The Difference Between For-Profit Hospitals and Non-Profit Hospitals

HBI Blog / The Difference Between For-Profit Hospitals and Non-Profit Hospitals

The healthcare industry has witnessed a notable increase in the number of for-profit hospitals in the recent times. Additionally, more and more non-profit hospitals are making inquiries on how they can become an investor-owned financial model. Currently, the non-profit to for-profit ration in the U.S. is 3:1. However, the trend seems to be changing. Therefore, let’s find out what these are and how do they differentiate.

For Profit Non Profit Hospitals

What is a For-Profit Hospital?

These hospitals are owned by investors/for-profit organizations and aim to make profits for the shareholders. Hospital Corporation of America, Tenet, and HealthSouth are some of the largest chains of for-profit hospitals in the country. These hospitals are often referred to as the highest-billing ones.

What is a Non-Profit Hospital?

These hospitals, according to the IRS, qualify as charities. It means that they do not have to pay property tax, sales tax, or state or federal income tax. To enjoy the tax-free facility, these hospitals distribute any additional capital back into the surrounding communities. These hospitals face regular scrutiny by healthcare policymakers to make sure that they are justifiably contributing to the communities.

How do They Differ?

It is hard to differentiate between these two types of hospitals by their day-to-day activities. They function quite similarly while following standard hierarchy for organizational structure. However, one striking difference is that for-profit hospitals use a part of their budget for advertising and marketing initiatives, which is rare in the case of non-profit hospitals.

Industry experts have raised several ethical questions regarding the matter of hospital advertising. Most of them think that these funds can be used for improved quality of care and better patient experience.

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