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Nonprofit vs. for-profit hospitals: How financial challenges differ

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Healthcare Dive has looked at the financing issues facing nonprofit compared to for-profit hospitals.

Among the observations in an article this week:

“Healthcare leaders say a hospital or health system’s nonprofit or for-profit status isn’t what leads it to profitability. Instead, it’s the health system’s location, size, ability to scale and share of the local market. Nonprofits are in many ways facing the same struggles that for-profits are.

“’Being nonprofit or for-profit on its nose does not determine performance,” Amy Knight, chief operating officer at Children’s Hospital Association, told Healthcare Dive. Instead, the system’s mission and business goal often influence market location, the scope of services and payer mix, she added.”

On finances, the “main differences between the two types of systems are how each accesses capital, which one pays taxes and which one must offer community benefits. Nonprofits must ‘serve the healthcare needs of the community.’ In return, nonprofit hospitals don’t pay taxes. For-profit systems benefit from investors’ money and have more flexibility about which services they offer, often seeking more profitable ones.”

The article has a in-depth look at nonprofit community hospitals, in singling out as a particularly useful example, Hallmark Health, which serves some of Boston’s  suburbs.

The article notes that “One issue for Hallmark Health — and other community hospitals — is the percentage of patients on government programs has increased, which means lower payments than if more patients belonged to private payers.”

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