Non-Profit Healthcare Organizations

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Nonprofit Versus For-Profit Healthcare Organizations and Options to Improve Both of Their Images

Hospitals in the United States first came into existence as “institutions of social welfare,” to provide for the sick, the poor, and to treat diseases. These facilities were mainly run and supported by charities. (Barton, 2009, p.252). Over time, with America’s capitalistic society, the emergence of for-profit hospitals began to compete with non-profit hospitals. Similarities between the two include utilizing the same commodities, i.e. healthcare workers, technology to perform tests, and equipment such as hospital beds. They also both receive payments from Medicare, Medicaid,
self-pay, and health insurance. The difference between these two sectors lies in how they allocate any profits, their role in a community, and differing regulations to run their business.
Nonprofit institutions are held to a higher moral standard. Because they are non-profit entities, they are expected to provide healthcare programs to the public, be involved in the community, with some also serving as centers for research and education. As stated in The Health Care Manager (October-December 2005), “Society in the majority believes that health care is too precious, intimate, and corruptible to entrust to market forces,” (p.299). These types of organizations are expected to treat patients who may have no way of paying for the services and to take that as a loss. These types of hospitals must also be careful in how they advertise in

Page 2 their community to compete with other practices in the area.
Too much advertising of their services can call into question their accounting practices, “how can they be nonprofit if they have that kind of money for advertising.” The nonprofit healthcare provider must have “transparency,” the public wants to know what you are doing with any excess monies.” (Advertising by Nonprofit Health Care Organizations, Fall 2008, p.261).
Nonprofits can be exempt from local, state and federal taxes, bringing with it many regulations to abide. However, by following these regulations in order to keep their exempt status, they can lose much of any profit they may generate, i.e. having to accept patients who cannot pay for services rendered or receiving reduced payments from Medicare and/or Medicaid. Any actual profit is reinvested in their organization. (Barton,
p.265).
For nonprofit organizations to effectively compete and survive financially in communities, they must look at ways to become more efficient and cut some of their operating expenses, all while maintaining quality care for their patients. One way is to reduce the turnover rate of employees and rate at which employees call in to work sick due to job dissatisfaction. According to Increasing Efficiency and Enhancing Value in Health Care, one hospital “determined the turnover cost for one nurse at one facility for recruiting, orientation, training, and productivity cost was between $48,000 and $74,000.” Also the costs were usually greater to use a medical professional from a staffing agency to cover shortages or sick days taken by hospital employees. (Martin, 2009, p.14). Improving employee morale, creating more of a team environment to work in, and listening to what employees want can result in less
Page 3 turnover and cost savings by not continually hiring and training new employees. The hospitals can also look at using more “generic medications instead of brand name,” transitioning patients to oral medications by stopping costlier IV medications sooner, and dosing correctly in the first place so you are not using other medications to reverse “adverse reactions”. (Martin 2009, p.18).
For-profit organizations are seen by some as the villains of healthcare.
They can pick and choose their patients, sometimes called “cherry-picking,” choosing patients who have less complications and referring others to nonprofits in order to save money.” (The Healthcare Manager, p.298). These types of hospitals are also more likely to provide what are considered “more profitable services,” such as open heart surgery and other cardiac services including angioplasty because insurers usually pay more for these services.” (Making Profits and Providing Care, p.1 and p.3). These providers do not have to provide free services or programs to the community because they are not considered a nonprofit and some regulations for operating this type of hospital can be less stringent than a nonprofit. For-profit organizations share their profits as dividends to their shareholders. (Barton, p.265).
For-profit organizations can improve their negative image by more involvement in the community in which they operate and showcase their efficiencies and state of the art facilities through advertising to the public. For example, Comfort Dental offices are each “independently owned,” but each franchise participates in their community by providing “Care Day on Christmas Eve” each year where they provide dental care free of charge on that day to
those
Page 4 who cannot afford it. (Comfortdental.com). Panorama Orthopedic and Spine Center in Golden, Colorado is owned by a group of physicians. They have the latest and greatest equipment and in many instances can perform surgery and have you in and out in the same day, thus efficiency and improved cost savings. (http://www.panoramaortho.com).

References

Barton, Phoebe L. Understanding the U.S. Health Services System, 4th Edition. Health Administration Press, 12/1/2009. VitalBook file.
Cirillo, A., Cowart, J., Kaegi, J., Taylor, G., & McPherson, B. (2008). Advertising by nonprofit health care organizations. Inquiry: A Journal Of Medical Care Organization, Provision And Financing, 45(3), 256-262.
Comfortdental.com website
Horwitz, J. R. (2005). Making Profits And Providing Care: Comparing Nonprofit, For-Profit, And Government Hospitals. Health Affairs, 24(3), 790-801.
Martin LA, Neumann CW, Mountford J, Bisognano M, Nolan TW. Increasing Efficiency and
Enhancing Value in Health Care: Ways to Achieve Savings in Operating Costs per Year. IHI Innovation
Series white paper. Cambridge, Massachusetts: Institute for Healthcare Improvement; 2009.
Panoramaortho.com website
Rotarius, T., Trujillo, A. J., Liberman, A., & Ramirez, B. (2005). Not-For-Profit Versus For-Profit Health Care Providers--Part I. Health Care Manager, 24(4), 296.