HCS/577
Comparative Summary
HCS/577
Comparative Summary
Introduction
, There are several types of entities in the health care industry that operate under different
financial environments. These environments include for-profit, not-for-profit, and
governmental organizations. Each of these organizations must adhere to the same regulation
and compliance requirements; are in the business of providing care to consumers; have similar
stakeholders affected by decision-making; receive reimbursement for services provided from
government programs, private health insurance plans, and the consumer’s own funds; and, must
operate on a budget and create a financial plan. Although these organization have several
similarities, they have many differences including their financial structures.
What is a Financial Structure?
A financial structure is “a mix of debt and equity that a business uses to finance its
operations” (Young, 2019). Thus, this makeup directly affects the business’ risk and value.
Most importantly, financial managers have the responsibility of deciding the best mix of debt
and equity to optimize the financial structure. Often, the financial structure of a business can be
referred as the capital structure. And, sometimes, analyzing the financial structure may include
deciding whether to manage a private or public business and the capital opportunities that
accompany each. In the health care industry, the financial structure of a business varies
between for-profit, not-for-profit, and governmental entities.
For-profit Health Care Organizations
For-profit health care organizations, such as Edinburg Regional Medical Center located
in Edinburg, Texas, operate for the benefit of making a profit for its owners. This organization is
“subject to all tax privileges and obligations applicable to for-profit enterprises in other sectors”
(Wedig, et. al., 1988). One distinction is that major governmental insurers pay for-profit health
care organizations for interest and depreciation incurred, and a direct return on equity that varies.
Investors are charged marginal tax rates on debt and equity income, and for-profit health
organizations are charged a marginal tax rate, offset by non-debt tax shields. If a for-profit health
Comparative Summary
HCS/577
Comparative Summary
Introduction
, There are several types of entities in the health care industry that operate under different
financial environments. These environments include for-profit, not-for-profit, and
governmental organizations. Each of these organizations must adhere to the same regulation
and compliance requirements; are in the business of providing care to consumers; have similar
stakeholders affected by decision-making; receive reimbursement for services provided from
government programs, private health insurance plans, and the consumer’s own funds; and, must
operate on a budget and create a financial plan. Although these organization have several
similarities, they have many differences including their financial structures.
What is a Financial Structure?
A financial structure is “a mix of debt and equity that a business uses to finance its
operations” (Young, 2019). Thus, this makeup directly affects the business’ risk and value.
Most importantly, financial managers have the responsibility of deciding the best mix of debt
and equity to optimize the financial structure. Often, the financial structure of a business can be
referred as the capital structure. And, sometimes, analyzing the financial structure may include
deciding whether to manage a private or public business and the capital opportunities that
accompany each. In the health care industry, the financial structure of a business varies
between for-profit, not-for-profit, and governmental entities.
For-profit Health Care Organizations
For-profit health care organizations, such as Edinburg Regional Medical Center located
in Edinburg, Texas, operate for the benefit of making a profit for its owners. This organization is
“subject to all tax privileges and obligations applicable to for-profit enterprises in other sectors”
(Wedig, et. al., 1988). One distinction is that major governmental insurers pay for-profit health
care organizations for interest and depreciation incurred, and a direct return on equity that varies.
Investors are charged marginal tax rates on debt and equity income, and for-profit health
organizations are charged a marginal tax rate, offset by non-debt tax shields. If a for-profit health
