in the United States (8th Edition) the authors add to the competencies a manager and owner of a healthcare service should have. To wit, besides motivating others the skill of "generating and allocating resources" is crucial. Also, "negotiating the political terrain" is particularly vital for those leaders seeking outside funding, public relations, lobbying, labor relations, negotiating with governing boards and medical staffs -- and for those whose task it is to build alliances with other organizations (Jonas, et al., 2005, p. 526).
The political terrain aspect means asking questions like, "What is the ballpark in which I am really playing, who are the players and what are the rules?" (Jonas, 2005, 526). After all, if the customer of an HCO is not happy, if expectations are not met, customers "will either try to change performance or they seek services elsewhere," resulting in the manager being fired or forced to resign.
FOUR: Who should be in charge of Healthcare Organizations and how should they be trained? As to who should be in charge, there should be no question -- the board of directors should be in charge. Roberta Carroll writes that the first and most essential responsibility of the board is "patient safety"; and the second most relevant responsibility is to ensure that the HCO is financially "prudent" so that "sufficient funds" are always on hand to help the HCO meet it's mission and obligations. Thirdly, the board must ensure that the "appropriate improvements" are made in a timely fashion.
As to how should those in charge be trained? Board members need to be trained to understand and respond to the following components of HCOs: a) "duty of care" (to act in good faith in a way that results in the best interests of the HCO and the patients it serves); and b) "duty of loyalty" (this entails not competing with the HCO, or disclosing…