“Among 5,200 non-federal hospitals in 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. a 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” (Health Care & 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. a Investing in
stat of the art technologies would be attractive to this type of facility. a
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. a 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 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. a 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. a 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. a 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. a
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 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. In www.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
