Hospitals may either be for profit or not for profit. There are several differences that may arise between the latter this maybe in governance, administration, sources of revenue, types of patients being treated and overall goal of the hospital. IRS Regulations That Govern Profit Status for Organizations Including Hospitals. The IRS has a number of federal codes that define whether an organization is profit making or not. First and foremost if an organization is under the non profit statute and it falls under the IRC code of 501, then it will be exempt from taxes.
In addition to the above, one ought to have a charitable status if they require an exemption to taxes. The IRS requires that there should be no benefits on the side for hospitals or organizations claiming to be non profit. This means that regular audits from agents will be conducted in order to find out if paperwork is in order. The amount of money that goes to a hospitals or organization’s board must not be doubtful or excess usually as a result of some side negotiations for none profits. (Hopkins, 1994) Differences between for profit organizations and not for profit organizations.
Profit organizations are not governed by a code but are instead governed by the state law. The judiciary system is the one that determines whether an organization is guilty of an offence or not or what kind of corporations it is. However, not for profit organizations are governed by IRC codes which give numerous guides on whether a hospital qualifies for tax exemption status or not. Governance in for profit organizations is controlled by law suits. In not for profit organizations, there are a number of restrictions on governance.
First of all, the amount that is paid to boards of directors is governed by the IRS. There must not appear to be any undue benefits by those who govern. When for profit organizations like hospitals commit an offence, they are disciplined by corporate law. This is not the case for not for profit hospitals. If some unanswered dealings are discovered within the hospital then the penalty given by the IRS is suspension from tax exemption status. For profit hospitals can sue each other or participate in legal suits but this is not the case in not for profit hospitals whose parties are quite different i.
e. , the donors while in for profit organizations it is the shareholders who make this suits. Not for profit organizations must have the main purpose of being charitable. They must have the main agenda of providing a public service to patients. However for profit hospitals have the main goal of making profit. Mangers and administrators must therefore run these hospitals having in mind what the overall goal is; otherwise they will be subject to disciplinary action. (Hopkins, 1994) Challenges Facing Not For Profit Hospitals in the US
There are many challenges that not for profit hospitals in the US face. They may either be structural or financial and some of them include: Hospital administration is left with heavy financial deficits to bear due to lack of insurance cover for many patients. The government has placed extremely stringent rules on who can qualify for insurance leading to a rejection of many people who cannot meet that criterion. That burden is the left to not for profit hospitals who must fill in this gap.
There is a possibility of a not for profit hospital being overwhelmed with a large volume of in patients. This is because many may not be able to afford exorbitant charges in for profit hospitals and will therefore go for the other alternative. This means that these hospitals will be stretched in terms of accommodation(beds), specialized treatment facilities and may face a shortage of staff members to attend to this upsurge of in patients. One of the greatest challenges facing these hospitals is balancing revenues with expenses.
A hospital must pay its staff members, it must have all the necessary medical equipment and it must also posses drugs. Yet the amount of revenue may not meet this since Medicare which is the government funder for not for profit hospitals is not meeting its end of the bargain. It disburses a very low amount to hospitals expecting that the hospital will sort itself out. Hospitals require renovations and updates. Constructions in this day and age are becoming more and more costly. Since the money disbursed to the hospitals are for running costs.
Then it becomes a tricky affair trying to upgrade these hospitals. (Hopkins, 1994) Conclusion For profit hospitals have straight forward goals and stakeholders have a defined way of doing things, however, not for profit hospitals do not have specific goals, their sources of revenue may not be clearly defined but the IRS has come in to ensure that this shaky ground attains some stability.
Reference
Hopkins & Bruce, R. (1994). : Non profit Law Dictionary: Wiley, New York Publisher