Forms of Ownership for Health Organizations


Healthcare centers like hospitals have always provided vital services to the general public. The healthcare market is served by organizations that are private for-profit as well as private for non-profit. There are also government-owned and operated hospitals. The provision of Medicare has been supported by the healthcare organizations that have played significant roles in funding as well as in the delivery of medical care services in the US. According to the Alliance for Advancing Non-profit Healthcare (2010), past studies have shown that about 80-90% of Americans believe that ownership of healthcare determines a lot in the provision of healthcare services. The ownership of hospitals has effects on the performance of the hospital. This happens particularly with respect to costs and financial management. Also, personnel issues can affect the operations of a hospital. The outcomes of a particular organizational system are also affected by hospital ownership. This is because these outcomes tend to prioritize goals differently. The differences are also caused by the nursing staff mix coupled with professional satisfaction.

Non-Profit Healthcare Organizations

Historically, these organizations have played and still play crucial roles in financing as well as delivery of healthcare in the US. According to the Alliance for Advancing Non-profit Healthcare (2010), about 60% of community hospitals in the US today are non-profit. Besides, approximately 30% of nursing homes and 17% of all home healthcare agencies are also non-profit meaning that most people in America rely on non-profit organizations for healthcare services. Insurance providers offer healthcare services to about two out of every five citizens in the US.

Non-profit healthcare organizations are mainly responsible and are also accountable to all the communities they provide services to. The organizations are legally as well as ethically bound to ensure that they provide excellent services to benefit the communities they serve. Members of the non-profit healthcare organizations do not share the profit they gain from their services, but rather, reinvest the profit to benefit the communities. Part of the profit is used to improve quality, service, as well as efficiency since the provision of healthcare services, is in a very competitive environment. The rest of the reinvestment is used to provide various community programs, products, and services whose costs are not covered with an aim of improving the health status of vulnerable people. These may include providing community health education; supporting medical research; providing trauma care services as well as preventive services; and safety-net insurance products among others.

Advantages of Non-profit Healthcare Organizations

Non-profit healthcare providers, as well as insurers, usually provide their services in a more honest and trustworthy manner. They rarely make misleading claims and besides, patients are not likely to lodge complaints against them. According to the Alliance for Advancing Non-profit Healthcare (2010), in more than a twenty-year period, only one non-profit healthcare organization out of the twenty largest healthcare organizations has been involved in healthcare fraud settlements. They do not discriminate against less-empowered people in the provision of healthcare services.

Non-profit healthcare organizations usually offer their services at lower costs. Non-profit nursing homes incur higher costs to provide higher quality services. They charge lower rates in adverse events. These organizations aim at high-quality services and patient satisfaction. They have lower costs while providing higher quality which is measured by lower mortality rates (Duggan, 2000).

Non-profit healthcare organizations are always exempted from tax deductions. This is because such organizations are eligible for tax exemptions under the Internal Revenue Code. They, therefore, do not pay corporate income tax. These organizations are also offered some reprieve from the similar state as well as local taxes. They are also permitted to solicit charitable donations from the general public.

Under federal law, non-profit healthcare organizations are different legal entities from their managers or founders. This suggests that creditors, as well as courts, are limited to the assets of these non-profit healthcare organizations. Thus, the founders and directors do not hold any personal liability for the debts of the organization and therefore cannot be held responsible should anything happen concerning these assets. This situation does not also affect the employees. An individual is not allowed to use the corporation to cover up illegal acts on his or her part. The directors of these organizations also have a fiduciary responsibility. They can therefore be held responsible for the underperformance of the organization (Duggan, 2000).


The cost of establishing a non-profit healthcare organization can be very high. It requires a lot of resources like time, effort as well as finance. The non-profit-making organizations have to acquire the services of an attorney and other professionals such as auditors. This is because these organizations are legal entities that fall under the federal state. The cost of applying for the federal tax exemption may be between $200 and $850. This is because it also involves legal and consultant fees. Besides, the organization has to pay the state fees to be incorporated (Cameron & Cleverly, 2003).

Non-profit healthcare organizations generally incur higher medical loss since most of the premium is spent on healthcare services while less is spent on administrative costs as well as profits (Duggan, 2000). These organizations are more concerned about the quality and satisfaction of patients than administrative costs.

There is also much paperwork since the organizations are exempt corporations. Non-profit healthcare organizations, therefore, have to keep detailed records that they submit to the state as well as the IRS. They have to be able to beat the stated deadlines to keep them active and also help them maintain tax-exempts (Cameron & Cleverly, 2003).

For-profit Healthcare Organizations

These organizations are offering medical services at relatively profitable costs. Most of them tend to locate in areas that have relatively well-insured consumers. The profits made from these corporations are shared among shareholders. However, they do not enjoy tax exemptions (Cameron & Cleverly, 2003).


For-profit hospitals have the benefit of easy access to equity capital. Besides, they are not burdened with presumptions that they are indebted to the community for uncompensated benefits. They are not obligated to provide services to the public and can therefore choose to withdraw from the market whenever the prices of products become too expensive to be managed.


For-profit healthcare organizations face many significant economic challenges. First, they have to generate income that can satisfy shareholders of the corporations. Secondly, these organizations pay high executive bonuses. Besides, these organizations incur high administrative costs and also pay taxes. These make them less cost-efficient as they have to spend less money on Medicare. Instead of finding new strategies for improving efficiency, they compromise the quality of health care and also increase the cost of services to satisfy their economic goals. For-profit hospitals can turn away a patient who has no healthcare insurance coverage or even send a patient to a government-operated hospital for economic reasons (Gray, 2003).

For-profit healthcare organizations have sometimes shown dishonesty in their operations. Fraud cases involving for-profit healthcare organizations have always been reported with some of them becoming major scandals in US history. For example, in 1997, Columbia/HCA Healthcare Corp had a major Medicare scandal. In 2004, Tenet Healthcare Corp was also charged with overbilling Medicare. In the same year, executives of HealthSouth’s former executives were also charged with criminal fraud charges. Out of the 20 greatest fraud settlements that have taken place in the land during the period of 1986-2006, 19 of them have been for-profit organizations (Alliance for Advancing Non-profit Healthcare, 2010).

Best form of ownership

Given the experience of the doctors, they can best serve the public through non-profit organizations where they can also become directors-come-doctors of the same hospital. They would be able to shape and control the organization in accordance with the laws and regulations. Since most states require that the non-profit organizations be headed by several directors, it would be advantage to them as almost all of them will have a major role to play in the organization. By opening, a non-profit healthcare organization, they would be able to learn from other established non-profit hospitals and provide high quality services to patients and also ensure satisfaction of the patients.


The US healthcare market is mainly served by the private non-profit, the private for-profit organizations as well as the government owned hospitals. Most Americans are served by the non-profit healthcare organizations which provide better quality and more ethical services at lower prices. The public has more faith on non-profit healthcare organizations and therefore establishing a non-profit hospital organization could be more valuable to the society than for-profit hospital.

Reference List

Alliance for Advancing Non-profit Healthcare (2010), The value of non-profit health care. Web.

Duggan, M. G. (2000). Hospital ownership and public medical spending. The Quarterly Journal of Economics, 115 (4). Cambridge, MA: The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Gray, B. H. (2003). For-profit enterprise in health care. Institute of Medicine (US). Committee on Implications of For-Profit Enterprise in Health Care. Washington, DC: National Academic Press.

Cameron, A. E. & Cleverly, W. O. (2003). Essentials of health care finance. Boston, Ma: Blackwell Publishers.

Removal Request
A real student has written this essay about Forms of Ownership for Health Organizations and owns intellectual rights to it. If you plan to use this work for research purposes, make sure to include an according citation.
Request to Remove Content

If you are the content owner and don’t want it to be available on our website anymore, feel free to send us a removal request. We’ll fulfill it after reviewing.

Send the Request
Receive a free price quote