Good Samaritan Medical Center
Without a doubt, healthcare is an integral part of any society, since the physical and psychological well-being of its members have a very strong effect on the development capacity. Consequently, healthcare providers are responsible for maintaining of this well-being, especially considering the constant improvement of medicine. It leads to the question of how these providers can ensure the best possible health status of society. Like in any other business, the performance capability of hospitals is dependent upon the management and organizational structures that they use (Weisbrod, 2009). Management is the main center of all operations, responsible for making all decisions, such as the deployment of resources. In recent years, an emergent trend in the healthcare industry has resulted in the creation of two primary systems, namely for-profit and non-profit healthcare facilities (Joynt, Orav, & Jha, 2014). A for-profit hospital, as the name suggests, is one that operates with the motive of generating profits for its investors, while non-profit, also known as not-for-profit facilities, operate primarily to provide care, making no financial gain (Eiland, 2015). Each of the two has its own benefits, as well as drawbacks, which are extensively covered by the research. It is essential to review these implications for Good Samaritan Medical Center in order to anticipate its performance under the Tenet Healthcare Corp.
It is important to highlight the standard by which healthcare providers are assessed. One such standard is the quality of service that patients receive in hospitals (Shi & Singh, 2012). There is no commonly-used system of quality measurement in healthcare, which results in ambiguity in the entire industry in the USA. Before the involvement of the government in the healthcare industry, it operated like other free markets, whereby the players were perceived as the units offering the best quality of services for the highest number of patients (Shi & Singh, 2012). Based on this background, the government of the USA has developed a standard for rewarding beneficiary hospitals (Eiland, 2015). In the end, the Centers for Medicare and Medicaid Services adopted a standard for healthcare quality measurement. The definition of high-quality healthcare is based on such elements as efficiency, effectiveness, safety, timely delivery, equitability, and patient-centered approach. A commonly used quality assessment tool is patient feedback, which reflects patient satisfaction (Hekkert, Cihangir, Kleefstra, van den Berg, & Kool, 2009). Therefore, in addition to meeting all the stipulations for quality healthcare as per the Centers for Medicare and Medicaid Services, Good Samaritan Medical Center must pursue a structure that maximizes patient satisfaction.
According to Shi & Singh (2012), access is another element that is central to delivering healthcare, in addition to quality. It is defined as an individual’s capability to get healthcare services at the moments when he/she needs them (Shi & Singh, 2012). It should be noted that it is not less essential to have access to healthcare than to receive high-quality care. For instance, if a hospital has the facilities to provide the highest quality of healthcare, it is still not delivering the highest value to the community, if it is not accessible to most of people. Therefore, any hospital that aims at improving the overall well-being of a community, must concentrate on improving accessibility and quality of healthcare (Eiland, 2015). There are several factors that affect the level of access to healthcare, one of which is its cost. For instance, if a hospital sets its services’ prices too high, it prevents many people from accessing them (Shi & Singh, 2012). The second factor is the willingness of patients to access the available care facility, which may depend on the proximity of the healthcare providers. It is essential in determining the number of people that receive their services (Cheney, 2016). Undeniably, a hospital must maintain its accessibility in determining its contribution to the improvement of society’s well-being.
There are several factors that set non-profit hospitals apart from their profit-making contemporaries. The Online Healthcare MBA Program at George Washington University (2017) reports that one of the distinguishing factors is the class of expenditure items that is a top priority for non-profit facilities. The article posits that these facilities spend most of their income on issues that directly improve their service delivery. For instance, non-profit facilities are likely to spend more money on equipment that is expensive to acquire and maintain and, therefore, is likely to give little profits (Online Healthcare MBA Program, 2017). Such priority follows the fact that operating as non-profit organizations, these hospitals’ main aim is the provision of value to the communities they serve. On the other hand, this strategy jeopardizes the stability of such facilities, as they may not afford to provide care without the resources that investors, who expect returns, may present (Cheney, 2016). It has led to a capital deficiency in some non-profit hospitals, which resulted in their acquisition and transformation into for-profit facilities (Weisbrod, 2009). With respect to providing uncompensated care, some researchers argue that despite their main priorities, there is no significant difference between non-profit and for-profit hospitals (Becker, 2014). Similarly, Becker (2014) notes that there is a big difference between the level of services delivered by uncompensated care and the ones provided by compensated care facilities.
Another distinct feature of non-profit hospitals is their exemption from most taxes at the federal, state, and local levels. The given area counts as one of the chief advantages of non-profit facilities, as it saves them significant amounts of money (Becker, 2014). However, it is also one of the controversial areas, as opponents of the exemption question its justification. Nonetheless, it is a well-grounded trend, which makes it possible to exempt charitable enterprises from federal taxes under the Revenue Act of 1861 (Fishman, 2008). The proponents also argue that such an exemption is justifiable, as it ensures the perpetuation of altruism in today’s capitalistic society. According to James (2016), this exemption acts as the government’s way of acknowledging that non-profit facilities benefit society. Eiland (2015) explains that the Affordable Care Act has played a critical role in setting empirical requirements that hospitals must meet to qualify for certain exemptions. Such requirements, classified under the Centers for Medicare and Medicaid Services, aim at instituting accountability and transparency in the hospitals’ operations (James, 2016). Evidently, in such cases, the non-profit facilities are held to a higher moral standard compared to profit-making ones.
The expenditures in these facilities reveal a more commercial orientation, unlike in non-profit ones (Eiland, 2015). For instance, for-profit facilities spend more resources on advertising and marketing. It is caused by the fact that they have a different system of measuring value, as compared to their non-profit-making contemporaries. For the latter, the maximum value is in serving society to the highest possible degree, while the former considers the value they receive as directly dependent on the profit they make (Cheney, 2016). Therefore, they appreciate competitive operation, which is perceived as a key to finding success. When there are profits at stake, management is usually more stringent in the deployment of resources, as it is aimed at obtaining the maximum economic value from every investment (Cheney, 2016). It reflects higher levels of efficiency for them, with minimal wastage and maximum resource expenditure (Weisbrod, 2009). In addition, these institutions manage to evolve with time. Upgrade of equipment and other facilities is usually capital-intensive and, hence, more easily accessible for for-profit facilities, as they have more resources at hand from their investors.
Considering the above information, for-profit entities have better self-governance, but less institutional oversight. They do not face stringent scrutiny compared to non-profit entities, and they are less obligated to deliver a certain level of service to the community (Joynt, Orav, & Jha, 2014). However, they also have a different type of regulation. They aim at maximizing profits, which results in the prices of services they provide. As a result, the patients, like any other consumers, will seek to obtain the best value for their money (Shi & Singh, 2012). In this way, for-profit consumers have similar performance standards as non-profit entities, albeit not official. Moreover, they offer different types of services compared to non-profit facilities, focusing primarily on expensive, technology-intensive diagnostic services with high-income potential (Joynt, Orav, & Jha, 2014). Such decisions are economically inspired, since such expensive services are essential for the involved individuals, meaning that they are motivated to receive care at a high cost.
Section Two: Comparative Analysis
More than seventy-two percent of hospitals in the USA operate as non-profit entities, while the rest are divided between for-profit and government facilities (James, 2016). However, in the recent past, many hospitals have transformed from non-profit or public to for-profit entities, mainly as a result of capital shortages (Cheney, 2016). Due to the controversy that causes such a trend and, consequently, intense research required for the implementation of the changes and their actual implications within the organizations, the opponents expressed their concerns that the hospitals would turn into facilities focused only on making profits while neglecting the quality of healthcare (Joynt, Orav, & Jha, 2014). Specifically, they fear that the hospitals may change and neglect caring for the disadvantaged, in favor of patients with higher paying capacity (Joynt, Orav, & Jha, 2014). However, advocates of the change argue that the only significant changes that follow such a shift are the improvement in management, reduction of wastage, and better operational efficiency (Eiland, 2015). Consequently, they argue that the change is positive for both investors, who earn from them, and patients, for whom the quality of services does not deteriorate.
One empirical study that focused on acute care centers compared the performance of those facilities that had changed from non-profit facilities and those that had maintained their status over the same period. All the empirical evidence that they gathered showed that there was no change in the correlation between payer to non-payer patients served. Becker (2014) observes that separate studies yielded similar results, whereby the non-profit and for-profit hospitals dedicated 4.7% and 4.2% of their respective budgets to uncompensated care. The 2014 study by Joynt, Orav, & Jha used the process of care, nurse staffing, and outcomes in acute care institutions to measure the quality of care. Joynt concluded that using the chosen indicators, there was no evidence of quality deterioration despite the change of system. Notably, these institutions significantly improved their total margins by 2.2%, compared to the non-profits’ 0.4% (Becker, 2014). Based on the evidence, organizational changes improve financial performance but have an extremely low influence on the quality of care (Cheney, 2016).
Section Three: Summary
There are clear differences between hospitals that operate as non-profits and for-profit entities. For instance, the former are more focused on delivering social value, while the latter operate as commercial enterprises to provide profit to the investors. Such difference raises fears that conversion from a non-profit to a for-profit form of operation may lead to a tradeoff in the quality and accessibility of healthcare. However, the empirical analysis does not reveal such evidence. In its turn, it shows that such hospitals only improve their financial management and results. It provides a clear direction for Good Samaritan Medical Center, which has undergone such a transformation. The research shows that the center, just like a number of similar care centers studied, is likely to improve financially, without deterioration in the quality of healthcare. Its acquisition by the large Tenet Healthcare Corp will help to expand resources and serve more people with time, improving their access to facilities. Therefore, it indicates that for-profit hospitals are better for providing healthcare, as they improve the access to services, as well as the efficiency of their delivery, without compromising on quality.
Becker, A. L. (2014). How different are for-profit and nonprofit hospitals? CT Mirror. Retrieved from http://ctmirror.org/2014/04/25/how-different-are-for-profit-and-nonprofit-hospitals/.
Cheney, C. (2016). Differences between NFPs and for-profits are marginal. Health Leaders Media. Retrieved from http://www.healthleadersmedia.com/finance/differences-between-nfps-and-profits-are-marginal.
Eiland, M. R. (2015). Differences between for-profit and nonprofit hospitals: Perceived quality and access. Retrieved from http://scholarworks.waldenu.edu/dissertations/749/.
Fishman, J. J. (2008). The political use of private benevolence: The statute of charitable services. Pace Law Faculty Publications, 487. Retrieved from http://digitalcommons.pace.edu/lawfaculty/487.
James, J. (2016). Nonprofit hospitals’ community benefit requirements. Under the Affordable Care Act, many nonprofit hospitals must meet new requirements to retain their tax-exempt status. Retrieved from http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_153.pdf.
Online Healthcare MBA Program. (2017). Profit vs. nonprofit hospital administration. Retrieved from http://healthcaremba.gwu.edu/resources/articles/profit-vs-nonprofit-hospital-administration/.