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Sunday, May 1

For-Profits vs Non-Profits

The debate on whether all healthcare institutions should be non-profit evokes many complex and topical issues. What needs to be examined is whether non-profit hospitals are inherently better than for-profit hospitals, and whether there is enough evidence-based data to support policies dictating ownership.

Not only have the business models of both ownership styles become more and more similar, there has also been a growing number of switches in ownership status between for-profits and nonprofits. The direction of the switches doesn’t suggest a preference for either ownership style. Research suggests that it is not a difference in objectives that dictates these decisions, but rather a strategic analysis of the environment in which the organization operates.

While nonprofits are hailed for their charity work, it is actually a byproduct of their exclusion from paying taxes. Many studies show that often nonprofits do not provide charity comparable to their tax savings, and that for-profits actually give back more in the form by being subjected to taxes. For-profits’ societal contribution occurs within the strict rules of the US tax code, while non-profits operate under more arbitrary conditions which has exposed them to many suits.

Another advantage that for-profits have is the ability to raise more capital through private investors and the stock market. As a result, many nonprofits that have found themselves in financial troubles have been rescued by financially healthier for-profit organizations.

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