CHARITABLE STATUS IN HEALTH CARE – WHY DOES IT MATTER
News in my fair City today, is whether a local retirement home community can claim charity status, in order to be exempt from various taxes. Read about the Glebe in Roanoke here. We hear all the time that some hospitals and nursing homes are “non profit” – but what does that mean?
On the surface, a non-profit healthcare provider will likely look the same as one that is for profit, but consider the differences.
Non-Profit Healthcare providers, often have a legal duty to provide some level of indigent care
(that means reduced rate or free services). In addition, they are limited to how they can compensate their Board of Directors and employees. Without shareholders, there is no duty to maximize profits – only the legal duty to provide care according to local standards. Non- profit health care providers do however, continue to charge governmental programs full price for services – so Medicaid will pay nursing home A that is non-profit, the same it pays nursing home B that is for profit.
The difference is usually the bottom line. A for-profit health care provider, has a legal duty to maximize profits. Well, as any good business man or woman will tell you, the way to maximize profits in an industry where prices are regulated, is to decrease expenses. Hire fewer nurses; pay your staff less; try to find a deal on bandaids and hospital beds; Provide food that costs $1.45 a day, rather than expensive, healthy meals that cost $5.00 a day. I am not making this up, this is how nursing homes especially, turn a profit. And for many, it is a rather large profit.
In past blogs we have discussed what a lucrative business nursing homes can be – so the lesson today, is ask whether the nursing home your aunt betty lives in is non-profit, and if not, dig around – find out if they are making a profit, and where they are skimping to do so.