According to the American
Hospital Association there are roughly 5724 total hospitals in the US comprised
of 2903 Nongovernment Not-for-Profit Community Hospitals and 1025 investor
owned hospitals and 1,045 State and Local Government owned Hospitals (AHA 2013)
Not-for-profit hospitals are organized under Section 501(c)(3) of the IRS tax
code and, as such, are exempt from federal and state taxes and generally from
local property and other taxes. Not-for-profit hospitals also have access to
tax-exempt bond financing and have tax-deductible status for gifts and
contributions (Barton 2009). Some issues according to the Barton text is that
not-for-profits receive more from their communities in tax exemptions than they
return to their communities in services.
The majority of hospitals in
the US are the not for profit hospitals comprising 50.7% of the total. The
government run hospital rate is around 18% not accounting for the federal,
prison, psychiatric, or long term care facilities. While the proprietary for profit hospitals
make up approximately 17.9% of the hospitals in the US. (AHA 2013)
According to Barton in our
text book the sources of revenue for Hospitals are the following: 36.9% from
private health insurance 28.2% from Medicare 17.2% from Medicaid 11% from State
and local government 4.6% from other
private insurance and 3.3% out of pocket. (Barton 2009) If I were just to
consider the sources of revenues It is easy to come to the conclusion that a
majority of hospitals receive funding from the government in one form or
another. However, I can understand how this situation offers benefit to the
community by servicing to both private and government insured persons. It would
be redundant to duplicate services in one geographic location according to this
sentiment.
According to Trussell , “The results of his study indicate that when
capital structure is proxied by leverage and is measured as the book value of
debt- to-assets, there is no significant difference between proprietary and not
for profit organizations beyond that which the profitability, risk, growth, and
size of the organizations can explain.” This is significant in the fact that we
would expect because of the tax structures and sources of income for the
capital structures to be different.” (Trussell, 2012).This means that
regardless of where the money is coming from the revenues use similar and if
there is an issue in the cost benefits of the not for profit sector then there
is an issue in the for profit sector as well.
Some comparative studies of
cost and performance have been done between the types of hospitals. Cost per
Adjusted Patient Day, show data from the state of Washington and Northwest
geographic area, ($2,081 for not-for-profit and $1,826 for government) hospitals,
followed by small ($3,297 for not-for- profit and $2,504 for government) and
large ($2,426 for not for-profit and $2,865 for government) hospitals (Coyne
2009). Looking at the cost per patient per day for non for profit hospitals
seems to be more efficiently run in the not for profit hospitals as evidenced
by cost per adjusted patient day.
In a study of hospitals in
an urban setting of California, the most interesting result is the difference
in cash flows between the two organizational types. Both measures of cash flows
are significantly different. The results show that non-profit hospitals are
good at managing their cash flows by generating cash quicker than they spend
it. The same was not observed in the FP hospitals. The FP hospitals spend money
quicker than they collect it, which puts them in a potential negative cash flow
position. This is a significant finding that has implications for FP hospital
management. (Plante 2009). After
reviewing that the cash flows in not for profit comes quicker than they collect
it. I question if this is a result of fundraising and tax free donations that
are given to these entities versus a for-profit institution or government
institution not having access to funds. Given that the author also notes that
the not for profit hospitals provide more community programs than for profit
hospitals I would argue for the not for profit hospitals as providing more
benefits, but I would still question if the benefits were more efficient than
the for profit institutions.
After reviewing some of the
information from fragmented regional studies I have come to find that not for
profit hospitals makes up a majority of the hospital systems in the US and when
compared to the government systems they typically perform better in Cost
Adjusted Pay. With revenues and Capital structures appearing similar I would
recommend a sample of hospitals around the country to confirm the similarities
between capital structures and patient cost nationwide. Barring the huge exception noted earlier and
looking at the research and numbers I am now more interested if the actual
issue of efficiencies of hospitals whether for profit or not for profit is
similar across different business industries.
References
American
Hospital Association (2013). Fast Facts on US Hospitals Retrieved from:
American Hospital Association http://www.aha.org/research/rc/stat-studies/fast-facts.shtml
Barton,
P. L. (2009). Understanding the U.S. Health Services System (4th ed). Health
Coyne,
J. C. (2009). Hospital Cost and Efficiency: Do Hospital Size and Ownership
Type Really Matter?. Journal Of
Healthcare Management, 54(3), 163-176.
Plante,
C. (2009). THE DIFFERENTIATION BETWEEN FOR-PROFIT AND NONPROFIT HOSPITALS:
ANOTHER LOOK. Research In Healthcare Financial Management, 12(1),
7-17.
Song,
P. E. (2013). Hospital Ownership and Community Benefit: Looking Beyond
Uncompensated Care. Journal Of Healthcare Management, 58(2),
126-141.
Trussel,
J. (2012). A Comparison of the Capital Structures of Nonprofit and Proprietary
Health Care Organizations. Journal Of
Health Care Finance, 39(1), 1-11
Vélez-González, H. (2011).
Vélez-González,
H. (2011). The Role of Non-Financial Performance Measures in
Predicting Hospital Financial Performance:
The Case of For-Profit System Hospitals. Journal Of Health Care Finance,
38(2), 12-23
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