Discussion week 6

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Southern New Hampshire University *

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IHP-610

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Medicine

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Feb 20, 2024

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A private hospital's three conflicting economic values are profits, debt, and debt-to-equity ratio (Sloan, 2020). Private and public hospitals have substantially varied debt loads that they can assume. Private hospitals are more likely than public hospitals to accrue debt since, in the US, non-profit hospitals are only permitted to accrue debt up to 60–90% of their entire worth, contingent upon the arrangement of ownership (Herring et al., 2018). A hospital's debt to property value is roughly represented by its debt-to-equity ratio. The amount of debt a hospital owes relative to the value of the property it owns is called the debt-equity ratio. Compared to public hospitals, private hospitals have a substantially greater debt ratio (Herring et al., 2018). The amount of revenue that a private hospital generates and the amount that insurance companies compensate it with define its financial viability (Lopez et al., 2020). The government's financial contribution to a public hospital is often limited (Lopez et al., 2020). A private hospital must use its debt ratio to optimize its profitability. This type of organization needs to take on an extensive amount of debt to generate as much revenue as it can while increasing the debt ratio (Jeurissen et al., 2020). The debt ratio may be smaller or equivalent to the private hospital's debt because the latter produces greater profits through debt (Jeurissen et al., 2020). To optimize earnings, a private hospital needs to manage its debt ratio. The private hospital needs to take on a lot of debt to maximize profits while keeping the debt-to- equity ratio low (Jeurissen et al., 2020). The ratio of debt may be smaller compared to or equal to the private hospital's debt because debt brings in more money for the facility. The debt-to-equity ratio must be used by the public hospital, however, because it is legally limited (Jeurissen et al., 2020). It is up to the public hospital whether to maximize revenues. It can't optimize revenues due to legal constraints; instead, it must rely on its debt-to-equity ratio (Jeurissen et al., 2020). To increase its debt-to-equity ratio, it needs to pay off more debt. Profits cannot be maximized at the

public hospital since it must maintain a low level of debt (Jeurissen et al., 2020). Furthermore, the public hospital must spend a lot of money on the equipment due to its high cost. The public hospital cannot make additional revenue than it owes to get the most income. Consequently, the debt-to-equity ratio is higher than the debt ratio. The private hospital accrues debt even though it is not obliged to use the debt-equity balance. Public hospitals need to make money to provide care for the underprivileged and impoverished. The debt-to-equity ratio of the private hospital is greater than that of the public hospital. In contrast to private hospitals, public hospitals are more financially successful and debt-free. This can be explained by the different missions that each of these hospitals has. Compared to state hospitals, which prioritize care delivery over revenue generation, private hospitals are more focused on the financial side of their business. The financial motivations of private hospitals are frequently focused on boosting profits, which is achieved by reducing costs and raising revenue. Public hospitals have certain financial goals in addition to their primary focus on providing healthcare to the public. These goals include providing high-quality care, helping the underprivileged, and ensuring that everyone in the public is insured. Private hospitals are exempt from government penalties and are not obligated to serve the underprivileged, but public hospitals must do so to receive government money (Lo & Grady, 2021). As a result, their financial objectives differ from those of public hospitals (Lo & Grady, 2021). Private hospitals are more profitable and debt-ridden than public hospitals because they must maximize their debt- to-equity ratio and generate income greater than their overall worth to satisfy these financial goals (Lo & Grady, 2021). References

Herring, B., Gaskin, D. J., Zare, H., & Anderson, G. F. (2018). Comparing the value of nonprofit hospitals’ tax exemption to their community benefits. INQUIRY: The Journal of Health Care Organization, Provision, and Financing , 55 , 004695801775197. https://doi.org/10.1177/0046958017751970 Jeurissen, P., Kruse, F. M., Busse, R., Himmelstein, D. U., Mossialos, E., & Woolhandler, S. (2020). For-Profit hospitals have thrived because of generous public reimbursement schemes, not greater efficiency: a Multi-Country case study. International Journal of Health Services , 51 (1), 67–89. https://doi.org/10.1177/0020731420966976 Lo, B., & Grady, D. (2021). Financial profit: not the mission of medicine. Annals of Internal Medicine , 174 (10), 1466–1467. https://doi.org/10.7326/m21-3220 Lopez, E., Neuman, T., Jacobson, G., & Levitt, L. (2020). How much more than medicare do private insurers pay? A review of the literature | KFF . KFF. https://www.kff.org/medicare/issue-brief/how-much-more-than-medicare-do- private-insurers-pay-a-review-of-the-literature/ Sloan, F. (2020). Not-For-Profit ownership and hospital behavior . Duke University. https://public.econ.duke.edu/~fsloan/156/articles/Sloan_Article.html

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In your response posts to at least two peers, address the following:  Compare and contrast the key conflicting financial values identified by your peers against your own initial post.  Identify one other essential value conflict your peers did not identify in their initial posts. Explain why you think the identified value conflict must be considered as it impacts health policies and laws. Hi Liza, Great job with your discussion post. You did a great job identifying three conflicting financial values of public and private hospitals. According to Sloan (2020), a private hospital's three conflicting economic values are profits, debt, and debt-to-equity ratio. Private and public hospitals have substantially varied debt loads that they can assume. Private hospitals are more likely than public hospitals to accrue debt since, in the US, non-profit hospitals are only permitted to accrue debt up to 60–90% of their entire worth, contingent upon the arrangement of ownership (Herring et al., 2018). A hospital's debt to property value is roughly represented by its debt-to-equity ratio. The amount of debt a hospital owes relative to the value of the property it owns is called the debt-equity ratio. Compared to public hospitals, private hospitals have a substantially greater debt ratio (Herring et al., 2018). Great job identifying Medicare and Medicaid as primary funding sources of public hospitals. The private hospital needs to take on a lot of debt to maximize profits while keeping the debt-to-equity ratio low (Jeurissen et al., 2020). The ratio of debt may be smaller compared to or equal to the private hospital's debt because debt brings in more money for the facility. The debt-to-equity ratio must be used by the public hospital, however, because it is legally limited (Jeurissen et al., 2020).

References Herring, B., Gaskin, D. J., Zare, H., & Anderson, G. F. (2018). Comparing the value of nonprofit hospitals’ tax exemption to their community benefits. INQUIRY: The Journal of Health Care Organization, Provision, and Financing , 55 , 004695801775197. https://doi.org/10.1177/0046958017751970 Jeurissen, P., Kruse, F. M., Busse, R., Himmelstein, D. U., Mossialos, E., & Woolhandler, S. (2020). For-Profit hospitals have thrived because of generous public reimbursement schemes, not greater efficiency: a Multi-Country case study. International Journal of Health Services , 51 (1), 67–89. https://doi.org/10.1177/0020731420966976 Lo, B., & Grady, D. (2021). Financial profit: not the mission of medicine. Annals of Internal Medicine , 174 (10), 1466–1467. https://doi.org/10.7326/m21-3220 Lopez, E., Neuman, T., Jacobson, G., & Levitt, L. (2020). How much more than medicare do private insurers pay? A review of the literature | KFF . KFF. https://www.kff.org/medicare/issue-brief/how-much-more-than-medicare-do- private-insurers-pay-a-review-of-the-literature/ Sloan, F. (2020). Not-For-Profit ownership and hospital behavior . Duke University. https://public.econ.duke.edu/~fsloan/156/articles/Sloan_Article.html Hi Rita, You responded to the discussion prompt with a well-reasoned essay that was backed up by the data you researched. Great job regarding the values that set public, for-profit, and non- profit private hospitals apart, I agree with your findings. According to Sloan (2020), a private hospital's three conflicting economic values are profits, debt, and debt-to-equity ratio. Private and public hospitals have substantially varied debt loads that they can assume. Private hospitals

are more likely than public hospitals to accrue debt since, in the US, non-profit hospitals are only permitted to accrue debt up to 60–90% of their entire worth, contingent upon the arrangement of ownership (Herring et al., 2018). I like that you found data on technology innovation and resources distribution when it comes to public hospitals. It was found that private hospitals need to take on a lot of debt to maximize profits while keeping the debt-to-equity ratio low (Jeurissen et al., 2020). The ratio of debt may be smaller compared to or equal to the private hospital's debt because debt brings in more money for the facility. The debt-to-equity ratio must be used by the public hospital, however, because it is legally limited (Jeurissen et al., 2020). References Herring, B., Gaskin, D. J., Zare, H., & Anderson, G. F. (2018). Comparing the value of nonprofit hospitals’ tax exemption to their community benefits. INQUIRY: The Journal of Health Care Organization, Provision, and Financing , 55 , 004695801775197. https://doi.org/10.1177/0046958017751970 Jeurissen, P., Kruse, F. M., Busse, R., Himmelstein, D. U., Mossialos, E., & Woolhandler, S. (2020). For-Profit hospitals have thrived because of generous public reimbursement schemes, not greater efficiency: a Multi-Country case study. International Journal of Health Services , 51 (1), 67–89. https://doi.org/10.1177/0020731420966976 Sloan, F. (2020). Not-For-Profit ownership and hospital behavior . Duke University. https://public.econ.duke.edu/~fsloan/156/articles/Sloan_Article.html

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Discussion week 6

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