For-Profit vs Not-For-Profit Hospitals

Since starting this blog, I have really started to look at what budgets are at hospitals around the country.  While saving money is on everyone’s mind these days I was wondering if it is the same for hospitals.  Part of me felt that hospitals are concerned with profit, but to what extent? We pay an arm and a leg just to have our arms and legs examined. With the extremely high costs of health care, do hospitals really struggle with their budgets?

When looking into this information, I came across a lot of articles comparing not-for-profit hospitals with for-profit hospitals. Call me naïve, but are there really not-for-profit hospitals out there? The answer is YES! So from there I began to look into the differences. Are there differences in the medical staff employed at each type of hospital? Do for profit hospitals have better doctors? Is this because they generate a better cash flow? Are not-for-profit hospitals struggling these days? And who actually owns these for-profit hospitals?

What I learned is that while not-for-profit hospitals seem to be run by the community and charitable donations, for-profit hospitals are run by a group of investors.  Not-for-profit hospitals tend to see their level of care for patients as their number one priority. Since their employees are paid less, because the hospitals income is dependent on charitable contributions, not-for-profit medical facilities have more programs focused on staff recognition.  Not-for-profit hospitals have been given a tax break by the Internal Revenue Service and are more often than not, a religious or secular run charity. When these charity sustained hospitals generate an extra income it is reinvested into the hospital to increase the quality of care that is provided and to help educate the community about health care. “Advocates of not-for-profits believe that the non-distribution constraint allows the mission of the nonprofits to focus on serving the community, with excess revenue being pumped back into the community, resulting in a higher societal benefit due to increased uncompensated care rates, and programs designed to educate the community” (Wikstrom 1).

I don’t want it to sound like for-profit hospitals do not value their patients as much as non-profit hospitals, but care and money are intertwined in for-profit facilities. Investors intend not only the money they provided, but also a larger dollar amount. Why invest when there is no way to earn a profit?  When for-profit hospitals generate an extra profit, that money is then returned to the investors, not the hospital and patient care. Within for-profit hospitals, there is a “demand for greater access to capital, less reliance on philanthropy, more attention to competition, and a greater understanding of profit margins in the long-run financing of any organization”. (Sloan, Vraciu 26) Unlike non-profit hospitals, for-profit hospitals are not given a tax break. When taxes are increased, for-profit hospitals are forced to raise their health care costs.

With the rising cost of health care and the loss of jobs, for-profit hospitals are a dying breed and becoming a thing of the past.  Many Americans are losing their health insurance and not-for-profit hospitals are picking up their slack. They are able to give people financial aid and while patients are still responsible for part of their health costs, these costs are not nearly what they would be if they were treated at a for-profit hospital and unable to get any financial aid.

The following graph shows the total number of registered hospitals in the United Sates according to the American Hospital Association.  You can see how nonprofit hospitals are on the rise:

The American Health Association Number of Registered Hospitals

Long story short – with our economy in a severe slump and government spending severely slashed, more and more Americans are in need of not-for-profit medical care. Not only to get the assistance they need, but to also be able to afford the care they need.

**Sloan, Frank A. and Vraciu, Robert A. Investor Owned and Not-For-Profit Hospitals: Health Affair, 2, no. 1 (1983):25-37

**Wikstrom, D. December 2077. Nonprofit to For-Profit Hospital Conversions: The effect of Charitable Care. Bachelors of Science Thesis, University of Puget Sound

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One Response to For-Profit vs Not-For-Profit Hospitals

  1. mbkjam says:

    My second reference has the wrong date. Rather than 2077 it is 2007. I apologize for the incorrect information. ~ mbkjam

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