Define For-Profit & Not-For-Profit Healthcare Providers

Religious orders originally established many hospitals and clinics in the United States for charitable purposes. But with the dramatic rise in health care costs beginning in the 1980s, health care providers have increasingly become for-profit businesses.

Not-for-Profit Providers

• As tax-exempt organizations, nonprofit hospitals, nursing homes and clinics have missions that involve being of service to their communities and providing care without regard to a patient's ability to pay. Although not focused on profits, their bottom line is covered by charging patients who can pay health care bills more to cover those who can't. In the 1980s, health care costs began to escalate because of inflation and the introduction of new technologies, which has threatened the survival of nonprofit health care providers.

For-Profit Providers

• For-profit providers look at health care as a business, with a financial bottom line producing profits that can be distributed to shareholders. Supporters of for-profit health care say that increased competition can produce a more efficient, effective, less expensive health care system. Since the 1980s, for-profit health care facilities have proliferated, including national hospital chains, health plans, nursing homes and local dialysis centers.

Effects of Rising Costs

• Employers and the government bear most of the expense for health care in the United States. Since the 1980s, they've pressured medical providers to decrease costs. Indeed, both for-profit and nonprofit health care providers have had to find ways ways of cutting costs, such as emphasizing outpatient services and becoming more efficient by partnering with other health services to provide care.

For-Profit vs. Nonprofit

• For-profit health-care providers claim they are able to provide better care at lower cost because of their focus on efficiency. But critics say for-profit facilities are successful because, one the one hand, they tend to serve affluent, insured patients and focus on highly profitable specialties such as cardiology and elective surgery. But, on the other hand, critics say, they avoid typically unprofitable areas such as emergency care, which often is used by the poor for basic health needs.

Hospital Performance

• For-profit facilities' focus on profits has raised questions of whether cost cutting negatively effects consumers' health. There is no definitive evidence that nonprofit hospitals provide better medical care than for-profit hospitals. A 2002 Canadian study of 26,000 U.S. hospitals did find that for-profit hospitals had a 2 percent higher mortality rate than nonprofit hospitals. No other study has shown clearly that nonprofit hospitals are better for patients than for-profit hospitals.