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Issues of Becoming a For Profit Hospital

Info: 2607 words (10 pages) Nursing Essay
Published: 11th Feb 2020

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Issues of Becoming a For Profit Hospital 


When a nonprofit hospital is considering converting to a for profit hospital as suggested by Joynt, Orav, & Jha, (2014, Para. 1-9). Supporters claim that for-profit hospital brings resources and skilled management to hospitals that are struggling, and improve quality and productivity of care that is provided by the hospital. It is believed that once a hospital become for-profit they concentrate on financial metrics to improve payer mix, grow volume and excluding patients who are at a disadvantage and paying little attention to quality of care. 

When breaking down the characteristics of a hospital that changed to a for-profit organizations with hospitals that did not. The hospital must include financial, quality and the patient population that applies to the metrics.

Key characteristics

According to an article by Materson, L. (2017, Para 6-9) there are more than nonprofit hospital as opposed to for profit hospital in the United States.  The key difference between the for-profit and not-for-profit is how capital is access and one pays taxes and the other offer the public benefits. Nonprofits are required to assist the community in their healthcare needs therefore nonprofits hospital do not pay taxes and for-profit hospitals get assistance with money from stakeholders and have more flexibility in regard to the services they will provide frequently looking for the profitable ones. 

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Nonprofits hospitals needs to show that they assist the community through their tax forms the keep up their status, exemption from federal, state and county taxes. The two organizations are required to offer charity care. A for profit hospital has the capability to increase its capital with stockholders giving them leeway to access more capital as opposed to the nonprofit hospital, A for profit can also return proceeds to stockholder while investing in healthcare, but a nonprofit have to give profits back to the hospital.

Maintain a nonprofit status

In an article by Moyer, B (2017, Para. 1-43) there are many characteristics needed to maintain a nonprofit status to include:

  1. Trained hospital personnel working to achieve a common goal. The more trained the employees are the hospital have a better chance at reaching success.
  2. Maintaining numerous sources of income. In order for non-profits to be successful it is important to reinvest in their organization, employees and system.
  3.  Have a good board of director that has various skill sets that can help the organization to advance forward and willing to share their knowledge and financial support. 
  4. A strong brief Mission Statement of the hospital.
  5. Filling a need.
  6. Community relations and Sales advertising 
  7. Employee unpaid workers, train, and treat them because volunteers are priceless to the nonprofit hospital.
  8. Consider outside professional to take a look at the hospital to give advice to help the organization adjust and adapt.

The need for shifts in corporate

An essential part of the hospital is change without it the hospital will not be able to maintain their competitive edge and will not become successful and unable to maintain a loyal clientele.  

Technology is important to communication. People have the ability to search for providers online via search engines and social media.  Today’s technology allows the hospital to learn more and faster than in the past. The needs of the patient changes and grows to keep up with the demands of new products and services to open up new opportunity for the hospital.

Change also provide opportunities for hospital employees and can create a strong economy by increasing the demand for products and offering new services which can cause the hospital to expand and add more staff or open a new clinic.

Growing opportunities allows hospital staff to learn new skills, discover new opportunities and become creative so that it may be a benefit to the hospital by bring new ideas and being committed. “Lastly”, change brings about new ways to address patient needs, delivering customer service, promoting patient interactions, and point out areas of concern to the patient that the hospital may haven’t been seen by the hospital.  Richard, L. (2018, Para. 1-7)

Mergers verses a corporate

Nonprofit organizations combine, partner and come together in many ways such as combining of programs, events, affiliation, and contributors, unpaid leadership and staffing. 

Merging and consolidation is when two nonprofit hospital unite, and the other organization officially becomes part of the current entity and dissolves.  The organization that survived will take over the title to all assets and take responsibility of all obligations from the organization that didn’t survive. Even though merger and consolidation are equal one organization with all the resources and obligations from the former organization prefer partnership over merge ring because it brings awareness that no organization as the lead over the other.

There are many advantages to merger or consolidation such as combining company assets, eliminating multiple administrative processes, deliver improvement, wide-ranging services and resources to the organization or occupation. It also allows nonprofits who participate in the same field or business to offer educational programs, journals, support, and services to a larger area. 

Other considerations include imposing strict laws and responsibilities on the affiliates leading body to guarantee that the merger or consolidation is necessary and if it will benefit the hospital. Management may be held responsible for failing to act carefully with due diligence. To include examining the books and records of the other organization, over riding documents, minutes from meeting, entitlements, employment practices, contracts, leases, indemnity policies and looking unto major financial obligations such as retirement, obligation to contractors and security investment.

A joint venture is when two nonprofit hospitals provide their efforts, resources, and knowledge for a common purpose and can grow a new organization to carry out the work. A new organization can get tax-exemption status if organized and is operated for exemption reasons. This type of venture can be long-lasting and set to terminate on a certain date later to accomplish a goal, or organized to increase the organizations’ commitment within eye concerning a final merger. Membership is not required in a joint merger. Also one of the hospitals give all of their assets to the organization.     

Other consideration in a joint venture is that tax-exempt hospitals whom chooses to associate with other payable hospitals should be aware of the legal obligations, so it does not risk the hospital tax status. We must also consider unrelated business income taxes, controls and private inurement and benefits.  Tenenbaum, J. S & Hix, L. M. (2013. Para, 1-50)

Assessment of the payer mix

For-profit hospitals in the community faces difficulties as well as nonprofit hospital are struggling as well to make money. Other difficulties these hospitals face is the ratio of patient that are on Medicare or Medicaid programs has risen, which causes lower payment oppose to patients with private insurance. Macdonald stated that about 58% of Hallmark organizations have patient on public programs and 47% on Medicare with 11% on Medicaid. 

Over the years more people are utilizing Medicaid insurance and causing an effect on many states that lengthened the program. The more patients that are on Medicaid causes the healthcare system to make less money to care for the patients.

Another problem for the public hospital is the fact that healthcare has changed over the years. In the past 5% of one hospital was outpatient and ambulatory and 95% was in-patient care. At the present outpatient and ambulatory care is now at two-thirds. Patient hospital stay was about four to five days after major surgery, volume was down cause some hospitals to find ways to increase income and combine services.

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One healthcare organization goal was to get 103% of its expenses to reinvest into the business and is having a hard time getting in the 1% or 2% boundary. The organizations have done great in the past two years and was able to offset their loss. Some hospital need to find associates to help close the gap in healthcare to provide services for admissions and discharge. Partnership can help organizations reinvest in the business, access capital and allow for borrowing power.

Nonprofits focus on benefiting the public and adding asset. They also choices which services to offer and ones you will not have. Non-profit hospital are required to look at profitable services. Decisions about community benefits is based on what is needed.

Moving forward A-profit and non-profit are on the same scale in which patient capacity and cost will remain flat over time. Expenses will decrease operating margins. Medication cost, employment, pension will grow while bad debt will continue to increase. Different payment models will play a role in the success of the organization as well as increasing the quality and safety methods while decreasing expenditures will put the organization in a greater position to handling new changes. Masterson, L. (2017. Para.1-36).

Uncompensated care burdens

The uncompensated care approach focuses mainly on the uninsured people these patients are managed in several ways first for poor patients, charity care is given to maintain the mission of the hospital and provide an explanation for tax-exempt status for not-for-profit organizations. Secondly if funds are not collected from patients it is considered a bad debt.

With the rise in coverage the cost is changing that will make patients responsible for a large percentage of their healthcare cost. This conversion places a burden on doctors in total causing patient obligations to account for a huge amount of net patient revenue, which causes doctors to concentrate on collecting payment from patients. Hospital has minimal success in collecting payments which causes pressure on the entire uncompensated care. 

When considering the present state of uncompensated care which reached 5.13% of net patient expenses in 2013 causing bad debt due to inpatient expensive surgical procedures and charity care explains why hospital’s intensively collect on high-dollar inpatient surgeries. Bad debt is also inquired from emergency room services, you will see a lot of self-pay patients use ER services for all of their healthcare.

Bad debt and net charity care from outpatient surgeries exceeds those from clinical services. Inpatient surgeries produce a greater amount of bad debt on a by case bases. Brand, R. (2014, Para. 1-8) 

Convert or create a joint venture

According to an article by Cufman, G. (2015, Para 1-10) in 2014 hospitals are merging all across the United States which there was 95 hospital that merged, purchased or joint venture in the U.S. slightly decreasing from 98 in 2013. What is causing these mergers to happen is to increase in productivity, better access and quality of care which may lower healthcare cost. If the hospital gives more care the more resourceful and less expensive. So in my opinion, consolidation appears to offer more benefits to the patients.   

It is believed that when a single hospital merge with a larger hospital they gain a great share of the customer health insurance market and puts them a situation to ask seek more money from health insurance companies to pay for health care and procedures which can increase premiums and believed to drive up medical cost and cause financial burden to the patient.

“Lastly”, hospital mergers can provide extended access to healthcare services but may come at a much higher cost for services and insurance.


In my opinion a joint venture concerning a for-profit and non-profit hospital can be a benefit to the public because there is a chance of increasing the services provided in the area and permits the organizations to get additional uncompensated care to the poor patients. The public will benefit from the flexibility standards that lets nonprofit hospitals along with their partners to continue to provide exceptional services needed for the patients.



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