Healthcare organizations can use four different types of ownership forms. Each has advantages and disadvantages, making it different from the others and preferred in some settings. These four forms include not-for-profit firms, governmental healthcare organizations (Governmental HCOs), for-profit healthcare entities and non-profit non-business-oriented (Akopova et al., 2020). Healthcare organizations include hospitals, home-based healthcare entities, and nursing homes. The form of ownership depends on the kind of healthcare organization one plans to open since they require different structures, financial statements, and strategies for execution.
Not-for-Profit Form of Ownership
Not for Profit forms of ownership exist to serve the community. An investor does not own them; their primary goal is the community. However, they are exempted from paying property taxes and federal incomes. Therefore, not-for-profit healthcare organizations provide some benefits for the community, like offering extra services other organizations do not offer and offering services at a lower price (Bai et al., 2021). Moreover, their primary interest is not the patient’s ability to pay; instead, they use their income to reinvest their services to the community. These types of organizations obtain funds from grants, tax-free debts, donations, and sometimes investments by other firms (Bai et al., 2021). This form of ownership has some advantages and disadvantages.
Not-for-profit organizations do not pay taxes, making them use most of their income to expand their area of operations. Furthermore, they are interested in helping people and not profits which means they can make a significant change in the community and work out of passion (Bai et al., 2021). These two aspects serve as the main advantages since they only serve the community. As such, their efforts and income is used to better the healthcare experience for patients and optimize the well-being of the patients in their care (Turner & Wright, 2022). In addition, they have a broad customer base because they are not limiting their services to specific community members.
On the other hand, some disadvantages stem from not-for-profit healthcare organizations. One such demerit is that they find it challenging to raise capital for infrastructure and technological advancement of their tools. This problem arises from them being exempted from government subsidies, which limits their ability to deliver the best healthcare to the community (Akopova et al., 2020). Since they are more about the community and not the income, they charge less and struggle to raise more money to provide the medication and technology needed to improve lives.
For-Profit Healthcare Entities
As the name outlines, these organizations focus on making a profit. Hence, one of their main objectives is making profits for the organization as they provide healthcare services. Under this form of ownership, there can be investor-owned, limited liability partnerships and professional corporations (Turner & Wright, 2022). These organizations work to earn more income and improve their revenue bases. Therefore, they endeavour to improve their services to their patients and attract more high-end ones for more profit.
Some advantages of for-profit organizations include quality healthcare services and financial stability. For-profit organizations aim to make profits, which makes them strive to offer the best services and attract a better consumer pool for more (Turner & Wright, 2022). Therefore, they give better healthcare services. In addition, they are free to make a profit and find ways to make more; hence, they are not dependent on donations and grants. This aspect provides them with financial stability that allows them to improve their technological tools and train their personnel for better healthcare service delivery.
In another spectrum, for-profit healthcare entities are about profits, which limits their patient pool to those who can give profits. They target high-end patients who can afford healthcare services and turn down others without the means to pay for them. As such, it comes out as an organization not concerned about improving the community’s wellness but serving its self-interest (Akopova et al., 2020). Another disadvantage is that they pay taxes which gives them more financial burden.
Governmental HCOs can be state government or local government-owned and exist as public corporations. They work in the same lane as not-for-profit organizations since they serve the community’s interests (Akopova et al., 2020). Their main advantage is that they have additional revenues that come through tax forms and are exempt from property and income taxes, making them deal with fewer bills and focus on improving healthcare services to patients (Akopova et al., 2020). On the downside, the governmental HCOs cannot raise funds through equity investments, and their lower charges lead to overcrowding and low-quality healthcare services. Another disadvantage is leading to staff dissatisfaction and burnout due to the high workload.
Non-Profit Non-Business Oriented Organizations
In this type of ownership, the organization provides voluntary services to patients and people of different communities. They serve as a welfare organization interested in improving people’s health and well-being (Algharabat et al., 2018). Examples of such organizations are the American Cancer Society and the Red Cross. Therefore, profits are not the goal; instead, they aim to reach out to more people and volunteer to help their healthcare process. As a result, they can handle education, development, and consultation on matters related to the well-being of the general community.
An advantage of this type of organization is that they are exempted from tax-paying, which means they spend less on bills. Furthermore, they depend on donations and grants, which means they do not operate under the wings of the government (Algharabat et al., 2018). Another advantage is that they are more about outreach and volunteering which means they are more focused on bettering the lives of others in terms of healthcare. However, there are some disadvantages, such as money since sometimes they spend more than they make and limited resources that can allow them to access and help every community member (Algharabat et al., 2018). Furthermore, financial problems can come from the inability to retain or attract more capable donors.
Despite the different ownership forms, advantages, and disadvantages, a healthcare organization can only use one form at a time. After outlining their limitations and benefits, the not-for-profit form of ownership seems preferable. These types of organizations are about delivering services to all without reservations, which means it is geared towards life improvement through promoting healthy living in the community (Bai et al., 2018). Therefore, forming an organization that cares about people and their health is a way to make more impact in society than focusing on profits. In addition, it will be a way to relieve the pressure that governmental HCOs are facing with more patient pools and fewer resources. Compared to for-profit organizations, the not-for-profit ones get more profit without effort since they attend to different patients without reservations. On the other hand, the organization must create a good strategy for attracting donors and grants that can allow them to get technological tools and other resources to better their services.
The ownership form an organization decides to use is based on its objectives and capacity to attract the resources to support its objective. Therefore, it is necessary for doctors interested in forming an organization to do thorough research and map their strategy for sustaining the organization for their long-term goals. Nonetheless, they all serve patients and work on improving healthcare on different levels. This means whichever one is used, they all lead to helping people only on different levels.
Akopova, E. S., Przhedetskaya, N. V., Przhedetsky, Y. V., & Borzenko, K. V. (2020). Marketing of healthcare organizations: technologies of public-private partnership. IAP. ISBN: 978-1-64113-578-8
Algharabat, R., Rana, N. P., Dwivedi, Y. K., Alalwan, A. A., & Qasem, Z. (2018). The effect of telepresence, social presence, and involvement on consumer brand engagement: An empirical study of non-profit organizations. Journal of Retailing and Consumer Services, pp. 40, 139–149. https://doi.org/10.1016/j.cities.2018.03.016
Bai, G., Zare, H., Eisenberg, M. D., Polsky, D., & Anderson, G. F. (2021). Analysis Suggests Government And Nonprofit Hospitals’ Charity Care Is Not Aligned With Their Favorable Tax Treatment: The study examines government and non-profit hospital charity care expenses compared to charity care obligations arising from the organizations’ favorable tax treatment. Health Affairs, 40(4), 629-636. https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2020.01627
Turner, S., & Wright, J. S. (2022). The corporatization of healthcare organizations internationally: A scoping review of processes, impacts, and mediators. Public Administration, 100(2), 308–323. https://doi.org/10.1111/padm.12724