Defining hospitals: Many names for healing

OWATONNA, Minn. 06/07/2007-- Photo of Scott Palmer, Owatonna Hospital Foundation executive director

Statement by Scott Palmer, Owatonna Hospital Foundation executive director, on the difference between not-for-profit and for-profit hospitals.

If you lived in the early 1800s and got sick, the last place you wanted to go to was a hospital. They were dreary places where a doctor might drop by a few times a week. Even after hospitals grew and served more people, they often turned the sickest away in favor of those with a better chance of being cured.

That's a far cry from today, when there are more than 36 million hospital admissions in the United States each year. Hospitals range from tiny facilities with just a few doctors and nurses to enormous complexes with more than a thousand beds serving many thousands of patients each year.

Sorting them out

An industry this big is sure to be complex. For example, there are hospitals that specialize in treating just cancer, heart or childhood diseases. Some hospitals serve people from a single community while others see patients from all over the world.

Here at Owatonna Hospital, we offer a broad array of health care services to people living in Owatonna or surrounding communities. But when someone sees us with a less common medical condition, we’re able to tap into Allina Hospitals & Clinic’s network of specialty services for more advanced care, patient education and other resources at Abbott Northwestern Hospital, the Heart Hospital of Abbot Northwester Hospital, the Phillips Eye Institute or Sister Kenny Rehabilitation Institute.

Another way to define hospitals is whether they’re for-profit or not-for-profit. It's a definition based on corporate structure and tax status. Not-for-profits were actually established first. In fact, Ben Franklin founded the first hospital in this country over 250 years ago.

Many not-for-profits, like Owatonna Hospital, started when the community saw a need and sold bonds or solicited donations. For example, back in 1901 a group of Owatonna residents believed they’d be a healthier community if they had a hospital nearby. In short order they established the Owatonna City Hospital, which later became Owatonna Hospital.

For-profit hospitals, on the other hand, are relatively new. Some earlier hospitals were owned by physicians, but the modern investor-owned hospital came about in the last 40 years. According to the National Center for Health Statistics and other experts, for-profit and not-for-profit hospitals differ in several ways.

Not-for-profits:

1. Are operated by a church or other nonprofit organization, such as Allina Hospitals & Clinics.
2. Can make a profit, but they may not pay it out to investors.
3. Must reinvest profits, such as in capital improvements or charity care. For example, in Owatonna, upon completion of the new hospital, Allina Hospitals & Clinics will have reinvested back into the hospital nearly $70 million in capital, which includes construction expansions, equipment, and technology upgrades.
4. Are exempt from paying most taxes.

For-profits:

1. Are operated by individuals, partnerships or corporations.
2. Can sell stock and pay out profits to investors.
3. Must pay taxes.
4. May also provide charity care.

More than health care

Owatonna Hospital is one of the 85 percent of U.S. hospitals that is not-for-profit. As such, we reinvest our profits, provide uncompensated care to patients, offer health education and meeting rooms for support groups, and contribute in other ways to making this a healthier community.

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Defining hospitals: Many names for healing

Sorting them out

More than health care

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