This topic hits home because my department is currently in a transition from a not-for-profit to a
large medical center. c Before the current company took over the entire hospital was not-for-profit,
but the psychiatry outpatient office was not a part of that merger. c When I transferred into the
department, I found the situation very odd. c The outpatient office needed a new printer, but we
could not just order it there were a lot of hoops to jump through. c This was my first introduction to
not-for-profit. c Nonprofit hospitals are community-oriented institutions, driven by mission rather
than shareholder returns (Kahn, 2019). c Our outpatient office was able to put together a program
where doctors go into patients’ homes for sessions. c This program helps patients that were either
unable to leave their homes or unwilling to due to their illness. c Now that we are in the middle of a
transition there is talk of ending the program. c For-profit hospitals must balance community service
with shareholder returns; operational efficiencies drive decision-making (Kahn, 2019). c Nonprofit
hospitals tend to plan for continued viability over the long-term; for-profit hospitals concerned with
quarterly returns make short-term decisions that may not align with the needs of the communities
they serve (Kahn, 2019).
c c c c c c c c A community that taxes for-profit hospitals benefits because it will be able to tax its citizens
and businesses at a lower rate than can a community that receives the same services from a
nonprofit hospital that does not pay taxes (Nicholson, Pauly, Burns, Baumritter, & Asch, 2000). c
Most for-profit facilities are debt-free compared to not-for-profit facilities. c For example, Mercy
Hospital on Chicago’s southside was a not-for-profit hospital that was catholic base and run by
nuns. c The hospital has been sold a few times to keep the doors open. c Last spring Mercy Hospital
and Medical Center had finalized a deal to sell its facility for $1 to a Michigan-based not-for-profit,
in a deal that promises to keep the hospital open (Kelly, 2021). c A few short months later, I began
receiving calls from Mercy patients seeking a therapist. c I could not find any documentation that the
hospital has closed, but when I drive by at night there are not many lights on.
Some business differences between a community not-for-profit hospital and a large academic
medical center is that not-for-profit facilities are voluntary hospitals. They are exempt from paying
any federal, state, or local taxes and they provide essential community benefits, charity, training, or
research. On the other hand, academic, or teaching hospitals must offer graduate residency
programs where the primary goal is to train physicians. Teaching hospitals tend to operate several
intensive care units, have the latest technology, and offer more specialty doctors than
subspecialties. They usually offer more services that aren't found in other institutions like burn care,
trauma care, and organ transplantation (Shi & Singh, 2019). With them having more specialty care I
would imagine that prices would be more than at a not-for-profit hospital. If a for-profit
organization were to be built within the community where I am working, some financial differences
would arise. c A private for-profit hospital would be owned by a private investor, corporations, or
partnerships. They benefit the stockholders. Most private for-profit facilities are smaller and
specialize in heart or orthopaedic surgeries and usually perform favourably compared to other
hospitals (Shi & Singh, 2019). Furthermore, a study published in Health Affairs in 2021 found that, in
aggregate, nonprofit hospitals spent 60 percent less than for-profit hospitals on charity care as a
share of total expenses (Rapfogel & Gee, 2019). However, being an academic facility has its financial
benefits as well. They can probably change more for their services just because there are not a lot
of physicians that can help depending on the circumstances. They also would have the best
equipment to serve patients, however, the patients might have to travel or stay for longer times.
That also would benefit the academic institution, specifically when they are able to get grants on
research for certain medical issues.
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?
According to the American Hospital Association (2022), more than half of nongovernment owned
community hospitals in the U.S. are not-for-profit hospitals while nearly 24 percent are for-profit.
Non-profit hospitals are exempt from paying federal, local, and state income and property taxes
and are typically looked at as charities, while for-profit hospitals are typically owned by investors
and run as a business (Burns, 2021). c However, contrary to popular belief, non-for-profit hospitals
still earn profits. At the same time, many for-profit hospitals can be more expensive to run, but in
many cases these types of hospitals invest more into advancing medical technologies, which could
be one factor that contributes to these higher costs (Burns, 2021).
What financial impacts could result if a for-profit organization was built within your community?
The building of any hospital, whether for-profit or non-profit, would have a financial impact on any
other hospital that was already in an area. c Despite the title of “non-profit,” non-profit hospitals still
can still make a profit, the same as a “for profit” hospital (Shi & Singh, 2017). c Therefore, building
any hospital in the area would create competition and patients could be lost to other hospitals for a
variety of reasons including dissatisfaction with current services, location, quality of services, or the
types of services available.
American Hospital Association. (2022). Fast Facts on U.S. Hospitals, 2022.
https://www.aha.org/statistics/fast-facts-us-hospitals
Burns, D. (2021, September 21). Nonprofit vs. For-profit Hospitals.
https://www.incrediblehealth.com/blog/nonprofit-vs-for-profit/
Shi, L. & Singh, D. (2017). Essentials of the U.S. Health Care System. Burlington, Massachusetts:
Jones & Bartlett Learning
Rapfogel, N., & Gee, E. (2019, February 22). How nonprofit hospitals can support communities and
Advance Public Health. Retrieved April 1, 2022, from
https://www.americanprogress.org/article/nonprofit-hospitals-can-support-communities-advance-
public-health/
Shi, L., & Singh, D. A. (2019). Chapter 8- Hospitals. In Essentials of the U.S. health care system (Fifth
ed., pp. 182-204). Burlington, MA, MA: Jones & Bartlett Learning.
Kahn, K. (2019, September 10). How Do Nonprofit and For-Profit Hospitals Differ? It’s Complicated.
Retrieved from NPQ: https://nonprofitquarterly.org/how-do-nonprofit-and-for-profit-hospitals-
differ-its-complicated/
Kelly, S. (2021, April 3). Mercy Hospital finalizes sale to keep doors open in Bronzeville. Retrieved
from Chicago Suntimes: https://chicago.suntimes.com/2021/4/3/22365497/mercy-hospital-sale-
finalized-insight-chicago
Nicholson, S., Pauly, M. V., Burns, L. R., Baumritter, A., & Asch, D. A. (2000). Measuring Community
Benefits Provided By For-Profit And Nonprofit Hospitals. Retrieved from Health Affairs:
https://www.healthaffairs.org/doi/10.1377/hlthaff.19.6.168#:~:text=A%20community%20that%20ta
xes%20a,that%20does%20not%20pay%20taxes.
