What’s the deal with nonprofit hospitals?
Nonprofits come in all sorts of shapes and sizes, but people tend to scoff at the very idea of a nonprofit hospital. And for good reason--it is difficult to image an institution that collects so much money from individuals as anything resembling our traditional idea of a nonprofit organization, which brings to mind images of service and even scarcity.
In the United States, there are 5,200 non-federal hospitals, and 3,000 of these are nonprofits. For-profit hospitals account for 1,300 of these, and 1,000 are operated by state and local governments. So what’s the difference?
How the government views them
Nonprofit hospitals, like other nonprofits, are viewed as charities, so long as they follow the same guidelines that govern other nonprofit organizations. This means that they are exempt from state, federal, and local property and income taxes. Hospitals which operate on a for-profit model are owned by investors or shareholders for a publicly traded company, and nonprofit hospitals are not, often aligning themselves with a religious institution.
Who goes there
Anyone can go to a nonprofit hospital, and they sometimes provide more care free of charge or at a discounted rate than for-profit hospitals, though this doesn’t necessarily apply to most of the patients who are seen there. Interestingly, nonprofit hospitals are frequently in higher income areas with more insured people.
How they use resources
For-profit hospitals tend to spend more of their money on advertising and marketing than nonprofit hospitals do, though there are nonprofit hospitals who break the mold in this category. Some for-profit hospitals grow scale up more or more quickly than nonprofit hospitals, but this is not true everywhere.
Financial pressure can be more apparent in a for-profit hospital where executives are regularly reporting to shareholders, resulting in organizational structures that are extremely focused on performance and what that means for the bottom line. Their operational strategy might reflect a numbers-based approach to management. This isn’t to say that nonprofit hospitals don’t care about that--in fact, they’re extremely driven to provide quality care at an affordable cost and routinely evaluate staff performance in much the same way.
Different but the same
In the community, nonprofit hospitals are more mission-driven, and tend to focus on long term planning more than short term returns. The average patient will find little difference in for-profit and nonprofit hospitals. When you go to a facility for care, your experience will be the same at either place. Ultimately, the designation isn’t much more than a tax status, which rarely matters to you, the patient.