Profit Versus Not-for-Profit Hospitals

1457 Words Oct 26th, 2012 6 Pages
Profit Versus Not-for-Profit

Hospitals

In Partial Fulfillment of the Requirements for

Health Services Systems

HSM 541

Blaise X. Schmidt

DeVry University

Keller Graduate School of Management

September 2012

1.0 Purpose

The purpose of this paper is to conduct a comparative analysis between for-profit hospitals and not-for-profit hospital. It will discuss the characteristics of each as well as factors affecting the operations of both systems. Additionally, it discusses potential areas of improvement and some of the challenges associated with each relative to finance and operations.

2.0 Comparing Not-for-Profit and For-Profit Hospitals

Not-for-profit hospitals are organized under the Section 501 (c)(3)
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It is also possible that a nonprofit hospital, especially in a large city, may be busier at any given time than a for-profit hospital. To get an idea of what a large city’s nonprofit hospital is like, you can recall the television show “ER,” which was set in a nonprofit hospital. By treating everyone regardless of ability to pay, nonprofits provide a needed service (Writing, 2012). The IRS interprets this reasoning in their rulings.

Another term often used with both not-for-profit and for-profit hospitals is uncompensated hospital care. With not-for-profit and for-profit, revenues come from daily operations. What happens if a person cannot afford the care in a not-for-profit hospital? Regardless of the type operation, hospitals must stabilize the patient and transport to a public hospital, even though they are not required to treat these patients. This uncompensated care is classified as uncompensated care, bad debt, or charity care. For-profit hospitals write off this bad debt and use these figures to offset their profits and to assist in developing their costs to Medicare and Medicaid programs.

Public not-for-profit hospitals are dependent upon tax-based support for their government sponsors and from patient revenues. Capital budgeting can be financed through government bonds that must be voted upon during elections. Under these circumstances, it is difficult to maintain current equipment and capital
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