For-Profit Vs. Not-For-Profit Healthcare Providers

by Elizabeth Layne - Updated September 26, 2017

Nonprofit healthcare providers, such as hospitals, nursing homes and health insurance plans, were established for charitable purposes, often by religious orders. But with the dramatic rise in healthcare costs beginning in the 1980s, healthcare providers have increasingly become for-profit businesses.

Background

As tax-exempt organizations, nonprofit healthcare providers have a mission of serving communities and providing care without regard for a patient's ability to pay. The financial bottom line of nonprofits is covered by charging more to patients who can pay bills, to cover those who can't. For-profit providers look at healthcare as a business, with a financial bottom line that produces profits distributed to shareholders.

The Claims

For-profit health care providers claim they are able to provide better care at lower cost due to cost cutting and efficiency. But critics say for-profit providers are successful because they tend to serve affluent, insured patients and focus on highly lucrative specialties such as cardiology and elective surgery. At the same time, critics say, they avoid treating the the uninsured and avoid providing emergency care, which often is used by poor patients for basic health needs. Further, critics question whether for-profit providers' focus on efficiency and cost-cutting impacts consumers' health negatively.

Video of the Day

Brought to you by Techwalla
Brought to you by Techwalla

Performance

There is no clear evidence that nonprofit hospitals or for-profit hospitals as a whole are better than the other. One study, a 2002 Canadian study of 26,000 U.S. hospitals, did find that for-profit hospitals had a 2 percent higher mortality rate than nonprofit hospitals. No other study has shown outcomes to be clearly better in nonprofit hospitals. But, surveys done by the U.S. Department of Health & Human Services, as well as Consumer Reports.org, have shown that nonprofit nursing homes give higher quality care than do for-profit homes.

Factors

A major factor for the lack of clear evidence over which type of hospital is better is that both nonprofits and for-profits provide services in an increasingly similar manner, since each need to cut rising healthcare costs to stay in operation. Healthcare plans, as well, focus on cutting costs. But, nonprofit nursing homes have been rated better by Consumer Reports.org because they tended to hire more staff.

Advocacy

When a nonprofit entity converts to for-profit, the law states that the monetary assets it holds prior to converting must be used for charitable health purposes. As conversions continue, consumer and community advocates work to ensure that public interest in nonprofit healthcare is protected as much as possible. Groups such as the Community Health Assets Project and the Alliance for Advocating Nonprofit Health Care, help community groups, media and policymakers ensure the continuation of nonprofit health services and protect the public's interest during conversions.

About the Author

Located in the mid-Atlantic United States, Elizabeth Layne has covered nonprofits and philanthropy since 1997, and has written articles on an array of topics for small businesses and career-seekers. An award-winning writer, her work has appeared in "The Chronicle of Philanthropy" newspaper and "Worth" magazine. Layne holds a Bachelor of Arts in journalism from The George Washington University.

Cite this Article A tool to create a citation to reference this article Cite this Article