The paradox of the not-for-profit hospital

This quantitative research study assesses the organizational characteristics, market factors, and performance of not-for-profit hospitals in the United States. These results have managerial implications related to hospital efficiency, organizational performance, and the role of not-for-profit hospitals within local communities. The study has policy implications on access to clinical services within local communities, the availability of charity care, and the long-term viability of the not-for-profit health care industry due to potential bankruptcy and closure. This study clearly demonstrates that not-for-profit hospital managers are faced with declining profitability and are challenged to reduce hospital-operating expenses while meeting their charitable mission. Additionally, the greater size and increased clinical complexity of not-for-profit hospitals are increasing organizational overhead. In many cases, the increased clinical complexity is a commitment to the organizational mission of providing a full range of services to the community. From a policy perspective, the study suggests that not-for-profit hospitals have aging facilities and reduced cash flow due to lower profit margins. As a result, many not-for-profit hospitals face potential bankruptcy and closure. This study clearly documents a threat to the provision of charity care in local communities and the long-term viability of the not-for-profit health care industry in the United States.     

The economics of for-profit and not-for-profit hospitals

This paper examines the economics of for-profit and not-for-profit hospitals through the prism of capital acquisitions. The exercise suggests that of two hospitals that are equally efficient in producing health care, the for-profit hospital would have to charge higher prices than the not-for-profit hospital would, to break even on capital acquisitions. The reasons for this divergence are (1) the typically higher cost of equity capital that for-profit hospitals face; and (2) the income taxes they must pay. The paper recommends holding tax-exempt hospitals more formally accountable for the social obligation they shoulder, in return for their tax preference.     

An organizational structure of the future. The not-for-profit clinic

It used to be unthinkable . How could a small, freestanding group practice attain tax-exempt status without engaging in teaching or research activities? In the late 1960s, four internists in northeastern Ohio did just that. This case study chronicles their ordeal in seeking, obtaining, and maintaining a not-for-profit designation from the IRS, and closely examines the laws which detail tax-exempt qualifications. Undoubtedly, there are freedoms relinquished when a group operates under the close scrutiny of the IRS, but the numerous benefits gained by the not-for-profit clinic could well make it the organizational structure of the future.     

The improving efficiency frontier of religious not-for-profit hospitals

By using data-envelopment analysis (DEA), this study evaluates the efficiency of religious not-for-profit hospitals. Hospital executives, healthcare policy makers, taxpayers, and other stakeholders benefit from studies that improve hospital efficiency. Results indicate that overall efficiency in religious hospitals improved from 72% in 1998 to 74% in 2001. What is more important is that the number of religious hospitals operating on the efficiency frontier increased from 40 in 1998 to 47 in 2001. This clearly documents that religious hospitals are becoming more efficient in the management of resources. From a policy perspective, this study highlights the economic importance of encouraging increased efficiency throughout the healthcare industry.     

UNAIDS highlights the plight of children

This news brief summarizes the high points of a speech presented by the executive director of UNAIDS at the UN Convention on the Rights of the Child. Dr. Peter Piot sought increased emphasis on children's health due to the effects of HIV/AIDS. The rights of children need to be protected. Because of their youth and dependency, children are more vulnerable to infection. Governments were asked to take responsibility and be held accountable for improving the conditions of children who are affected by HIV/AIDS, either through their own illness or through the effects from family member's illness. Children need to be protected from infection. Children should be participants in the process in order to have their needs and views respected. In June 1998, UNAIDS, UNICEF, and WHO began a joint effort to reduce mother-to-child transmission in about 30 pilot sites in 11 low-income countries. The effort involves use of antiretroviral drugs among pregnant women. The effort has the support from 7 international pharmaceutical companies to participate.     

The plight of female infants in India.

For most human populations the infant mortality for males is about 20-30% higher than for females. But in several States of India male infants experience a better survival than females. Many social, religious, and economic factors appear to operate against females throughout India. In the agriculturally prosperous States of Haryana and Punjab the neglect of female infants appears most severe; it is estimated that more than 10 000 die of neglect every year. Additional reasons could well be deeply rooted in the turbulent history of north-western India, which has borne the brunt of savage invasions through Afghanistan for several centuries. These areas have not seen peace for the last 1000 years.     

The five critical areas for effective governance of not-for-profit hospitals

The pressures on hospitals continue to mount. Voluntary boards increasingly are nervous, making management's tasks all the more difficult. We believe the environment demands a new approach to the process of not-for-profit institutional governance. The volunteer board model has worked very well, but it must be adapted to the changed environment. There must be a direct link between the function of institutional governance and the priorities identified through the strategic planning process. It is our observation that truly effective boards have the following areas clearly in focus within the board and between the board and management: (1) a common working definition of "governance"; (2) a clearly defined mission with specific goals and objectives; (3) a well-planned decision-making process; (4) a board structure tailored to the priorities at hand; and (5) an information, reporting, and communication system that keeps the priorities clearly in focus. This article explores these factors and suggests ways to link the board's work directly to the strategic plan.     

Cash holdings of not-for-profit hospitals

Many not-for-profit (NFP) hospitals hold substantial cash reserves. Using a national sample of 608 NFP hospitals over the period 1996-1999, we related theories of cash holdings to NFP hospitals to develop a conceptual framework for understanding cash holdings. We tested whether these hospitals differentially managed operating and strategic cash with respect to establishing target balances and investigated motivations for holding cash. NFP hospitals actively targeted levels of operating cash, but did not target strategic cash balances. Strategic cash balances were positively related to profitability and growth in assets, but negatively associated with the use of debt.