For-Profit and Nonprofit Hospital

Business Objectives

The primary objective of for-profit hospitals in the provision of services in order to generate income. Nonprofit hospitals have as their principal aim the provision of services to the general public to benefit society through the provision of superior medical care. The charitable organization’s objective is to provide services and support activities that strive to improve global healthcare. In terms of their commercial aims, the significant distinction between for-profit and not-for-profit organizations is the intention to produce revenue while simultaneously delivering services. The work that nonprofit hospitals do, which is to provide services without expecting a profit, is beneficial to the community. The fundamental forces behind the development of for-profit organizations are individuals and businesses that enter the healthcare field to make a profit. Nonprofit hospitals are frequently linked with faith-based groups and other organizations whose primary values align with those of faith-based organizations. While both for-profit and nonprofit hospitals provide medical care to patients, the pursuit of money is the fundamental objective of both types of hospitals.

Financial Strategy

Profit-driven hospitals pay taxes. Corporate taxes, municipal property taxes, and state income taxes are some critical taxes paid by for-profit hospitals. The hospital is considered a business and a for-profit organization that must pay federal and state taxes. The hospital is exempt from federal and state taxes due to its nonprofit status. Nonprofits must show how their efforts benefit the general public and society. Nonprofit Health has been exempt from taxes since 1946. The main feature of its tax-exempt status is that it keeps providing services to society without paying taxes. The US government provides a tax-free operating environment for nonprofit hospitals to carry out their tasks. A community healthcare provider, Nonprofit Health works to provide the most necessary medical treatment to the local population. It is essential to distinguish between different taxes statuses to manage hospitals and control their operations.

Non-Profit Health works to accomplish a few goals that have remained crucial for assessing the organization’s performance and improving the impact these have on the results provided. For-profit hospitals need money to pay their employees, pay taxes, advertise services, pay for utilities, rent, and rates on land, buy drugs, pay for insurance, and provide better services. The financial needs of Non-Profit Health include paying employees’ wages, buying prescription drugs, and paying their utility costs, such as those water, electricity, and security. Nonprofit Health has provided coverage for some expenses, which impacts the results of payments and improvements.

Provision of Uncompensated Care

Uncompensated care refers to the sum of unpaid medical bills and financial aid received by hospitals. It represents the overall cost of hospital care not covered by the patient’s insurance or their own payments.

Hospitals that provide uncompensated care pay a premium on balancing marginal expenses and income. It emphasizes marginal costs and returns due to the assumption that it makes profits and exists to generate profits rather than to benefit society. This is the primary reason why marginal costs and returns are given such importance. It is assumed that the business endeavors to maximize earnings. Uncompensated care is the cost incurred by hospitals due to forgoing care expenses due to charity or bad debts. This expense is referred to as “the uncompensated care gap.” As a result, charitable organizations in the United States provide less treatment without compensation. In other words, the organization’s choice not to offer uncompensated medical care is based on the notion that a nonprofit does not seek to maximize its profits. Pursuing maximum profits remains essential in determining the amount of uncompensated care supplied and how this influences decisions. Nonprofit hospitals do not provide uncompensated care since they are not motivated by the need to create profits. However, hospitals that are operated for profit try to enhance profits by reducing expenses and boosting revenues. As a result, the relevant hospitals actively attempt to enhance both results and systems.

Liability for Malpractice

Hospitals that operate for profit must now assume corporate accountability for medical malpractice. In other words, the liability for malpractice has shifted from individual professionals to the entire corporation. This modification is designed to make the corporation accountable for all hospital-based procedures and possible malpractices. Typically, businesses that are regularly sued to employ this method to protect their practitioners from legal action. In contrast, the hospital has its internal procedure for handling carelessness cases. The sanctioning of unethical behavior is carried out following the techniques created internally, which, it has been determined, will continue to be essential and improve results (Policy, 2022). The liability criteria for wrongdoing in the nonprofit health sector consider professionals.

Consequently, individuals are held accountable for their actions within the organization. Individual liabilities are examined using the most efficient method, which may result in adjustments to the obligations and improved service quality. All professions are expected to adhere to a standard set of fundamental values. Staff members are held accountable for their conduct since they must adhere to these criteria. In each of these scenarios, the law of sovereign immunity influences the conduct of employees. The law of sovereign immunity dictates the kind of crimes individuals can commit and the repercussions of such crimes.

Recommendation

The main differences between for-profit and nonprofit hospitals in the US are ownership, taxes, and the patients they serve. Community-based hospitals are non-profit, as opposed to for-profit hospitals, which are primarily owned by registered organizations and are in the healthcare business to make a profit. The ultimate objective of the two healthcare systems is to create an accessible healthcare system that generates a profit. The government’s objective of offering all citizens low-cost, easy-to-access healthcare is excellently accomplished by both healthcare systems.

Taxation: Charitable hospitals are exempt from state, local, and federal income taxes according to the IRS. In contrast, all applicable federal, state, and local property taxes must be paid by for-profit hospitals.

Ownership: While for-profit hospitals are owned by either shareholders or investors in a public trading corporation, nonprofit hospitals are community- and religion-focused.

Clientele: Most non-profit hospitals are situated in prosperous communities with higher incomes, fewer uninsured patients, and lower poverty rates. Those with lower incomes are often served by for-profit hospitals. Additionally, compared to nonprofit hospitals, for-profit hospitals typically provide more compensated care.

Healthcare provision is the main goal of nonprofit hospitals. Since they are legally compelled to contribute every dollar they make back into providing medical services, efforts have been made to approve mergers and acquisitions in order to become the organization profitable. According to the law, for-profit hospitals are allowed to discharge a patient if they primarily offer specialized medical care and the patient is unable to pay for additional care. If monetary gain takes precedence over human life, a legal loophole results. With this, a plan can be put in place to prevent these people from dying and improve the standard of healthcare.

Yes, hospitals that are both for-profit and nonprofit are required. Non-profit hospitals make healthcare more accessible to everybody by offering a wider range of services. Let’s say a patient at a nonprofit hospital needs a more complicated procedure. They can then be routed to a for-profit hospital that provides more specialized and cutting-edge medical care. It makes it possible for the two healthcare systems to work in harmony and close the affordability and accessibility gap for everyone.

Module Six Activity For-Profit and Nonprofit Hospital Comparison Table

Conclusion

Profit-seeking hospitals prioritize expanding their patient population over maximizing their earnings. These hospitals are compelled to pay taxes due to their profitability and the fact that they receive revenue from their day-to-day operations. Nonprofit hospitals provide medical services without the intention of making a profit. The excess funds are invested in activities that benefit society as a whole. These hospitals are exempt from paying taxes because they commonly contribute to the betterment of society as a whole.

References

Bruch, J. D., & Bellamy, D. (2021). Charity care: do nonprofit hospitals give more than forprofit hospitals?. Journal of General Internal Medicine, 36(10), 3279-3280

POLICY, F. A. (2022). NONPROFIT WISCONSIN. POLICY, 2, 1. https://m.ermc4.com/-/media/healthcare/markets/wisconsin/financial-assistance/fap/NonProfitwi/runningfile_Non-Profitwi_eng_fap.pdf