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HCA 807 Week 5 Discussion Question Two

HCA 807 Week 5 Discussion Question Two

 

Is a non-profit health care structure sustainable in the long term? Why or why not?

Nonprofit and not-for-profit are terms that are used similarly, but do not mean the same thing. Both are organizations that do not make a profit, but may receive an income to sustain their missions. The income that nonprofit and not-for-profit organizations generate is used differently. Nonprofit organizations return any extra income to the organization. Not-for-profits use their excess money to pay their members who do work for them. Another difference between nonprofit organizations and not-for-profit organizations is their membership. Nonprofits have volunteers or employees who do not receive any money from the organization’s fundraising efforts. They may earn a salary for their work that is independent from the money the organization has fundraised. Not-for-profit members have the opportunity to benefit from the organization’s fundraising efforts.[8][unreliable source?]

In the United States, both nonprofits and not-for-profits are tax-exempt under IRS publication 557. Although they are both tax-exempt, each organization faces different tax code requirements. A nonprofit is tax-exempt under 501(c)(3) requirements if it is either a religious, charitable, or educational based organization that does not influence state and federal legislation. Not-for-profits are tax-exempt under 501(c)(7) requirements if they are an organization for pleasure, recreation or another nonprofit purpose.[8]

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Nonprofits are either member-serving or community-serving. Member-serving nonprofit organizations create a benefit for the members of their organization and can include but are not limited to credit unions, sports clubs, and advocacy groups. Community-serving nonprofit organizations focus on providing services to the community either globally or locally. Community-serving nonprofits include organizations that deliver aid and development programs, medical research, education, and health services. It is possible for a nonprofit to be both member-serving and community-serving.

A common misconception about nonprofits is that they are run completely by volunteers. Most nonprofits have staff that work for the company, possibly using volunteers to perform the nonprofit’s services under the direction of the paid staff. Nonprofits must be

HCA 807 Week 5 Discussion Question Two

HCA 807 Week 5 Discussion Question Two

careful to balance the salaries paid to staff against the money paid to provide services to the nonprofit’s beneficiaries. Organizations whose salary expenses are too high relative to their program expenses may face regulatory scrutiny.[9]

A second misconception is that nonprofit organizations may not make a profit. Although the goal of nonprofits isn’t specifically to maximize profits, they still have to operate as a fiscally responsible business. They must manage their income (both grants and donations and income from services) and expenses so as to remain a fiscally viable entity. Nonprofits have the responsibility of focusing on being professional, financially responsible, replacing self-interest and profit motive with mission motive.[10]

Though nonprofits are managed differently from for-profit businesses, they have felt pressure to be more businesslike. To combat private and public business growth in the public service industry, nonprofits have modeled their business management and mission, shifting their raison d’être to establish sustainability and growth.[11]

Setting effective missions is a key for the successful management of nonprofit organizations.[12] There are three important conditions for effective mission: opportunity, competence, and commitment.[12]

One way of managing the sustainability of nonprofit organizations is to establish strong relations with donor groups.[12] This requires a donor marketing strategy, something many nonprofits lack.

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