How to Tell the Difference Between Nonprofit and For-Profit Hospitals

As a future healthcare administrator it’s very likely that you will find yourself at some point working, interning, or connecting with a hospital. When that happens it will be helpful to understand the differences between two basic types of hospitals: nonprofit and for-profit. Here are a few of the similarities and differences between both:

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The two different types of hospitals access capital differently. Whereas for-profit hospitals may have access to cheaper equity capital, nonprofit hospitals don’t need to pay returns on the equity they use. Additionally, nonprofit hospitals differ from for-profit hospitals in that they are required to offer community benefits in exchange for their tax-exempt status. If you’re interested in working in hospital finance you might want to consider what these differences would mean to you in your future work.

Community Benefits & The Affordable Care Act

The issue of community benefits is a career unto itself. Many administrators who work for nonprofit hospitals choose to specialize in the tracking and administration of their institution’s community benefits program. There are a few new rules and regulations on community benefits that these types of administrators might want to know about.

Under the Affordable Care Act (ACA), nonprofit hospitals that provide community benefits now have new tasks and responsibilities to manage. In general, there is now a higher level of transparency required by hospitals as to how they charge and collect on services provided to their communities. Some of these charging and collection activities that were viable in the past may now be prohibited. Additionally, nonprofit hospitals now need to conduct research into the health needs of the communities they serve and develop plans to address those particular needs. Healthcare administration students who are interested in health research may be especially interested in learning more about new ACA regulations and gaining skills related to fulfilling its requirements.

Patient Pool

Even though nonprofit hospitals are required to provide community benefits, some sources say that nonprofit hospitals tend to be located in communities with higher incomes and a lower number of uninsured patients than for-profit hospitals. So working at a for-profit hospital doesn’t necessarily mean that you won’t be working with the neediest populations.

Similarities

Despite the differences in structure between nonprofit and for-profit hospitals, often doctors and administrators may not notice much substantive variation between the two in day-to-day operations. When it comes to quality of care and administrative oversight, there might not be any large-scale contrasts to point at, especially since both types of hospitals are functioning within the same overall system of healthcare contracts. When you look at lists of best hospitals in the U.S. for example, you will find both nonprofit and for-profit hospitals.

In the end, students of healthcare administration would be well-served by investigating the differences between nonprofit and for-profit hospitals and the ways that those differences may or may not affect their work. Depending on your area of focus, you might see opportunities and challenges in either one model or the other, or you may decide that you are happy working under either system.