It depends! From a management perspective, there is really no significant difference. As a CEO, you will answer to someone or something (county commissioners, the voters or shareholders!). One difference is that the non-profit, in most instances, have a requirement to provide care (excluding emergent/EMTALA) regardless of the ability to pay- and this may be part of their mission and vision. Furthermore, non-profits that are public (county/city owned) are usually reimbursed from taxes and fees for uncompensated care.
Another difference, from my experience, is that for-profits can sometimes provide better benefits to managers and senior employees throuth stock options and employee stock purchas plans. This can create ownership for employees to improve their organization and have a vested interest in providing high quality care effeciently.
If asked about personal compensation preferences, one can argue that from a personal perspective, the difference of profit and not-for-profit on personal remuneration is negligible.
"Where past research on nonprofits in general indicates that high rates of CEO pay can generally be correlated with organizational size and high levels of available cash, a recent Harvard University study has found that that the compensation of nonprofit hospital CEOs is not necessarily correlated to margins or liquidity, but to the numbers of hospital beds (possibly a proxy for size), high ratings on patient satisfaction surveys, whether or not the institution was a teaching hospital, and whether it had advanced technological capacity. Those paid the most tend to oversee larger, urban hospitals, which are generally teaching institutions."
Also, there are less constraints on operations in terms of making a distinctive contribution to the society. I think it can be argued that for-profits and not-for-profits both provide a tremendous amount of good to a community. Being the CEO for a for-profit hospital means you have more latitude in how your make that happen.
I vote not for profit. - Risk incurred in an agency problem (Finan I) is lower. In a for profit, the share holders may be investors and are looking for their bottom line to increase in order to get back their investment. This has the potential to maintain a rise in healthcare costs as it promotes high dollared reimbursement services, instead of promoting a more preventive stance. - Tax Reimbursement. (Finan I) Not for profit organizations mitigate risk attained from patients who either do not have the means to pay for their healthcare, or opt not to pay by the ability to attain tax exempt status. Additionally, not for profit organizations have access to tax subsidized contribution capital. - Earnings {in full} come back to the facility (Finan I) and ultimately benefit the patients. Not for profit serves the public and does not require a portion of earnings go back to investors / shareholders.
It depends! From a management perspective, there is really no significant difference. As a CEO, you will answer to someone or something (county commissioners, the voters or shareholders!). One difference is that the non-profit, in most instances, have a requirement to provide care (excluding emergent/EMTALA) regardless of the ability to pay- and this may be part of their mission and vision. Furthermore, non-profits that are public (county/city owned) are usually reimbursed from taxes and fees for uncompensated care.
ReplyDeleteAnother difference, from my experience, is that for-profits can sometimes provide better benefits to managers and senior employees throuth stock options and employee stock purchas plans. This can create ownership for employees to improve their organization and have a vested interest in providing high quality care effeciently.
Excellent response, Drew.
ReplyDeleteA few additional points:
If asked about personal compensation preferences, one can argue that from a personal perspective, the difference of profit and not-for-profit on personal remuneration is negligible.
https://nonprofitquarterly.org/management/23077-nonprofit-hospital-exec-pay-linked-to-specific-constellation-of-factors.html
"Where past research on nonprofits in general indicates that high rates of CEO pay can generally be correlated with organizational size and high levels of available cash, a recent Harvard University study has found that that the compensation of nonprofit hospital CEOs is not necessarily correlated to margins or liquidity, but to the numbers of hospital beds (possibly a proxy for size), high ratings on patient satisfaction surveys, whether or not the institution was a teaching hospital, and whether it had advanced technological capacity. Those paid the most tend to oversee larger, urban hospitals, which are generally teaching institutions."
Also, there are less constraints on operations in terms of making a distinctive contribution to the society. I think it can be argued that for-profits and not-for-profits both provide a tremendous amount of good to a community. Being the CEO for a for-profit hospital means you have more latitude in how your make that happen.
I vote not for profit.
ReplyDelete- Risk incurred in an agency problem (Finan I) is lower. In a for profit, the share holders may be investors and are looking for their bottom line to increase in order to get back their investment. This has the potential to maintain a rise in healthcare costs as it promotes high dollared reimbursement services, instead of promoting a more preventive stance.
- Tax Reimbursement. (Finan I) Not for profit organizations mitigate risk attained from patients who either do not have the means to pay for their healthcare, or opt not to pay by the ability to attain tax exempt status. Additionally, not for profit organizations have access to tax subsidized contribution capital.
- Earnings {in full} come back to the facility (Finan I) and ultimately benefit the patients. Not for profit serves the public and does not require a portion of earnings go back to investors / shareholders.