Hospital Profit Case Study

A business needs to receive a profit whether it is a hospital or a coffee shop in order to pay the overhead costs including employee salaries as well as expansion costs for effective competition. “A profit center is a unit of a company that generates revenue in excess of its expenses. It is expected that, through the sale of goods or services, the unit will turn a profit.”1 Profit is “a financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something”.2 I believe the answer to this question has more to do with the degree of profit that is made or desired within the profit center. Historically, health care organizations that focused on higher profit margins did not concentrate

In contrast, the chief executive officer at a New York-Presbyterian hospital system was paid $9.8 million in 2007 and $2.8 million in 2008. The chief executive officer at a Bronx-Lebanon hospital in New York State was paid $4.8 million in 2007 and $3.6 million in 2008. Both hospital systems receive public funding through federal and state taxes. In an effort to unburden the cost of health care for New York State, the task force assigned devised a plan that involved increasing the cost of a hospital stay by $5 and to limit housekeeping services for disabled individuals in their homes, as opposed to capping CEO salaries.4 In essence, a CEO for a health care organization should not be making the salary that the CEO of AT&T is

This led to a significant income disparity between PCP’s and specialist. Today, the number of specialists greatly outweighs the number of primary care physicians because of historical higher reimbursement practices initiated by Blue Shield and other plans. This aided in developing the U.S. health care market into a dispersed model that is so fragmented without the efficient checks and balances that would need to be in place in order for cost containment. The high cost of health care is attributed to the organizational disarray compared to health care performed in other industrialized countries (Understanding Health Policy, pages 54,