“Among5,200 non-federal hospitalsin the US, 3,000 are nonprofits, 1,300 for-profit, and 1,000 operated by state and
local governments” (Kahn, 2019). Both facilities need to make a profit in order to succeed. Not for profit does not
mean they hospital does not need revenue. The difference lies in how they spend their revenue.
“For-profit organizations are owned by and accountable to investors, who ultimately receive the profits either in the
form of dividends or increased equity” (HealthCare & Gray, 1986). Unlike non-profit hospitals which are tax-exempt
for-profit hospitals must pay state and local taxes. In addition, for-profit institutions offer a smaller variety of services
than their not-for-profit counterparts. They may specialize in a particular service that will set them apart. Investing in
stat of the art technologies would be attractive to this type of facility.
Not for profit hospitals also must make a profit to survive, but they reinvest in their community and themselves. They
are considered a charity by the IRS and do not have to pay taxes. In some communities this can cause friction. One
well known academic hospital system; Yale New Haven Hospital owns a significant amount of property in the city they
serve. Although the hospital and university both make voluntary payments to the city of New Haven and the state of
Connecticut voters and candidates continually site their nonprofit status as a reason for high taxes and mill rates.
“Vincent Petrini, spokesman for Yale New Haven Health, said in a statement, “Yale New Haven Health continues to be
the largest taxpayer in Connecticut, paying more than $300 million a year. At the same time, we have provided $30
million in voluntary payments to New Haven over the last decade. In addition, we pay nearly $6 million in property
taxes to the city annually, contribute to critical community programs, like New Haven Promise and we are working
collaboratively to drive down employee healthcare costs” (Staff, 2020). A requirement for nonprofit hospital tax
emption is a community health needs assessment and plan for needing the needs of the community (IRS.gov, 2013).
Not for profit hospitals may focus their investments on community needs rather than technology. Health education,
treatment programs, or specialized units (Wilson, 2019).
It is also important to note that Medicaid does not fund nonprofit hospitals directly; Medicaid reimburses nonprofit
hospitals for the costs of treating Medicaid patients (Wang & AbouAssi, 2021). In order to obtain Medicare and
Medicaid reimbursement, which is lower than the actual cost of care hospitals must meet the standards for care. Many
things can impact reimbursement and cause a reduction in the amount reimbursement. For example, a patient who
develops a pressure ulcer during a hospital stay is ineligible for reimbursement of the care for that condition (CMS.gov,
2021). Not for profit hospitals must balance actual cost of care and reimbursement rates from Medicare and Medicaid
which are less than cost of care.
Location can play a key factor in hospital financial and charity policies. Payor mix, the amount of Medicare, Medicaid,
or privately insured patients determines revenue streams. “On the Lown Index, differences in charity care spending
between hospitals were far more evident among states than between nonprofit and for-profit hospitals” (Garber, 2020).
A not-for-profit hospital located in a wealthy community will not have as high of Medicaid and uninsured population
seeking their services. The community itself will have less need and require less programing and health support from
the nonprofit hospital.
An academic medical center has many advantages. In addition to being a teaching hospital an academic medical center
is associated with a medical school. An academic medical center will invest in cutting edge technology in order to
attract the best and the brightest students which in turn attracts patients. Reputational excellence in research and
treatments drives business. Patients will travel to academic hospitals for second opinions or to receive care not
available a local community hospitals. Academic medical centers have research grants that help fund positions for
physicians as well as support staff helping to defray salary costs. Residents are paid on a scale based of their resident
year but are less expensive than a salaried provider.
A private hospital moving into the catchment area of our organization may have both negative and positive impacts. It
may negatively impact certain service lines including orthopedics and specialized surgeries. Our location in a city with
higher volume of uninsured and Medicaid patients may have a slightly favorable result in our emergency care
locations. Private hospitals can not deny evaluation of care or treatment of care to uninsured or Medicaid patients
seeking treatment for an emergent health condition. “The Emergency Medical Treatment and Labor Act (EMTALA) is
a federal law that requires anyone coming to an emergency department to be stabilized and treated, regardless of their
insurance status or ability to pay, but since its enactment in 1986 has remained an unfunded mandate” (American
College of Emergency Physicians, 2019).
Our institution would benefit from decreased utilization of our emergency room. While those patients needing
admission would likely be transferred to our institution, we would not be responsible for the initial interventions need to
stabilize a patient for transfer. A cost savings could be recognized for patients who are in labor or require expensive
testing on presentation to the emergency room. If a new institution, private or not for profit were to move into our area
an increase focus on marketing and patient retention would be necessary. Patient satisfaction ratings will be more
important than ever before.
References
American College of Emergency Physicians. (2019). EMTALA Fact Sheet. Acep.org.https://www.acep.org/life-as-a-
physician/ethics--legal/emtala/emtala-fact-sheet/
CMS.gov. (2021, December 21). Hospital-Acquired Conditions (Present on Admission Indicator) | CMS.
Www.cms.gov.https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond
Garber, J. (2020, September 4). Nonprofit and for-profit hospitals provide similar levels of charity care, study finds.
Lown Institute.https://lowninstitute.org/nonprofit-and-for-profit-hospitals-provide-similar-levels-of-charity-care-study-
finds/
Health Care, I. of M. (US) C. on I. of F.-P. E. in, & Gray, B. H. (1986). Summary and Conclusions.
Inwww.ncbi.nlm.nih.gov
. National Academies Press (US).https://www.ncbi.nlm.nih.gov/books/NBK217912/
IRS.gov. (2013). Requirements for 501(c)(3) Hospitals Under the Affordable Care Act – Section 501(r) | Internal
Revenue Service. Irs.gov.https://www.irs.gov/charities-non-profits/charitable-organizations/requirements-for-501c3-
hospitals-under-the-affordable-care-act-section-501r
Kahn, K. (2019, September 10). How Do Nonprofit and For-Profit Hospitals Differ? It’s Complicated. Non Profit News
| Nonprofit Quarterly.https://nonprofitquarterly.org/how-do-nonprofit-and-for-profit-hospitals-differ-its-complicated/
Staff, N. (2020, August 11). Campaign lets homeowners calculate tax savings if Yale, Yale New Haven paid on untaxed
properties. New Haven Register.https://www.nhregister.com/news/article/Campaign-lets-homeowners-calculate-tax-
savings-if-15476527.php
Wang, R., & AbouAssi, K. (2021, April 12). The Impact of Medicaid Expansions on Nonprofit
Hospitals.https://www.degruyter.com/document/doi/10.1515/npf-2020-0053/html?lang=en
Wilson, B. (2019, December 13). For Profit Hospitals vs. Nonprofit Hospitals – the Pros and Cons of Both.
Carevoyance.https://www.carevoyance.com/blog/for-profit-hospitals-nonprofit-hospitals#:~:text=Operating
%20efficiently%20and%20managing%20revenue
