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Healthcare Finance

Article 1 (Rosenbaum & Margulies, 2011)

Nearly 2,900 of all U.S. hospitals are nonprofit and under the Internal Revenue Code qualify for tax-exemption provided they attain several federal necessities (AHA, 2010). In 2002, 12.6 billion U.S. dollars was estimated to be attributed to foregone tax revenues (Rosenbaum & Margulies, 2011). Non-profit hospitals have been subjected to class-action lawsuits regarding their tax-exemption status based on billing procedures and care of uninsured and low-income patients. These hospitals must have provided extra information to the IRS to support their community assistance expenditure in 2009.

The Internal Revenue Code was amended to include additional provisions for charitable hospitals. The provision clarifies the qualification requirements for tax-exemption status. These requirements include having a community health requirements evaluation and an implementation plan, financial aid policies, hospital charges policies and collection and billing policies. For the community health requirements evaluation, the organization must have completed a community health needs evaluation and developed a strategy to implement the plan. Additionally, the organization should have considered opinions from the community they serve especially those with knowledge in public health and make this information public. Furthermore, the evaluation and implementation should be continuous and regular with alterations as conditions vary.

On the implementation end, the hospitals have been given ample time for planning and implementation but must produce meaningful results. Meaningful here suggests that the plan has been executed in a reliable, valid and relevant manner in the context of the community health requirements, has been executed using proper input and processes from experts in community health, is a reflection of the community’s needs and has been structured in a manner that supports implementation. The debate still exists as to how treasury will define clear and regulatory measures for an acceptable evaluation, an evaluation process and an implementation proposal. Most of these were left to the judgement of public health officials.

The community health requirements evaluation measure has the potential to initiate collaboration between local and state health bodies and healthcare facilities serving the locale. Despite the need for further guidelines from the treasury, the evaluation process is being further clarified via consultation with local hospitals to gauge and measure vital public health improvement objectives including serving the community especially with preventive services, improved management of chronic diseases, increasing public health literacy levels, offering support to community health officers and achieving population health objectives. This process is evident-based and continues to open doors for a both public health experts and communities to address public health issues (Rosenbaum & Margulies, 2011).


Article 2 (Dong, 2015)

Economic challenges faced by U.S. healthcare facilities have resulted to business practices aimed at reducing costs and improving operational and financial efficiency. However, the question of whether this finance-based management principles can affect care quality naturally arises. Despite many administrators favoring this management culture, there is evidence that this profit driven model could prove harmful to patients and their health outcomes.

This condition has called for healthcare finance managers and administrators to focus their efforts on lowering costs, strengthening balance sheets, improving operational efficiency and consolidating the supply chain. To attain these goals, hospitals have tried reducing the staff, increasing patient waiting time, delaying technology upgrades, lowering compliance levels and sometimes even reducing the utilization of medical resources. The financial condition of a hospital can be analyzed through various measures such as profitability, cost, efficiency and liquidity. To what extent does the financial uncertainty of hospitals affect patient care quality?

Public hospitals score lower on quality in comparison to nonprofit hospitals. They also have smaller and newer assets, lower leverage, lower profitability and efficiency and higher labor costs than non profit hospitals. When determining which of these hospitals is likely to offer higher-quality care, location, hospital size, ownership, capital structure, labor costs, operating efficacy and charity expenditure all become crucial factors of the quality of patient care. Since the risk of bankruptcy or financial feasibility is not the main concern of a hospital, the administrators can finance investments and operations in projects related to quality improvement, facilities and infrastructure via municipal securities. Using the capital borrowed and profits earned, the hospitals are able to employ more skilled staff, train them, improve safety and quality control, upgrade their medical technology and reduce patient waiting times. These actions gradually improve patient health outcomes. Greater need for high quality service may incentivize a hospital to higher expert workforce which in turn incurs meaningful costs in benefits and compensation (Chiswick, 1973). However, doing so may introduce operational costs that may lessen profits. In summary, the advantage of hiring a skilled workforce supersedes the additional cost in wages. Pursuing profits may enhance a hospital’s quality and quantity of service they provide. However, inadequate organization of financial management may lower quality standards therefore suggesting the importance of monitoring the care quality in hospitals with limited financial might (Dong, 2015).





AHA. (2010). Fast Facts on U.S. Hospitals, 2021 | AHA. American Hospital Association. Retrieved 2 September 2021, from

Chiswick, B. (1973). The Rising Cost of Hospital Care. Medical Care11(2), 168-172.

Dong, G. (2015). Performing well in financial management and quality of care: evidence from hospital process measures for treatment of cardiovascular disease. BMC Health Services Research15(1).

Rosenbaum, S., & Margulies, R. (2011). Tax-Exempt Hospitals and the Patient Protection and Affordable Care Act: Implications for Public Health Policy and Practice. Public Health Reports126(2), 283-286.