The heated debate of whether the health institutions should be established as, not for profit organizations has caused topical and complex discussions. The debate has led to the need of establishing whether the not for profit organizations are in any case better in terms of service delivery than for profit counterparts. Nonetheless, private hospitals, which are famed with provision of high quality services, can either be classified as either not for profit of for profit organizations. However, the two types of hospital classifications differ significantly in terms of regulatory principles. Basically, not for profit organizations are not required to pay sales, property or any type of income taxes. Interestingly, the two types of the hospitals have been changing ownerships a good suggestion that hospital industry is not stagnant as people would expect it to be. This paper analyzes the structure and working of both not for profit and for profit organizations in respect to concepts discussed by both professionals and academics. Further, it will explore the objectives, structure and features of importance for both sectors of healthcare.
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In terms of service provision, the not for profit organization are built on the premise of provision of services to the poor. Notably this forms the ground under which these types of hospitals are exempted from paying taxes. In terms of uncompensated care provided between the two kinds of hospitals, the not for profit organizations provide extra care, which corresponds to the element of tax exceptions. Disappointingly, despite, not for profit health organizations being viewed as exceptional facilities, previous researches indicate that about 20 to 80% of such organization fails to make societal impact that corresponds to amount of tax exempted leaving the authorities considering whether they should in a real sense qualify for tax exemption (Ward, 1992). According to Kitchen and Pelsmacker (2004), Unlike for profit organizations, which are built on the premise of offering services for a margin, the not for profit organization are to some instances bound by the law requiring them to offer charity care that equals their tax exemptions in value.
In the public eye, there has been great misconception of the two types of hospitals. Not for profit are viewed as charitable organizations with community centered missions unlike for profit organizations, which on the other hand are considered opportunistic and compassionless. However, this argument fails to consider the increased convergence between the two types of ownerships. According to research by Neuman (2003), the two types of different ownerships exist based their ability to benefit the targeted clientele. Surprisingly, a number of health organizations have been trying to switch from profit centre types to not for profit organizations with a view of enjoying the ability to serve multi state employers, diversification of risk and more importantly, the economies of scale.
One of the major weaknesses that face for profit organizations is the society’s perception that they fall short of offering quality services that can correspond the high fee charged. Disappointingly, the not for profit organizations are of late resembling for profit organizations in numerous ways. As witnessed, they are currently not only relying on donations from sponsors but are also generating revenues from the services provided hence deviating from the noble cause (Tench and Yeomans, 2006). Moreover, to access some kinds of financing, the not for profit ventures are losing ties with the community and moving towards those practices that were traditionally reserved only for profit establishments such as joint ventures, hybrid arrangement and alliances.
The proponents of the two types of ownership support different views with those of, not for profit establishments claiming that their main aim is to better the society while for profit organizations are mostly for profit maximization. According to Smith and Jonathan (2004), the two types of healthcare ownerships face serious constraints, bur for profit organizations have more resources and allow for more flexibility to deal with such constraints. In addition, as compared to the not for profit organizations, they have more resources at their disposal to deal with such constraints. Unlike the management of for profit healthcare organizations, which resembles any other formal organization, the management structure for not for profit organization is not clearly defined. As echoed by various authors and academicians, not for profit organizations are difficult to define as one patent kind. The goes further to state that, the not for profit health care providers have diverse mission and approach vis-à-vis nature, but at the same time acknowledges their extensive vision.
With the majority of people considering for profit organizations as opportunists who charge high fees, the management should counter this kind of perception by providing unmeasured services that correspond to the fee levied. Secondly, even with the objective of maximizing the shareholder’s wealth, the for profit entities should also embrace the idea of bettering the community at large and as such engage in corporate social responsibilities which will ensure the organizations give back to the society within which the grow and survive.
On the other hand, not for profit organizations have been accused of offering services that hardly match with tax benefits they enjoy from the authorities. In deed, the management should ensure that the facilities provide services that commensurate with the objective of the government. The government shuns levying taxes from, not for profit health organizations hoping that such funds will go to community welfare and as such the management should utilized such funds to further the community wellness. Secondly, not for profit organizations should stick to the purpose for which they were established and should, therefore, not engage in activities that defeat the purpose of their establishment. In this light, they should avoid in activities that promote profit maximization as the initial goal for their establishment was to serve the poor masses.
Considering the premise under which the two types of healthcare ownerships are established, I would prefer to work for not for profit establishment given that they exist to make a difference in the society. Further, this type of establishment is set up to fill the gaps that neither the market neither the public sector is willing to serve. Nonetheless, this kind of ownership calls for voluntarism which is fundamentally an individual’s choice rather than compulsion.
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