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Two Primary Models to Fund Healthcare, Research Paper Example

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Research Paper

There are two primary models to fund healthcare: for profit and not-for-profit. Depending on which model a health care organization chooses, there are numerous implications for how the organization is managed and how care is ultimately delivered.

The “for profit” model of health care essentially relies on two different sources of capital: private capital (as in private equity or through other private investors) and public capital where equity holders and bond holders provide the capital.  The main difference in the provision of capital is who is able to wield control in the organization and their ultimate goals.  When a private equity organization takes over a hospital chain (such as HCA), the investors are aiming for a relatively high return on equity that will influence how the organization is run- that is, the organization will usually pursue efficiency and profit maximization as the main goals that may result in less than optimal care for patients.  Although the public fundraising model has some similairties to the private model, it is more transparent, at least in theory, about how the hospital will maintain the seeming offsetting goals of profitability and quality patient care.  In addition, private hospitals tend to offer less indigent care, instead focusing on provide services for individuals that can pay more.

The second main model of health care financing is private non-profit.  This is the typical financing structure one finds in church-run hospital.  The main difference in the funding is that a non-profit does not aim for a profit, and if there is a profit, it is usually invested back into the hospital’s resources rather than giving it out to  shareholders via dividends or other types or payouts.  In general, the non-profit model also has a greater emphasis on indignent care, as the pressure to make a profit is not so great.

References

Clerverly, W., Cleverley, j., Song. P (2010).  Essentials of health care finance.  Jones and Bartlett.

Giled, S. Health care financing, efficiency, and equity.  NBER Working Paper. 13881

NewYork Times (August 14,2012  ). A giant hospital chain is blazing a profit trail.  Available at: http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-creates-a-windfall-for-private-equity.html?pagewanted=all&_r=0

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