Difference Between Profit and Nonprofit Hospice
What is the difference between profit and nonprofit hospice? A for-profit hospice must pay tax on its profits and provide a financial return to its shareholders. Non-profit hospices are not required to pay taxes to state or federal governments on the funds they receive from Medicare or insurance (this tax exemption applies to all non-profits, not exclusively to hospice care).
Nonprofits rely on donors, investments, and community funding to provide care. They pay no property, income, or sales taxes. What they don’t spend must go toward their mission. Although they both care for patients facing serious illness, for-profit corporations make money and pay dividends, while non-profits fulfill a compassionate mission.
While both aim to deliver quality care, profit generation influences how for-profits make decisions about offerings and resources. Quality is a goal for all hospitals, nothing significantly separates not-for-profits and for-profits now on quality measures. The difference is a few percentage points one way or the other in care measure data.
Influence on Healthcare Services
A hospital’s focus on community benefits and nonprofit tax status versus operating for profit can influence the types of healthcare services it provides. Depending on the circumstances, this could create a pro or a con for healthcare organizations.
Impact on Hospice Care
The influx of for-profit companies into the hospice field has benefited patients because the commercial companies made big investments in technology, focused on efficiency and made care more accessible. But analysis of U.S. hospice records indicates that, as those companies transformed the movement into a $17 billion industry, patient care suffered along the way.
Hospice as a 501c3 Organization
Hospice provides end-of-life care to terminally ill patients. Hospitals must submit IRS Form 990 to maintain 501c3 status. 501c3 organizations have governance, accountability, public benefit requirements. 501c3 organizations cannot engage in political activity. Nonprofit hospitals, youth groups and food pantries are 501c3 organizations.
IRS issued regulations for tax-exempt hospitals to maintain 501c3 status, ensuring financially needy patients access care. There’s no requirement for Hospice Care Agencies to be tax-exempt.