There are two principal approaches to healthcare: public, where the state funds the care providers, and private, where patients pay for treatment. However, there is another distinction that many people frequently ignore in the United States. Private healthcare organizations can be either for-profit or nonprofit, with the differentiation implied by the names. Most medical providers and related institutions in the United States are for-profit, and some people believe their motivation to maximize income to be one of the reasons behind the recent increases in care costs.
As such, an investigation into the other potential methods of care delivery and their pros as well as cons relative to the for-profit model is warranted. This paper will analyze the nonprofit approach based on quality, service cost, and price and identify the policy barriers that currently prevent their further spread.
Private healthcare organizations aim to deliver the highest possible standard of care to retain their patient base. However, Cohen, Hoffman, and Sage (2017) note that research shows that nonprofits generally provide a higher standard of care than their counterparts. There are several possible reasons why such results may consistently surface, starting with specialization. Unlike for-profits, which are compelled to orient themselves towards widespread or highly profitable conditions, nonprofits are often founded to address specific issues.
They can then deliver high-quality expert treatments for patients that need them while remaining competent to respond to issues that patients frequently manifest. By comparison, for-profits may not employ workers with the appropriate in-depth expertise or have specific rare equipment that is necessary to address such concerns. As a result, their care quality would be lower, even though they may be somewhat better prepared to treat more common issues.
Attention to social and cultural factors is another aspect that may contribute to the superior overall quality of nonprofit care providers. Being less concerned about the patient’s ability to pay than their for-profit counterparts, these organizations can serve people who require special accommodations such as housing. The Information Resource Management Association (2018) highlights the critical role of nonprofits in supporting culturally appropriate care delivery, offsetting costs, and working as patient advocates.
The category’s ability to serve niche needs allows it to address the specific needs and gaps that arise when working with minorities. As such, these people would receive better treatment at the facility, return there when further issues arise, and promote it to other members of the community. As a result, the overall care quality may also be higher because the facility satisfies these specific needs.
Both types of private care providers purchase the resources necessary to provide their services from the same suppliers, and there is usually little difference in price. Cohen, Hoffman, and Sage (2017) note that the costs at for-profit and nonprofit facilities are generally the same. However, the Information Resources Management Association (2017) notes that nonprofits tend to incur lower costs than state-run institutions.
The added efficiency is likely caused by the lack of bureaucratic issues that arise in many governmental initiatives. Moreover, both for-profit and nonprofit facilities are motivated to reduce service costs as much as possible, though their reasons may be different. As such, they tend to achieve similar arrangements with their suppliers and pay the same price. These purchases contribute to a significant portion of the overall service costs, but there is also a sizable sum in payments to the medical workers at these facilities.
All medical facilities try to attract the best possible specialists and retain them throughout their careers. While their altruistic motives may make nonprofits popular among medical professionals, both types have to offer their workers the opportunity for an appropriate livelihood. As a result, every public and private care organization has to offer a competitive salary across the industry. For-profits tend to set the trend, as their higher revenue allows them to increase wages if necessary.
Non-profits have to follow suit because otherwise, they may lose workers and no longer attract new ones. Correspondingly, if for-profits lower medical professional wages, non-profits may do so as well, though the situation is unlikely to occur. Overall, the two types of organizations are similar enough that there are virtually no differences in their internal operations concerning service costs.
Unlike service costs, prices are defined by their specific providers, though they are not entirely arbitrary. For-profit organizations derive their prices from the amounts consumers are willing to pay, using the cost of the service in question as a baseline. As a result, policies where the government pays for treatment at a for-profit facility, such as the Affordable Care Act, can result in a price increase due to the consumers’ improved ability to pay.
Moreover, Cohen, Hoffman, and Sage (2017) claim that for-profit facilities are likely to give patients diagnoses that are more profitable than appropriate. All of these factors contribute to consumers having to pay significant sums to be treated at for-profit facilities. Nonprofits generally charge patients less, as they use a variety of patient-friendly approaches and models and do not add a profit margin.
There are several different approaches to nonprofit care pricing, based on the overall method the organization in question employs. Some organizations do not charge their patients or offer various price reduction plans, but most charge consumers the price of the service directly with some modifiers. Ultimately, to remain sustainable, nonprofits have to make at least as much as they spend, and so, in the absence of other money sources, they have to transfer their treatment costs to the buyers. Additionally, they have to maintain and upgrade their equipment and hire new personnel, tasks that require a significant amount of resources.
Some organizations try to supplement their costs by running charities and collecting donations, but such methods cannot sustain an extensive healthcare system. Ultimately, the presence or absence of the profit margin is the primary pricing difference between for-profit and nonprofit healthcare providers.
Overall, the nonprofit model appears to be as beneficial as and sometimes better than the for-profit approach to healthcare. As such, it would appear that it would be better to switch to the superior method than to remain in the current problematic situation. However, as Gholipour and Rouzbehani (2016) note, current healthcare policy is inadequate to address existing issues, and the political environment that surrounds the topic is highly complicated due to partisanship. Nonprofits have the potential to change this trend by introducing a third option that all involved parties may accept, but they are currently not represented in Congress. They should become politically involved and advocate for their patients, collaborating with state and federal governments to expand and show their advantages.
There is currently no clear policy answer to the issues affecting healthcare in the United States. However, there are examples of successful nonprofits that manage to address the issues surrounding healthcare for minorities and disadvantaged populations on the local level. These organizations should become drivers of change and help formulate better legislation by supporting lawmakers with their expertise.
According to the Information Resources Management Association (2018), some states, such as Connecticut, have already called for such initiatives. Examples of initiatives that can help promote and improve nonprofit care include reducing their service costs. For example, the government may subsidize purchases of new equipment and necessary medications for nonprofits to allow them to render services at lower prices. As a result, the quality of care throughout the nation should improve, and healthcare spending and prices should fall.
Nonprofits used to be widespread in the United States, but in the 20th century, for-profit private healthcare became the model for the majority of the industry. Due to a variety of factors, including the exploitation of government health insurance enabled by the Affordable Care Act, treatment prices in the United States eventually escalated dramatically. Now, nonprofit models warrant an examination again due to their recent successes in addressing relevant care issues.
They tend to deliver better care at lower prices than their for-profit alternatives, though their service costs remain mostly the same. They have also succeeded in delivering quality care to minorities, disadvantaged people, and patients with specific and rare conditions. Overall, the expertise and successes of the nonprofits that currently operate in the U.S. warrant their inclusion in policy discourse, as they may help reach viable solutions.
Cohen, I. G., Hoffmann, A. K., & Sage, W. M. (eds.). (2017). The Oxford handbook of U.S. health law. New York, NY: Oxford University Press.
Gholipour, R., & Rouzbehani, K. (eds.). (2016). Social, economic, and political perspectives on public health policy-making. Hershey, PA: IGI Global.
Information Resources Management Association. (2018). Health economics and healthcare reform: Breakthroughs in research and practice. Hershey, PA: IGI Global.