Profit vs Non Profit Hospitals

Millions of dollars are spent on healthcare every year in USA but the health of the beneficiaries has not increased accordingly. Just providing healthcare is not enough; quality healthcare with long term benefits should be the aim of the healthcare providers. I have studied and worked in certain multi-specialty hospitals and government facilities in my home town. I have seen corruption and frauds happening at various levels and hence wanted to study about how such non profit and

The largest for profit healthcare carrier in the United States (US) is UnitedHealth Group, the parent of UnitedHealthcare.

The private health sector tends to be beneficial for the service user who can afford quality treatment leaving others having to rely on the states medical interventions which includes long waiting lists and several appointments before diagnosis.

Globally, the United States has one of the largest and most convoluted healthcare systems, whereas universal healthcare coverage seems extremely farfetched. Annually, the US spends over $3 trillion on healthcare. Nevertheless, we have the worst health outcomes when compared to other industrialized countries. As stated by Anja Rudiger (2008), “Recent data suggest that around 101,000 deaths a year can be attributed to the underperformance of the US healthcare system.” Thus, the United States’ healthcare system greatly relies on revenue. Both funding and the distribution of services are commercially structured and held accountable by investors to increase financial gains. According to Andrew Jameton and Jessica Pierce (1997), “the US healthcare system increasing appears to have

In 1997 University of California, San Francisco (UCSF) merged its two public hospitals with Stanford’s two private hospitals. The two separate entities merged together to create a not-for-profit organization titled UCSF Stanford Health Care. The merger between the health systems at UCSF and Stanford seemed like a good idea due to the similar missions, proximity of institutions, increased financial pressure with cutbacks in Medicare reimbursements followed by a dramatic increase in managed care organizations. The first year UCSF Stanford Health Care produced a profit of $22 million, however three years later the health system had lost a total of $176 million (“UCSF-Stanford Merger,” n.d.). The first part of this paper will address reasons

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.

Nonprofit hospitals have become a common characteristic of the hospital sector because they can be found across the country because of their presence in almost every corner, they never decline to provide treatment, and offer several community-based health programs. On the contrary, the for-profit health facilities are regarded as the corporate model of health care services as they seek to make profit first. They enjoy huge capital that enables them to develop state-of-the-art facilities and purchase the latest clinical technologies.

In the current U.S. system the free market prevails and companies, in this case, major insurance providers “compete” for business. This competitive business approach should in theory drive costs down. For some reason, however, an argument can be made that it has produced the opposite result in profiteering. The nation’s largest insurer, UnitedHealth, boasted over a 10 percent revenue increase in 2013 according to Forbes (2013). Health insurance affordability contributes to the disparity in access to health care, as evidenced by the fact that there are millions that are still uncovered. A greater majority of certain minorities lack both health insurance and the financial resource to seek out either health care or insurance. While insurance companies reap huge profits the percent of private sector companies offering health insurance has dropped to less than 50 percent (Kaiser, 2013). There is decidedly a lack of coordination of care for this at risk population as well, since treatment is rendered sporadically and with continuously changing providers. The last major challenge is that of improving the quality of health care. According to a 2010 report by the U.S. Department of Health and Human Services, Office of Inspector General (OIG), an estimated 13.5 percent of Medicare beneficiaries experienced adverse events during their hospital stay and an additional 13.5 percent experienced a temporary

The debate over non-profit versus for-profit healthcare organization has been ongoing, does one provide better care than the other? Do the operations of for profit perform better than the non-profit organizations? Are the criticisms about for-profit organization validated and is there proof? The goal is to examine those questions as well as offer options to improve the financial and operational performance of non-profit and for-profit organizations criticisms.

A comparison will be held against non-profit hospitals and for-profit hospitals in regards to their operating costs focused on uncompensated care and their operating profit margins. The locations and statuses of the hospitals will also be taken into account and explained to add more context and clarity to the true meaning of their dollars. The comparison will be displayed not only in a paragraph format but also in a bar graph visual to accentuate and clarify the either vague or noticeable difference between the hospitals.

The major objectives of healthcare financial management include: generating income (which is the most important) because it is the financial status of the organization. It is important to ensure that revenues are exceeding expenses. After assets are invested in, they are meant to be used. They must respond to regulations and be accredited to qualify for loans, reimbursements, etc. Facilitate relationships with third-party payers because they are the ones helping with the bills. The health organizations must also influence method and amount of payment to avoid overpaying, when faced with capitated prices or prospective payments. Monitoring physicians is important because they are at the forefront of everything, so management must make sure that physicians’ orders are consistent with patient needs. Lastly, protecting tax status involves for-profit organizations trying to reduce tax liabilities, while not-for-profit organizations try to protect their tax-exempt

Though they are not entirely comprehensive tools, a great deal can be learned about a hospital or other healthcare organization for-profit or not-for-profit from an examination of their annual financial documents (Finkler & Ward, 2006). The balance sheet and statement of revenue and expense can both yield valuable clues even in the absence of other evidence about changes that might be occurring in the organization, a definition of the type and degree of certain problems that it might be facing, and potential opportunities for improvement in performance that might exist (Finkler & Ward, 2006). Comparing two or more years' worth of financial information yields even more valuable insights, tracking movement in the hospital or other organization's ability to finance its activities and thus continue providing services at the same level, quantity, and scope as current operation.

The non-profit, for-profit, and governmental hospitals have certain policies and financial forms that are unique to each organization. The non-profit

“Hospitals can be non-profit, for-profit, and government-owned and/or operated” (Baker & Baker, 2006). There are different terms for each classification in how to report and handle the finances but the basics are the same for any type of business. Business finances require the following basic fundamentals: creating “budgets, understanding capital expenditure, loan acquisition, and financial fees” (Baker & Baker, 2006). Government owned and operated hospitals offer unprofitable services; which

The hospital industry consist of privately and publicly owned and operated hospitals and medical facilities. The financial backgrounds of these assorted categories of organizations are sizeable and contrasted. Therefore, industry ratios are to be considered and evaluated from a greater proportion in order to identify with the financial data involving the industry as a whole (Dunn & Becker, 2013). Based on analysis and evaluation of the financial ratios gained from Nasdaq and Google Finance, it is apparent that the hospital industry is gradually rising and supports increase in profitability. These ratios are divided into several categories: Growth rates, financial strength, valuation, profitability, efficiency, dividends, and management effectiveness.