Healthcare organizations are grouped into two categories – for-profit and non-profit. The non-profit and for-profit status refers to the differences in taxes, philosophy, goals, and organizational structures. Non-profit status does not mean that these types of organizations cannot make money. All these institutions need to generate revenue to remain operational (Getzen & Kobernick, 2022). However, there are remarkable dissimilarities in taxes between non-profit and for-profit health organizations from a financial perspective. As their name suggests, for-profit health organizations seek maximum profits in their operations.
In most cases, for-profit health organizations are owned by individuals with interests in making profits for the organizations and their stakeholders. Therefore, the motivating factor in the provision of health services is the profits that the organization can generate. Additionally, the success of for- profit organizations is tied to the success of their managers who are compensated for their performance through stock options and, in some cases, through ownership of the company (McPake et al., 2020). Therefore, they feel motivated and can positively influence the organization’s success. For non-profit health organizations, the arrangement is different, and managers do not have a chance at ownership. Therefore, they have to draw their motivation from other factors but not through ownership or stock options as is the case in for profit institutions.
For non-profit organizations, one of the major differences with regard to managers is that it is challenging to get buy-ins from them because non-profit health organizations lack financial incentives that are similar to the ones available for managers in for profit organizations. Moreover, given that managers cannot be turned into owners of the organization they lead, they may lack adequate motivation to work longer for the organization. The motivation for such managers solely depends on their financial competition in the form of salaries and allowances, which they can get from other organizations (Getzen & Kobernick, 2022). Under this scenario, the managers in the non-profit health organization can only invest in the organization subject to their financial compensation. Because of the lack of ownership as an incentive in non-profit organizations, they experience less oversight. Cases of incompetence in organizations’ mid-level management are also inevitable. Therefore, in cases where managers are interested in financial rewards only, they may not perform effectively in non-profit health organizations because they have different motivations for performing their jobs.
Non-profit health organizations have some significant advantages in connection with donations. Majority of the sponsors and donors tend to shift their donations to non-profit health organizations because they prefer service providers with intrinsic motivation (McPake et al., 2020). As a result, for-profit organizations do not get as many financial donations as non-profit health organizations. Additionally, the two types of health organizations also differ regarding their target customers. Non-profit organizations target all people in a community irrespective of their social and financial status. More specifically, they rely on providing services to all members of society without specific preferences. However, unlike non-profit health organizations, for-profit health organizations target a specific class of people, often those capable of paying for the services. Lastly, a significant difference between non-profit and for-profit organizations lies in their costs. No-profit health organizations often receive tax breaks and tax exceptions which consequently lowers their operations cost. For-profit health organizations are only exempted from taxes on corporate profits from donations. Moreover, they do not get the same benefits as non-profit health organizations.
References
Getzen, T. E., & Kobernick, M. S. (2022). Health economics and financing. John Wiley & Sons.
McPake, B., Normand, C., Smith, S., & Nolan, A. (2020). Health economics: An international perspective. Routledge.