NonProfit Hospitals and Finances

Nonprofit hospitals traditionally have been expected to accept social and economic responsibilities for public services that forprofit enterprises and government are either unsuited, unable, or unwilling to provide. In turn, the operations of nonprofit hospitals have created economic benefits for the communities and states in which they are located.

During the 1980s, nonprofit hospitals were encouraged by public policy (in the form of cost and quality controls) to operate in a more competitive manner. Nonprofit hospitals responded in part by adopting commercial financial and management strategies, including attempts to diversify incomes bases, and the inclusion of forprofit affiliates in their corporate structures. While such efforts have not always achieved the intended financial goals, they have altered the traditional public perception of a nonprofit hospital.

The combination of the changing public perception of a nonprofit hospital, the entry of commercial firms into the health care services sector, and the budget crises at all levels of government has resulted in an increased frequency of political challenges to the taxexempt status of nonprofit hospitals. Nonprofit hospitals are particular target because the typically high values of their property bases.

The situation existing within the Commonwealth of Pennsylvania p

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ects of such a decision on the capacity of such institutions to fulfill their designated societal functions. The relevant decision criteria in this context are as follows: 1. Change in net income. This indicator is defined as the excess of residual income over expenses in a given year. 2. Before tax operating margin. This indicator is defined as the net operating income/operating revenues ratio (percentage) without consideration for taxes. 3. After tax operating margin. This indicator is defined as the net operating income/operating revenues ratio (percentage) with consideration for taxes. 4. Before tax total revenue margin. This indicator is defined as the total income/operating revenues ratio (percentage) without consideration for taxes. 5. After tax total revenue margin. This indicator is defined as the total income/operating revenues ratio (percentage) with consideration for taxes. Alternatives The exemption of the property of nonprofit organizations from taxation is intended to produce societal benefits through the encouragement of socially desirable activities. In effect, the taxing jurisdictions subsidize these activities. Taxing jurisdictions which experience significant impacts as a consequence of exe
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Approximate Word count = 2948
Approximate Pages = 12 (250 words per page)