For-profit vs. Nonprofit Hospitals: Pros & Cons

As of 2017, about 59 percent of all hospitals registered in the U.S. were nonprofit, and 21.3 percent were for-profit hospitals, with the remainder state-owned. With nonprofit hospitals outnumbering for-profit hospitals by nearly three to one, it may appear that organizing as a nonprofit clearly has more benefits than choosing a for-profit model. However, there are pros and cons of each type of hospital organization.

Here’s a breakdown of some of the pros and cons for hospital administrators as well as how MedTech sales and marketing professionals can use that information to their advantage.

Hospital Tax Status

This is an obvious item in the “pros” column for nonprofit hospitals, which don’t pay federal corporate income taxes, state income taxes, and, often, local property taxes. In exchange for a substantial tax break, however, nonprofit hospitals must show that they are benefiting their communities. Along with meeting IRS requirements for 501 (c) (3) hospitals under the Affordable Care Act (ACA), nonprofit hospitals must perform a community health needs assessment every three years and then develop a plan to meet those needs. Those plans often include charity care, which nonprofit hospitals provide much more often than for-profit institutions.

Medtech sales and marketing professionals can use statistics on the charity care as a metric for defining your idea buyer persona and qualifying leads. If your system can enable nonprofit hospitals to save time and provide quality care more cost-effectively, the ROI of your system may include their ability to provide services to more people, meeting benchmarks in their plan to address community health needs and maintain their nonprofit status.

Healthcare Services

A hospital’s focus on community benefits and nonprofit tax status versus operating for profit can influence the types of healthcare services it provides. Depending on the circumstances, this could create a pro or a con for healthcare organizations. Nonprofit hospitals are often more likely to provide alcohol and drug treatment programs, which may align with their community health needs plan. They may also have departments dedicated to home health or psychiatric care, depending on the needs of the populations they serve. They may also provide their communities with intensive care units (ICU), trauma centers, burn units and organ transplant centers, which may not be available at for-profit hospitals, due to the high cost to operate them with little potential for profit.

For-profit hospitals, on the other hand, may focus more on opportunities to provide state-of-the-art diagnostics and advanced procedures that elevate them to the status as leaders in select areas — and drive profit for their owners or investors.

Although there are no absolutes when it comes to the services you’ll find at a nonprofit vs. a for-profit hospital, MedTech companies could segment their customer lists according to those categories to target messaging more accurately to decision makers. Knowing what a healthcare organization’s goals are at the highest level can enable you to craft your messaging so it’s relevant to either a nonprofit or for-profit hospital’s team.

Operational Efficiency & Revenue Cycle

Operating efficiently and managing revenue cycle are definite pros for for-profit hospitals. They streamline processes and carefully track revenues from service through to reimbursement from insurers or payment directly from patients. This emphasis on lean operations can, however, be a dual-edged sword. The downside is the pressure to keep overhead as low as possible, cash flowing, and profits maximized.

The marketing and sales teams at MedTech companies that offer solutions proven to increase efficiency may be able to use this information to attract attention of decision makers looking for another way to cut costs. Also, if you provide solutions or systems as a service, you may have the opportunity to show prospects how they could replace a capital expenditure with an affordable operating expense.

Likelihood to Invest in MedTech

Perhaps counterintuitively, making smart MedTech investments can be a pro for both for-profit and nonprofit hospitals. “Nonprofit” doesn’t mean the hospital doesn’t have capital to invest in new solutions or systems, especially if that investment will pay off with better patient outcomes. Both nonprofit and for-profit hospitals can be strong prospects if your Medtech solutions address their needs and objectives.

Regardless of how hospitals are incorporated, they have the common goal of providing the best possible standard of care. The leading hospitals in the country include both nonprofit and for-profit hospitals, and they all leverage MedTech to administer effective treatments, improve patient outcomes, operate efficiently, and maintain market position.

When you have the opportunity to speak to a hospital decision maker, ensure you understand exactly who you’re talking to. Tailor your messaging for nonprofit hospitals differently for for-profit hospitals — and demonstrate how your Medtech systems and products can address their specific needs.