Nonprofit and for Profit Healthcare Organizations Non-Profit

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 medical services, these hospitals must increase costs to help pay the profits as well. 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 a much different style of care. As such, "hospital-based, psychiatric emergency services are relatively unprofitable" and thus can often be seen as a specialty within non-profit locations (Horwitz, 2005). Therefore, it is clear that the two different types of hospitals tend to focus on providing different levels of care in different specialty areas.

There are a number of criticisms leveled at the for-profit institutions. Business, especially in today's uncertain financial world, can be ruthless. This is one issue that contradicts a hospital's ability to properly care for the well-being of patients while at the same time executing ruthless strategies to increase profit potential. Here, the research suggests that "mixing business with medicine will inevitably lead to abuses that violate patient dignity" (Andre & Velasquez, 1988). Patients can easily be exploited to ensure that a hospital meets its bottom line and makes share holders happy with their dividends at the end of the fiscal year. It can exploit patient welfare. In many instances, physicians at for-profit hospitals are encouraged and on average assign patients to do more procedures than sometimes necessary. Apparently "physicians themselves are offered little incentive to concern themselves with the cost of care, and go about ordering treatments that yield little or no benefit" (Andre & Velasquez, 1988). Many procedures are recommended but not truly needed, but serve as a viable way to make a profit from insurance companies (Andre & Velasquez, 1988). There have been many cases of for-profit hospitals being exposed for physicians recommending procedures that are not necessarily needed (Real Natural, 2012). Insurance companies are billed to generate further profit; yet, it is the patient that ultimately suffers with higher premium rates due to increased care needs.