... Tradeoff Theory in For-Profit Firms. According to the static tradeoff theory of capital structure, what are the main pros and cons associated with debt financing? Based on this, when would you recommend that a firm take on a large amount of leverage? (In other words, what kind of firm characteristics are more conducive to high leverage?) When would you recommend low leverage? The main pros of debt financing are Tax shield – debt payments are a tax deductible expense The main disadvantage of debt is that it is risky. There is a risk of bankruptcy and bankruptcy can be filled with expensive costs and fees. Small or high growth firms should not use as much leverage but rather should finance more through equity. These high growth firms may not be able to get debt or debt will come at a higher price because of the risk inherent in the high growth and the lack of collateral. However, some small firms may see their opportunity as so great that they may want to hold their equity so they do not have to share profits with stockholders. Large firms and firms that will have low or no growth and have unutilized debt capacity should finance through debt and use little or no equity. If firms with little growth issue equity, it could signal to the market that the stock is overpriced and the future does not look so bright. Additionally, firms that are large will have smaller costs of debt than smaller firms For-Profit vs. Non-Profit Hospitals. What are some pros and cons...
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...Profit Versus Not-for-Profit Hospitals In Partial Fulfillment of the Requirements for Health Services Systems HSM 541 Blaise X. Schmidt DeVry University Keller Graduate School of Management September 2012 1.0 Purpose The purpose of this paper is to conduct a comparative analysis between for-profit hospitals and not-for-profit hospital. It will discuss the characteristics of each as well as factors affecting the operations of both systems. Additionally, it discusses potential areas of improvement and some of the challenges associated with each relative to finance and operations. 2.0 Comparing Not-for-Profit and For-Profit Hospitals Not-for-profit hospitals are organized under the Section 501 (c)(3) of the Internal Revenue Service (IRS) tax code, and as such, are exempt from federal and state taxes and generally from local property and other taxes. Not-for-profit hospitals also have access to tax-exempt bond financing and have tax-deductible status for gifts and contributions (Barton, 2010). For-profit hospitals do not have this luxury. Public or private hospitals can be classified as non-profit. Non-profits include a majority of the hospitals in the US. The two types of hospitals differ mainly in regulatory rules. Not-for-profit hospitals do not need to pay property, sales, or income taxes. For-profit hospitals do. Despite these differences, the two types of ownerships have been becoming more and more similar and many hospitals...
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...Running Head: Non-Profit to Profit Making Plan Non-Profit to Profit Making Plan Assignment Two Strayer University HSA 505 Health Services Strategic Marketing Non-profit and for-profit hospitals come with their own set of rules, regulations, and expectations. They both work financially differently and it is known that for-profit hospitals generate millions of dollars in revenue every fiscal year. This is not the same for non-profit hospitals. Non-profit hospitals work with what the state and federal government allots them and they do not make money hand over fist. The obvious motive for turning a non-profit hospital into a for-profit hospital is for money. This paper will address the external and internal factors that influence decisions, the theory and practical framework of data, market segmentation, and analyzing of data for the switch from non-profit to for-profit hospitals. Describe the external and internal factors that influence the executive team’s decision making and specify which might be most instrumental in making the decision to become a for-profit entity. Why do you think so? It is imperative to understand the differences of internal and external factors, especially in terms of decision-making due to the fact that a problem has to be recognized in order to establish a next crucial step. In this instance the next crucial step is the decision to move from a non-profit to a for-profit entity. Within this move both internal and external factors...
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...are for-profit, not-for-profit, and government owned. In the following paragraphs, I will identify one entity from each of the three categories of ownership and describe the financial structure in their financial environment. I will identify the policies unique to each financial environment as well as financial management practices prevalent in the financial environment. I will also explain why effective financial management is more difficult in health care than in other industries. Entities Piedmont Medical Center is a for-profit acute care hospital located in Rock Hill, South Carolina. It is an entity with the Tenet Healthcare Corporation that offers a broad range of surgical and diagnostic services that include advanced heart and stroke care, women and children services, and a 24-hour emergency room. It has received recognition for its cardiac care, cancer care, diabetes management, orthopedic care, stroke care, and surgical care. (Piedmont Medical Center, 2014). Greenville Memorial Hospital is a not-for-profit acute care hospital also located in Greenville, South Carolina. It is an academic teaching hospital with a 24-hour emergency room that provides inpatient and outpatient services for the immediate community as well as a referral center for the diagnosis and treatment of heart, cancer, reproductive, and endocrine disorders. It has a children’s hospital, a heart institute, and a cancer treatment center connected to the main building (Greenville Memorial Hospital, 2014)...
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...I hope to provide in this paper a comprehensive understanding for what the term “hospital” has become. Hospitals are an extremely complex system that man has created and shaped and reshaped throughout history. My goal in writing and researching this paper will be to provide those who read it a clear understanding on how the hospital system got to where it is today, and to shed some light on the many organizations that affiliate with and contribute to all the wonderful things that hospitals do for people. The evolution of hospitals is one of the most interesting things (in my opinion) that history has to offer. Long before America was even in existence there were places of care located throughout all of the world and depending on where you lived determined how you would be treated. I am primarily going to focus on hospitals that began in America and how they got to be what they are today. Today people think of hospitals to be so crucial in their lives that they (including myself) cannot imagine what life would be like if we did not have the option of taking our children to the Emergency Room after they had broken their arm in an unfortunate accident with a bicycle. In the past however, the idea of a hospital was often viewed as unwanted and unnecessary for the overall good of the people. During the early establishment of America there were few hospitals around. Those that were around were mainly used as places to house those who were homeless and needed help and to keep those...
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...medicine in as an establishment to take care of our communities and patients. Over the years, hospitals have been the brunt of antitrust litigation. Between 1985 and 1999 hospitals were defendants in 61 percent of 394 medical antitrust disputes that led courts to issue formal opinions (Hammer, Peter, J. and Sage, William, M., 2003). However, these numbers do not support the under published cases, which do not result in a judicial decision. When hospitals are healthcare conglomerates to provide services antitrust views them as just a business. The services provided by hospitals are complex from the services they provide to the technology they use to the human capital necessary to run the operations of the hospital. Unfortunately, antitrust law concentrates on the overall hospitals behavior and not its purpose. Therefore, not-for-profit designation and lifesaving intentions of the hospital consider immaterial to any type of analysis performed by antitrust. Hospitals reserve the right to enter into any joint venture agreement provided each entity is able to achieve its objects autonomous of one another and avoid becoming a dominate player in the market (Hammer and Sage, 2003). For the most part, it will be the market that dictates if the hospital meets the demands and services demanded by the community. The challenge of healthcare antitrust law is not its insignificance or opposition to hospitals or physicians commitments to provide outstanding care, but its incapacity to rationally...
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...Non-Profit versus For-Profit Healthcare and Organizations In analyzing the characteristics in relation to nonprofit versus for-profit healthcare and organizations I found an interesting article from the Congressional Budget Office [CBO] (2006), which breaks down the ownership types of hospitals nationally. Based on 4,518 community hospitals, 58 percent are non-profit, 18 percent are for profit, and the remaining 24 percent are government owned hospitals. Non-profit hospitals were established for charitable purposes and tend to be larger, and are more likely to be teaching hospitals. They also are responsible and accountable to the communities they serve. They are governed by leaders of the communities they serve. Earnings received from the non-profit hospitals are reinvested to improve quality and care provided at the hospitals, and also invested in community programs, such as providing no fee or discounted fees to the uninsured and low income for health care services. Non-Profit healthcare organizations mission is to serve communities by providing healthcare without regard for a patient’s ability to pay. For-profit hospitals are legally responsible to their owners and stockholders and performance is based on profitability and the return on equity to its shareholders. Profits from earnings can be distributed to owners and stockholders. There are also tax treatment differences for the for-profit and non-profit hospitals. (CBO, 2006) The non-profit...
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...entities exist in. These include for-profit, not-for-profit, and government organizations. These environments have many similarities, as well as differences. Examples of these may include the Methodist Hospital in San Antonio, which is a for-profit organization; the American Heart Association, which is a not-for-profit organization; and the U.S. Department of Health and Human Services, which is a government organization. Each of these organizations has their own practices and policies unique to them. Not-For-Profit According to Investopedia (2016), a not-for-profit organization does not earn profits with the intent to line the pockets of an owner, but rather it is earned or donated and then used to achieve the goals or objectives of the organization. Many, but not all NFPs are charities or some other public service organization. NFPs are able to apply for a tax exempt status, as long as they meet certain criteria set by the state and federal government, thereby freeing them from most forms of taxation. Any donations that are made to the organization may be tax deductible for the person making the donation. According to Carter (2016), “Not-for-profit organizations raise capital by soliciting donations from businesses and individuals. Government and private grants may be used to fund the operation of a nonprofit organization. A not-for-profit organization may have an easier time getting the public to donate capital in comparison to a for-profit organization due to the perception...
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...Webliography to find a research article(s) (no older than 2001) related to nonprofit versus for-profit healthcare and organizations. Analyze the characteristics of each type of organization and the factors that impact operations. Discuss options to improve the financial and operational performance of nonprofit organizations and the criticisms leveled at for-profit healthcare organizations. Define: characteristics a feature or quality belonging typically to a person, place, or thing and serving to identify it. Define: Analyze examine methodically and in detail the constitution or structure of (something, esp. information), typically for purposes of explanation and interpretation. Characterists: accepting patients community benefits monetary payments "More important, most doctors in a for-profit practice own that business and have complete decision-making autonomy. Doctors in nonprofit settings have no stake in the practice, and major decisions must be okayed by a board of directors." (school) "To be sure, the very nature of hospital payrolls means fewer benefits for physicians. Doctors in private practice can sock away as much as $30,000 annually in a tax-deferred SEP-IRA, or similar plan. But contributions to a nonprofit hospital's plan are capped at $10,000. That's because a private practice can skew its benefits to favor the high earners. In a hospital, with hundreds of employees clamoring for slices of the benefits pie, it's illegal to carve out a...
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...Comparative Studies Dominique Comparative Studies There are many forms of health care organizations, they are grouped by their financial structures, and sources of funding. The three types that exist in the United States are for-profit, non-profit, and government funded organizations. The financial resources and how profit is appropriated are different amongst all three types of organizations. Government Funded The most well-known government funded health care system is the Department of Veterans Affairs. This health care system is unique in that it was created specifically to treat American veterans of the US military, whereas for-profit and non-profit organizations must treat every patient regardless of status, or ability to pay. A person who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable may qualify for VA health care benefits ("Office of Public and Intergovernmental Affairs", 2014). Many diseases and permanent disabilities or service-connected disabilities, US veterans suffer from were acquired serving in wars both past and present while serving this country. It is the governments’ intention to help treat those who so bravely laid their life on the line to serve and protect this country. On that note, most military are eligible to be treated within this health care system for little to no cost, with very few not meeting eligibility requirements. There are still however financial...
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...Stacey McDade HCA-240 04-17-2016 What is your role as an administrator in creating an operation budget? *The role of a hospital administer for a non profit level 1 trauma center is to plan and monitor day to day activities, personnel and supplies. This process of planning a budget typically is written out for a one year time frame. The administrator needs to assess revenue and expenses as well. For this hospital the administrator would need to make sure the time a patient is occupying a bed. Every new patient in the trauma center equals a profit for the hospital. What are the components of operating budgets for a hospital of this kind? *The components of this kind of budget would be to assess revenue vs. expenses and make sure the for-profit hospital is making a profit. Revenue would include the amount of money the center gets from the patient or the insurance company for services rendered. In a trauma center profit is based off of patient days spent and procedures. Expenses would include the cost of staff, supplies either office of medical, equipment rental, repair and maintenance and pharmacy. What role does variance reporting have on building an operational budget? *Variance plays a role within the trauma center in two different ways, revenue and expenses. The administrator would have to evaluate expenses and set up a budget to make sure the trauma center is making money. The administrator uses variance to assess the differences between the two figures....
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...costs and only utilize emergency rooms when in need of care. Health care reform ideally will address the millions who are without health insurance and provide a higher standard quality of care. The reform of the health insurance system aims to reduce national spending by making changes to the law to incentivize health care providers and organizations to reduce unnecessary spending and focus on increasing access to meet the new demand of the newly insured. Profit vs. Non-Profit Consider for a moment that the majority of health services spending is done by non-profits. These same non-profit organizations are now held to a higher standard, specifically, what exactly they are doing to serve the underserved in their local markets. Recent healthcare reform is a mixed blessing for non-profit and for profit hospitals. Over 30 million Americans previously uninsured Americans will now have the ability to pay for preventative care and check ups and stay visit the emergency room less often. This upside for both profit and non-profit hospitals creates a greater customer base and fewer uncollectible services. However, there are new limits on certain charges and Medicare reimbursements are now tied to performance levels. Healthcare organizations (HCOs) are increasingly responsible for the...
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...Hospitals and Long-Term Care Facilities Hamza Abobaker DR / Jo-Rene Queensberry Health Service Organization February 7, .2012 Describe the differences between nonprofit and for-profit hospitals. The difference between nonprofit and for-profit hospitals is the bottom line. Nonprofit hospitals main goal is to produce the best quality of care for the patients while turning profits into more advanced equipment used within the hospital. The nonprofit hospitals have a higher standard in performance in treating common conditions where the for-profit hospitals are not as high. Nonprofit hospitals are hospitals that are controlled by the quality of care and is at a less out of pocket for their patients where the for-profit hospitals are more costly for their services and tend to cost more for the patients after insurance has paid their portion of the bill. For profit hospitals while they do care for the patients the hospitals usually generate higher cost of care to the patients and any profit is returned to investors instead of back into the hospital where more advances and services can be performed (Williams & Torrens, 2010). In today’s efforts to improve the quality of care for patients it has become necessary to sell off to for profit hospitals for some locations. Hospitals today that ran on nonprofit efforts are seeing a hardship on keeping up with new technology equipment and is left with the decision to sell off to a for profit investor to keep the hospital running...
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...when making a claim. For example they highlight operating rules for each HIPAA transaction, the new standards for electronic fund transfer and health care claims, and health plans to certify compliance with the standards and operating rules (Centers for Medicare & Medicaid Services, 2014). So as we all know there are many different types of healthcare organizations that provide medical services to patients in need. Throughout this paper, those kinds of organizations will be touched on along with their differences and similarities of the financial entities for-profit, non-for-profit, and government agencies. The examples I would like to highlight from each economic environment are (for-profit organizations: Private practices, group practices, and outpatient surgical centers), (not-for-profit organizations: hospitals, American Red Cross, and Alzheimer's Association), lastly (the government: Veteran's Hospitals, local health centers, and the Office of Alcoholism & Substance abuse). It needs to be understood that unlike most other services that are provided out there, health services is on another level when it comes to...
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...Economics of an Urgent Care Center in a Market of Emergency Departments One of the contributors to the rising cost of Healthcare can be attributed to the over use of emergency departments (EDs) for non-emergency needs. In the greater Capitol/First/Beacon Hill area there are three major hospitals (Virginia Mason, Harborview, and Swedish) with emergency rooms and no urgent care centers with the exception of Group Health which is restricted to Group Health insurance members. The question I asked myself is, “Why does Group Health have urgent care for their insurance plan members and the major hospitals in Seattle do not.” Urgent vs. Emergency Care A study by the CDC showed that approximately 70 % of emergency department visits can be treated in a typical primary care or urgent care setting and another study by National Center for Policy Analysis demonstrated that only 13% of patients that sought treatment in the emergency department were clinically appropriate. Reasons for non-emergency visits to the ED range from access issues to primary care providers (wait times, no primary care provider assigned, or no insurance) to a lack of knowledge that they could have been treated at an urgent care or primary care setting. There are good reasons to visit the emergency department: * Trauma due to an accident or assault | * A wound that will not stop bleeding | * Shortness of breath | * Vomiting blood | * Chest pain | * Sudden loss of consciousness...
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