What are some business and financial implications of the differences between
community not-for-profit hospitals and large academic medical centers that
may affect staffing, programs offered, and policies and procedures?
One of the major differences between not-for-profit and for-profit medical centers
is their treatment policies. For instance. While all hospitals are required by the
Federal government to administer free stabilizing care to any patients that seek help.
“For-profit hospitals can lawfully release patients who lack the ability to pay for
further treatment after they establish that they are out of danger while Nonprofit
hospitals are obligated to treat all conditions, whether life-threatening or not,
regardless of the patients’ financial or health insurance status.” (Healthcare
Management Degree Guide, 2021)
This one difference can affect multiple areas such as staffing. The policy
requirement to treat all conditions means that the not-for-profit hospital will need to
have more staff than similarly sized for-profit organizations.
This distinction could lead patients to choose the not-for-profit hospital which
would affect the revenue generation of the for-profit organization. In addition, better-
informed patients could be pulled away from the for-profit hospital due to cost vs.
outcome disparity between the two types of hospitals. Not-for-profit, hospitals
“traditionally charge lower rates than for-profit hospitals for almost all medical
procedures. The icing on the cake is that the lower-cost care does not come with a
corresponding drop in quality level. Statistics show that despite charging more, for-
profit hospitals perform worse than nonprofit hospitals when it comes to treating
common illnesses, and, consequentially, have higher death rates.” (Healthcare
Management Degree Guide, 2021)
Another difference would be that not-for-profit hospitals normally have a wider
range of services than for-profit hospitals. Those services also tend to be ones that are
vital but not necessarily profitable. For instance, a non-profit hospital is more likely to
“offer a wide range of services, including services that don’t typically generate a lot of
income. For example, neonatal intensive care units are costly to operate.” (Healthcare
Management Degree Guide, 2021)
What financial impacts could result if a for-profit organization was built
within your community?
Well, regardless of whether a hospital is for profit or not for profit, they both have to make
a profit. So one impact of another competitor in the area would mean a possible impact on
the revenue for the not-for-profit. For-profit hospitals can have large amounts of capital,
especially when they open, offering the latest in technology and innovations which could
lure patients with private insurance way from the not-for-profit. Moreover, as more people
join government insurance revenues drop. Meaning that the not-for-profit could find itself
with dwindling dollars.
One example is Hallmark Health, whose percentage of patients on government
programs has increased resulting in lower payments than if more patients belonged to
private insurers.
Alan Macdonald, president, and CEO of Hallmark Health estimated that “58% of
Hallmark Health’s patient base is on a public program (47% on Medicare and 11% on
Medicaid). Macdonald said the Medicaid percentage has doubled since Medicaid
expansion. Medicaid expansion gave more people insurance, but it is also having a
financial effect on Massachusetts and other states that expanded the program.” (Masterson,
2017)
The result is that around 40% of the State’s budget goes to MassHealth, which is
the commonwealth’s Medicaid program. Like any business not for profits, need those
revenue dollars to offer new programs, update, maintain their facilities, etc. So local
competition could potentially hurt the organization.
What are some of the financial benefits of being an academic facility rather
than a not-for-profit facility?
One benefit is that for-profit hospitals are very efficient. They strive to cut away or
reduce anything that might eat into their profitability. For instance having the latest
software, interoperability, and other efficiencies are at the top of the list for profit-driven
facilities.
"There is no question that the financial and revenue cycle aspects of the investor-
owned sector hospitals are their sweet spot. They do a wonderful job in a complex
environment. The companies we represent have generally found the balance between
centralizing much of the paperwork for groups of hospitals, as well as making sure that the
right kind of collecting information and other tools are used at their individual hospitals. It
has been an advantage for us," says Charles N. "Chip" Kahn III, president, and CEO of the
Washington, D.C.–based Federation of American Hospitals. (Cheney, 2019)
They can do this because they do not have the burden of demonstrating community
benefits, so for instance, hardly anyone needs neonatal care in that area, the for-profit can
simply omit that from their list of services to focus on those programs that are more in
demand.
References
Cheney, C. (2019, September 3). 3 Strategic Differences Between Nonprofit and For-Profit
Hospitals. HealthLeaders Media.https://www.healthleadersmedia.com/clinical-
care/3-strategic-differences-between-nonprofit-and-profit-hospitals
Healthcare Management Degree Guide. (2021, August 4).Are Non-Profit or For-Profit
Hospitals Better?https://www.healthcare-management-degree.net/faq/are-non-
profit-or-for-profit-hospitals-better/
Masterson, L. (2017, May 25).Nonprofit, for-profit hospitals play different roles but see
similar financial struggles. Healthcare Dive.
https://www.healthcaredive.com/news/nonprofit-for-profit-hospitals-play-different-
roles-but-see-similar-financ/442425/
