Healthcare Business Basics
Concept of a business Legal forms of business For-profit versus not-for-profit ownership Organizational goals Financial goals Taxes
Concept of a Business A business is an entity that
raises money in the capital markets, invests these funds in assets (land, buildings, equipment, inventories, and so on), uses these assets to create products or services, and sells these products or services to sustain itself.
A pure charity is different. Why?
Legal Forms of Business There are four major categories of business organization (legal forms of business):
Proprietorship (sole proprietorship) Partnership ...view middle of the document...
However, in the health services industry, a significant proportion of businesses, particularly hospitals, are organized as not-for-profit corporations. How much does ownership influence the practice of healthcare finance?
Investor-Owned (For-Profit) Corporations
Investors become owners by purchasing shares of common stock.
Primary market transactions
Initial public offerings (IPOs) New common stock sales
Secondary market transactions
On exchanges In the over-the-counter market
right of control, and claim on residual earnings and residual liquidation proceeds.
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Not-For-Profit Corporations If a business meets certain requirements, it can qualify as a not-for-profit (nonprofit) corporation. These corporations:
generally have no shareholders and, hence, do not have a single clientele to which managers are responsible; receive various tax exemptions; and can be thought of as being owned by “the community.”
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Organizational Goals The primary goal of for-profit corporations is shareholder wealth (stock price) maximization.
The primary goal of not-for-profit corporations is generally expressed in a mission statement, often in terms of service to the community.
What is the primary goal of proprietorships and partnerships?
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All businesses have stakeholders, who are parties that have an interest (often financial) in the business. Stakeholders include owners (if for profit), managers, employees, suppliers, patients, and even the community at large. Not-for-profit managers must satisfy all stakeholders. For-profit managers are primarily concerned with satisfying owners.
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Discussion Items What responsibilities do for-profit businesses have to stakeholders other than owners? Should for-profit businesses behave ethically? If so, why?
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The primary financial goal of investor-owned corporations stems from their organizational goal: shareholder wealth (stock price) maximization. The primary financial goal of not-for-profit corporations is to ensure the financial viability of the organization. Does the difference in financial goals lead to different behavior?
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Tax Laws Some understanding of tax laws is necessary because taxes...