Hsm 541 Profit Versus Not-for-Profit Hospitals

HSM 541 Profit Versus Not-for-Profit Hospitals

Profit Versus Not-for-Profit

Hospitals

In Partial Fulfillment of the Requirements for Health Services Systems

HSM 541

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) of the Internal Revenue Service (IRS) tax code, and as such, are exempt from federal and state taxes and generally from local property and other taxes. Not-for-profit hospitals also have access to tax-exempt bond financing and have tax-deductible status for gifts and contributions (Barton, 2010). For-profit hospitals do not have this luxury.

Public or private hospitals can be classified as non-profit. Non-profits include a majority of the hospitals in the US. The two types of hospitals differ mainly in regulatory rules. Not-for-profit hospitals do not need to pay property, sales, or income taxes.

For-profit hospitals do. Despite these differences, the two types of ownerships have been becoming more and more similar and many hospitals have been switching ownership status suggesting that the hospital industry is less stagnant than the public perception assumes (Smith, 2011). According to a 2006 study, not-for-profit ownership was 59% (Barton, 2010). According to (Smith, 2011) approximately 85% of hospitals are non-for-profit and are expected to have a charitable mission.

Nonprofit hospitals are typically considered to accept everyone who comes in the doors, regardless of their ability to pay. Therefore,...