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Comparative Summary

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Comparative Summary
HCS/577
July 28, 2014

Comparative Summary
Introduction
The financial environment of the different types of health care entities is defined by the classification of ownership. The three categories of ownership 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).
The Medical University of South Carolina Medical Center is a state university with a hospital and six colleges for the education of a wide range of health professionals located in Charleston, South Carolina. It has served the citizens of South Carolina since 1824. It is a major referral center with specialized care for the heart, organ transplants, cancer, digestive diseases, and the eyes. Programs with notable recognition located at the facility include neuroscience, cardiovascular medicine, cancer care, perinatal medicine, substance abuse, ophthalmology, rheumatology, genetics, hearing loss, and drug sciences (Medical University of South Carolina, 2012).
Financial Structures
Financial structures of for-profit, not-for-profit, and government owned facilities have many similarities as well as differences. The largest source of revenues is Medicare reimbursement for all types of hospitals. They all provide both profitable and unprofitable services as well as uncompensated care. All facilities invest a portion of their profits to improve services delivered (Gapenski, 2008). For-profit hospitals are more profitable in comparison to not-for-profit and government hospitals. Tenet Healthcare Corporation, a for-profit organization, increases equity funds by investors buying new public stock and by holding profits rather than paying them out to investors. In for-profit organizations, if profits are not needed to finance fixed assets, then it can be returned to the investors in the form of dividends or to purchase stock. For not-for-profit and government organizations, there are no taxes associated with debt financing. Equity funds, also called fund capital, are obtained by the donation of monetary gifts from individuals or corporations, making profits that must be used to improve services, or receiving grants from the government (McLean, 2002). For-profit organizations have a distinctive advantage over not-for-profit and government hospitals in their capacity to raise capital funds by selling stock. All types of hospitals can acquire equity internally by retaining rather than distributing earnings (Valvona & Sloan, 1988).
Policies
The for-profit hospital must follow the regulations of the securities laws proposed in the Securities Exchange Act of 1934. Securities sold to the public market are subject to the federal laws and the state laws of each state they are presented. One of the basic principles of the federal securities laws is mandatory registration. Non municipal stock presented for sale to investors must be registered with the U. S. Securities and Exchange Commission (SEC). Each issuer and agents of the issuer must provide all relevant facts about themselves to those who would contemplate obtaining their stock. In the for-profit segment, this requires filing quarterly and annual disclosure forms with the SEC. Another regulation that must be followed is no insider trading. No one in the organization with access to information related to the price of the securities can purchase stock prior to the release of that information to the public. They must keep all purchased stock for at least six months and cannot release privileged information to anyone who may gain from trading stock (McLean, 2002). For-profit organizations also follow the rules of the Generally Accepted Accounting Principles to prepare financial reports that are useful to potential investors and creditors (Gapenski, 2008). The not-for-profit hospital has the right to issue municipal bonds and receive tax subsidized contribution capital to raise revenues to expand hospital services. As a provision of the not-for-profit financial guidelines, an annual financial report must be provided to the Internal Revenue Service. They must also file state hospital financial and statistical reports (Needleman, n. d.).

Financial Management Practices
The decisions for the for-profit organization are made by the board of directors, elected by the shareholders. The Piedmont Medical Center (PMC), as a component of the Tenet Healthcare Corporation, has publically traded stock on the New York Stock Exchange to increase revenues (Piedmont Medical Center, 2012). The Greenville Memorial Hospital (GMH) provide charitable and community services therefore it receives income and property tax exemptions (Greenville Memorial Hospital, 2014). The Medical University of South Carolina Medical Center, a government owned facility, operates as a not-or-profit hospital and also receives tax exemptions. Not-for-profit and government owned facilities usually have a higher percentage of uncompensated care than for-profit facilities whereas for-profit hospitals are usually located in areas with higher rates of insured customers (Horowitz, 2008). Not-for-profit hospitals are very different from for-profit organizations because there are no shareholders and no one has rights to the profits. The not-for-profit hospital has the right to issue municipal bonds and receive tax subsidized contribution capital to raise revenues to expand hospital services (McLean, 2002).
Why Financial Management in Health Care is Difficult
Financial management in health care is difficult because of the assortment of operations, multiple level make-up of the modern-day hospital, the mixture of payers, and the types of ownership. Hospitals offer multiple levels of care that include inpatient and outpatient services as well as education and research. Revenues are obtained from each of these activities whereas costs to provide these services may be connected. Decisions of which activities to expand or discontinue are made by which activities are cost effective. Healthcare organizations are also multilevel organizations with several hospitals in one system. These systems may also own physician practices and office building that may add of take away from the profitability of the organization. Hospitals may receive payment from multiple third party payers or patients who are liable for their charges. Each payer has a different reimbursement practice and government insurers such as Medicare and Medicaid can have complex repayment rules. Hospital ownership can be for-profit, not-for-profit, or government with differences in accounting and financial reportage. Some costs are unreported on revenue and expense reports or hospital employed physicians may bill separately for their services. Hospitals vary in how they report uncompensated care, subsidies, and grants. Contributions may be received with specific instructions or profits from other activities are used to fund care. There are many components in hospitals that make financial management more difficult than in other industries (Needleman, n. d.).
Conclusion
In the paragraphs above, I have identified one entity from each of the three categories of ownership, for-profit, not-for-profit, and government, and a description of the financial structure in their financial environment. I have identified the policies unique to each type of ownership as well as financial management practices prevalent in each financial environment. I have also explained why effective financial management is more difficult in health care than in other industries. In conclusion, the financial environment of the different types of health care entities is defined by the classification of ownership.

References Gapenski, L. C. (2008). Healthcare finance: An introduction to accounting and financial management (4th ed.). Retrieved from The University of Phoenix ebook Collection.
Greenville Memorial Hospital, (2014). Retrieved from http://www.ghs.org/greenvillememorial#.U9UvhfldXvw
Medical University of South Carolina, (2012). Retrieved from http://academicdepartments.musc.edu/musc/about/
McLean, R. A., (2002). Financial Management in Health Care Organizations. Retrieved from http://books.google.com/books Needleman, J. (n.d.). Assessing the financial health of hospitals. Retrieved from http://archive.ahrq.gov/data/safetynet/needleman2.htm
Piedmont Medical Center, (2012). Retrieved from http://www.piedmontmedicalcenter.com/
Tenet Healthcare Corporation Corporate Governance Principles (n. d.). Retrieved from http://www.tenethealth.com/ Valvona, J. & Sloan, F. A., (1998, August). Hospital profitability and capital structure: A comparative analysis. Health Services Research, (23)3, 343-357.

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