Not-For-Profit Hospital

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Not-For-Profit Hospitals
About 60% of the United States of America’s (USA) community hospitals are not-for-profit. The Internal Revenue Service (IRS) through Section 501(c)(3) gives not-for-profit hospitals direct and indirect tax exemption from state, federal, and local governments. Additionally, these health institutions are allowed to receive charitable donations and issue tax-exempt bonds. The value of tax exemption on not-for-profit hospitals in the USA in 2011 was estimated to be $24.6 billion (Herring et al. 1). The tax exemption status for not-for-profit hospitals makes sense since these institutions do not have many revenue generation channels as compared to for-profit health institutions and focus on meeting communities’ needs.
The primary difference between for-profit and not-for-profit hospitals is that the former pay income and property taxes. As such, the most significant thing that for-profit hospitals do is to look for various ways they can generate revenues so that they can pay tax and make profits. In other words, the daily operations of these health institutions are driven by shareholders. Investors are the ones who push the management of the for-profit hospitals so that they can make more money to meet their expectations (Eiland 17). However, the primary benefit of for-profit hospitals is that they have to acquire new medical equipment and information technology systems that help them to improve their healthcare services even though they are not driven by the needs of their communities.
Not-for-profit hospitals are the best since they are aligned to the communities' needs. As discussed earlier, it is clear that for-profit health institutions are controlled by shareholders who are more concerned about the revenues generated quarterly instead of how these hospitals meet the needs of patients. Around 5,000 acute care health institutions in the USA are private, not-for-profit entities (Rubin et al. 546). These hospitals are important since they serve millions of Americans. Although the value of tax exemptions has been increasing over the years, not-for-profit hospitals are exempted from local, state, and federal taxes. The money they save from these tax exemptions helps them to meet the needs o...