"Is the distinction beginning to blur between for-profit and nonprofit healthcare organizations?" This is Christopher Cheney's question in an article originally published in HealthLeaders Magazine. The author's conclusion: only subtle differences exist.
According to the Michael Wiechart, president and CEO of Capella, a privately held company that operates 10 acute care and specialty hospital facilities in five states, "For-profits and nonprofits have a nearly identical mission under ground rules designed to foster and support value-based care, Wiechart continues. "Neither for-profits nor nonprofits have the luxury of ignoring sustainability or patient-care excellence. We're all dealing with the same environment and the same challenges. And it's about who can do it better. Being able to make a sustainable bottom line is necessary for reinvestment and growth for everyone, regardless of your tax status."
But, "organizational culture at for-profits a subtly different flavor than the one at their nonprofit counterparts, says Yvette Doran, FACMPE, chief operating officer at Saint Thomas Medical Partners in Nashville, which is affiliated with Ascension Health, a nonprofit based in St. Louis that owns 131 hospitals in 24 states and the District of Columbia. When I think of the differences, culture is at the top of my list. While quality care is a priority for both, the culture at for-profits is business-driven. The culture at nonprofits is service-driven," she says."
Back to Wiechart, "Both of us share the mission of delivering the highest-possible quality of care. And both of us must make a sustainable bottom line in order to achieve the mission and to expand care for the future. We are both held accountable on our quality of care, our ability to be good stewards of the operations, and to make our organizations great places to work for both employees and physicians. While each operates by some slightly different rules and regulations based on our business or tax structure, both of us have all of the same basic goals and challenges."
For-profits and nonprofits have a nearly identical mission under ground rules designed to foster and support value-based care, Wiechart continues. "Neither for-profits nor nonprofits have the luxury of ignoring sustainability or patient-care excellence. We're all dealing with the same environment and the same challenges. And it's about who can do it better. Being able to make a sustainable bottom line is necessary for reinvestment and growth for everyone, regardless of your tax status.
In an interview with HealthLeaders, Santerre explains that for-profit boards and their executive leadership teams, which invariably have monetary performance incentives built into compensation packages, face a measure of financial pressure that is absent at nonprofits. "Theoretically, there is a residual claimant, and that residual claimant wants to maximize profit," he says, referring to for-profit shareholders.
But, Rexford Santerre, PhD, a professor of finance and healthcare management at the University of ConnecticutIn contrast, says "nonprofit boards and their executive leadership theoretically have an "incentive not to compromise quality," noting a nonprofit is required to distribute earnings back into the organization or into its service-area communities. Nonprofits can reinvest earnings in facilities, lower charges to patients, or offer community benefits. In contrast, one of the prime benefits of operating as a for-profit is the opportunity to bank positive operating margin after taxes. "You can take on risks, but you can also gain the rewards as a for-profit," he says.
Health care is not the only industry in which there are both nonprofits and for-profits. According to the three-leg stool paradigm, nonprofits fill that void where there is little or no incentive for for-profits and no demand by the public. While "ownership" as pointed out in the article is clearly distinct for non-profits, I pose that a more important distinction between for-profits and nonprofits is who gets served. Nonprofits most often serve those who would otherwise not be served or not receive the same benefits as those who can pay. Mission for the nonprofit is not just about delivering value, but about delivering value to a population that would otherwise be left suffering at the hands of those who "have".