Profit Versus Not-for-Profit Hospitals Essay

1438 Words Oct 7th, 2012 6 Pages
Profit Versus Not-for-Profit


In Partial Fulfillment of the Requirements for

Health Services Systems

HSM 541

Blaise X. Schmidt

DeVry University

Keller Graduate School of Management

September 2012

1.0 Purpose

The purpose of this paper is to conduct a comparative analysis between for-profit hospitals and not-for-profit hospital. It will discuss the characteristics of each as well as factors affecting the operations of both systems. Additionally, it discusses potential areas of improvement and some of the challenges associated with each relative to finance and operations.

2.0 Comparing Not-for-Profit and For-Profit Hospitals

Not-for-profit hospitals are organized under the Section 501 (c)(3)
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Not-for-profit hospitals do make a profit. The profit is reinvested in the facility upgrades, staff and other services. For-profit hospitals use the profits for capital improvement, hiring staff, and returning the profits to the shareholders and Chief Executives in the form of bonuses and profit sharing.

The public views the not-for-profit as a dichotomy. They see the hospitals making profits though developing profitable centers such as outpatient surgery, or diagnostic service. Conversely, the hospitals due provide a level of care that “appears” to be better than for-profit. This point is contentious. Jill Horwitz, a business and law professor at the University of Michigan who studies the hospital market, says the biggest difference between the two types of hospitals is in the services they offer. For-profit hospitals, she says, are more likely to offer lucrative services, such as cardiac and diagnostic services, while their not-for-profit counterparts often provide more less-profitable services such as trauma centers, burn centers and alcohol- and drug-treatment programs (Gold, 2012).

3.0 Future Operations

Competition among the various hospitals, whether private, public, non-profit, government, or for-profit is increasing. Consequently, there is duplicity of operations resulting in marketing nightmare, care perception, operational decisions, productivity and profitability, and public perception. Hospitals compete with each

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