Tax exemption. Challenge and opportunity for not-for-profit hospitals

As healthcare reform is debated over the next several years, not-for-profit hospitals will see increased challenges to their tax-exempt status. Over the past forty years, the requirements for maintaining a tax-exempt status have undergone numerous changes. In the last several years, several states have challenged the right of hospitals to maintain this desired status. As we move toward the mid-1990s, it will be critical for not-for-profit hospitals to demonstrate and communicate their commitment to charitable endeavors.     

Comparison of efficiency and profitability of investor-owned multihospital systems with not-for-profit hospitals

It is often assumed that investor-owned hospitals are more market driven than are not-for-profit hospitals, and that they will maximize output and minimize inputs, to the exclusion of other management strategies. To resolve the conflicting research evidence, this study analyzed efficiency and profitability measures for approximately 50 investor-owned and 60 not-for-profit hospitals in Florida for the period from 1982 through 1988. The results indicate that the investor-owned hospitals used significantly fewer FTE staff per bed, had significantly fewer manhours per adjusted patient day, and paid significantly less in wages and had significantly higher operating margins (profit) than did the not-for-profit institutions.     

Returns on equity for not-for-profit hospitals.

This study examines the circumstances in which a large third-party payer or regulator might want to set hospital prices to yield a positive rate of return on equity capital. The level of return is shown to depend on the willingness of donors to make funds available in the community relative to the (derived) demand for capital to produce output. It is shown that the appropriate price might well be set to yield a zero or below-market return, and that the return to not-for-profit firms should generally be less than that to for-profit firms, if for-profit firms are to be active in the market.     

Accounting based risk measures for not-for-profit hospitals.

This paper discusses the issues involved with determining an appropriate discount rate for not-for-profit hospitals and develops a method for computing measures of systematic risk based on a hospital's own accounting data. Data on four hospital management companies are used to demonstrate the method. Results indicate the need for sensitivity analysis in the selection of estimation methods and in the final determination of a discount rate.     

Paying for quality: not-for-profit program promotes rewards for performance

Two years ago, the Institute of Medicine report Crossing the Quality Chasm issued a challenge to find ways to reduce the "burden of illness, injury, and disability" in the United States while "improving the health and functioning" of the population. Last month, a new program called Bridges to Excellence--created by a coalition of major employers, physicians, health plans, and others--was unveiled to meet that goal by rewarding physicians through incentive payments related to performance.