Ownership Forms of Health Care Organizations
Information is an essential aspect when one wants to start a health organization. It is vital to consult an individual who has had experience in the field before the organization establishment. I have ten years of experience in the health organizations sector, and this essay is aimed to advise 50 doctors who are planning to start a health organization. It sets out my suggestions on developing the ownership forms of the health organization. My advice explains the common ownership forms that are available for the organization and provides different examples of each ownership form. I have also included the advantages and disadvantage of every ownership form and the one I recommend to the doctors to adopt. I have given the rationale for my choice of ownership form so that they can understand why I prefer it to other ownership forms. The intention of this essay is to guide the doctors to understand different ownership forms of health care organizations.
The progressive development in the health sector has led to the creation of health care organizations to meet the rising demand of people. However, the dynamics of the health sector require in-depth understanding before setting up any organization. Health care organizations are becoming big organizations but with complex demands. Understanding the different ownership forms of health care organizations is one of the essential components to succeed in the health care industry. Therefore, rapid growth of the health care industry calls for the provision of information to guide practitioners who have interest in starting health care organizations. In addition, they need sensitivity in decision making processes when starting health care organizations such as knowing the right ownership forms to adopt in the organization.
There are four main categories of ownership forms of health care organization. They include non-profit health care organizations, private investor organizations, non-profit, non-commercial based organizations and state health organizations. The organizations are different in terms of proprietorship arrangement, objectives and their financial management (Kenner & Speck, 2013).
Firstly, the non-profit health care organizations belong to the entire community. Therefore, they provide health care services to the community. Their management is the same as commercial enterprises in order for them to remain with a sound financial framework. Ascension health care is an example of a non-profit health care organization (Cleverley et al., 2011).
The advantage of these non-profit health care organizations is that they lack the burden of federal revenue taxes and property levies. This gives the organization a tax benefit over the other organizations. The non-profit health care organization has the benefit of a lower expenditure of equity capital than the other types of health care organizations. They offer the public health care services at a low cost. Therefore, they can build their health organization brand in the public image. A non-profit organization can be sponsored through the tax-exempt debt, contributions, and aids (Cleverley et al., 2011).
However, the disadvantage of these non-profit health care organizations is that they offer services at a cost that may not be viable in the market. Therefore, they incur more expenses than incoming revenue. In addition, they are unable to raise money in the equity markets (Cleverley et al., 2011).
Secondly, private investor health care organizations belong to private investors who choose to set up the organization. Investor based health care organizations start with the main objective of making profits for the investors. Shareholders share the revenue they earn equitably. The hospital corporation of America is an example of an investor based health care organization. It is one of America’s leading hospital organizations. The management of the investor based health care organization usually has the role of reporting to the company shareholders and providing health care services to people. It is a risky investment owing to the fact that investors take their financial chances. Private health care organizations can take the form of a sole proprietorship when the investor is one, and a partnership in case of more than two or more members. This form of ownership can also be a limited partnership in case one general partner owns unlimited liability for the organization’s debts and financial burdens. The investor based health organizations can be in a category where shareholders enjoy protection from liability responsibilities. In such case, the organization is a limited liability company (Cleverley et al., 2011).
The advantage of private investor health care organizations is that they have a wide base of financial support. The organization can increase their support from the risk based equity capital. The organizations also have the benefit of limited liabilities. The other advantage of this organization is that there is no sharing of revenue in case the investor is a sole proprietorship. For a sole proprietorship investor it is also easy to begin and liquefy a health organization than in other ownership forms. In case of the private investor health care organization limited partnership, shareholders have the benefit of protection from the responsibility of the organization’s debts and financial obligations (Cleverley et al., 2011).
The disadvantages of these organizations include tax and levy burdens unlike in the non-profit organizations. This health care organization pays the tax on revenue tax and proceeds that accrue from the sale of the organization’s stock. The disadvantage of limited partnerships is that they need a general partner to hold the responsibility of the organization’s debt burdens (Cleverley et al., 2011).
Thirdly, non-profit, non-commercial based organizations are voluntary health care organizations that provide voluntary services to people. The American Cancer Society and the American Red Cross are examples of voluntary health care organizations. Their advantage is freedom from tax payments and public donations as a source of raising funds. They provide basic services to people. The disadvantage of these organizations is that their expenditure requirements do not match revenue. In addition, voluntary health care organizations cannot raise funds in capital markets (Washlick, 2013).
Finally, state health care organizations belong to the national or the local government. They provide health care services to communities in their vicinity. Nassau County Medical Centre in New York is an example of state health organization (Cleverley et al., 2011).
The advantage of state health organization is that they have a wide base of financial sources that are unavailable for other ownership forms. They can enact taxes as a way of raising funds from people. They have the benefit of not paying property and revenue levies. In addition, the state health care organization can invest their revenue to the community to benefit people. The disadvantage of this health care organization is that they are not able to raise funds through equity investments (Cleverley et al., 2011).
I would recommend the doctors to start an investor owned organization such as a partnership. In my opinion, a partnership health organization will suit them because it is easy to start and entail few government regulations than other ownership forms. It will be also easy for 50 doctors to raise funds to start a partnership. The doctors may even attract the others to join them and increase the prospects of the organization. In addition, a partnership will be appropriate because there is no subjection to double taxation (Smith, 2011).
In conclusion, the rapid development of the health care industry had increased the number of practitioners who search for information about how to start health care organizations. The advice in this essay is critical in guiding the doctors on the different ownership forms of available health care organizations. My 10 years of experience in the health care industry mean that I have precise understanding of the sector and its operation. I hope my discussion on the ownership forms for health care organizations, their advantages and disadvantages, and the one I have chosen will be essential for the choice the doctors make before starting the health organization. The decision of the doctors on the ownership form they will use will be a major factor in determining their success.
Cleverly, J. O., William, O. C., & Song P. H. (2011). Essential of health care finance seventh edition. London: Jones & Bartlett Learning.
Washlick, J. R. (2013, May 9). Nonprofit health care organizations: Federal income tax issues. Bloomberg BNA. Retrieved from http://www.bna.com/Nonprofit-Health care-Organizations-p7498/
Kenner, & Speck. (2013, May 9). Forms of business organization. KC Source Link. Retrieved from http://www.kcsourcelink.com/startup/registrations-licenses-and-permits/forms-of-business-organization
Smith, H. (2011, May 23). Non-profit versus for-profit health organizations. Heleni Smith. Retrieved from http://www.helenismith.me/non-profit-versus-for-profit-health-organizations/