Title: Ownership Forms of Health Care Organizations
Class: MHA612: Financial & Managerial Accounting
There are many common ownership forms that are available to form a health care organization. So when asked to advise fifty doctors on what common ownerships forms there are you must first think of what organization of health care you plan to open. Working on the capacity as an external consultant in the field is common to give guidance and provide feedback to any ideas that can help improve the way to do things. To have a better outlook on how things can be done 50 doctors have gathered together to come up with ideas on developing ownership form for their organization. The job is to ...view middle of the document...
Hospitals can also be for profit, government organizations or not for profit health care organizations.
A not for profit, business oriented organizations are owned by the entire community rather than by the investor owners. Unlike the kits for profit counterpart, the primary goal of not for profit organization is not to maximize profits but to serve the community in which it operates through the healthcare services it provides. When it comes to not for profit organizations usually are exempt from federal income taxes and property taxes. In return for this favorable tax treatment, a non for profit organizations are expected to provide community benefit, which often comes in the form of providing more uncompensated care. (J., 2006)
There are advantages and disadvantages when it comes to each form of ownership, for instance if you pick not for profit business oriented the primary advantage is that it has tax advantages. Which also means it can sometime enjoy having a lower cost of equity compared to the for profit firms. However, the disadvantage of this form is that not for profits are very limited to the access they have to the capital.
For profit healthcare entities the main of objective is to earn profits that are distributed to the investor owners of the firms or reinvested in the firm for the long term benefit of the owners. For profit hospitals management must strike a balance between their fiduciary responsibilities to the owners of the company with their other mission of providing acceptable quality healthcare services to the community. The advantages and disadvantages for profit healthcare entities are as followed. An advantage of being publicly traded is a great ability to be able to raise equity capital through the sale of different company stocks. However, that does mean that everyone would have the ability to be in the same stock and left with nothing for the company.
Governmental HCOs are public corporations, typically owned by a state or local government. They are operated for the benefit of the communities they serve. A variation on this type of ownership is the public benefit organizations. Then there is nonprofit non business oriented organizations the perform voluntary services in their communities they are often called voluntary health and welfare organizations. They too are also tax exempt and rely primarily on public donations for their funds. Examples of these organizations include the American Red Cross and the American Cancer Society. Even though these types of organizations provide invaluable services the financial statements and financial management of these organizations can be different the those of business oriented firms. (William O. Cleverley, 2011)
The advantages and disadvantages of the Governmental Healthcare Organizations is they have access to additional revenues sources through taxes which are just as similar if not the same as the other not for profits. However, they are...