Custom «Multi Corporate Structure in Healthcare Organizations» Essay Paper Sample

Multi Corporate Structure in Healthcare Organizations

In the present day and age where profits are the driving force of every financial entity, it is not often odd to find healthcare organizations taking up the model used by these profit maximizing firms. Health organisations, whether for-profit or not-for-profit, often face the daunting task of managing the effects associated with increasing costs and decreasing revenues. Alexander et al reported in 1988 that a significant number of hospitals had undergone corporate restructuring in order to cope with hard financial times.

The Kaiser Permanent is one such healthcare organization that applies the multi corporate structure system of management in running of its operations. The organization has three distinct entities under it with each entity operating a number of subsidiaries in the name of the parent organization. The entities include; the Kaizer Foundation Health Plan which runs several regional subsidiaries, the Kaizer Foundation Hospitals and the Permanente Medical Groups. The organization runs the Kaizer Foundation Hospitals as a not-for-profit entity. There are many benefits associated with employing such a multi corporate structure in healthcare organizations;

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First, one of the major advantages of applying the multi corporate model in management is the fact that all the distinct entities under the organization are assumed to be one entity for tax purposes. The organization is taxed only once, either at the corporate or at the subsidiary level. Also, the not-for-profit arm of the organization is a tax exempt entity. Though most of the funds for running the not-for-profit entity come from the parent organization, any returns filed under it will go back to the organization without being taxed as per the law. In a way, the organization stands to lose nothing by running the not-for-profit Kaizer Foundation Hospitals.

Second, the Kaizer Foundation Hospitals runs a number of regional subsidiaries. These subsidiaries include hospitals under its umbrella and other affiliate hospitals that offer services to the public. It is through these subsidiary hospitals that the not-for-profit arm of the larger organization carries its for-profit activities with the returns being channeled back to the parent organization. However, it should be noted that any subsidiaries under the not-for-profit foundation are not tax exempt as well.

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Third, as an added advantage, separate entities in the organisation are considered to be separately owned and managed. As a consequence, any liabilities or credit claims against one of its entities subsidiary are locked in that particular entity. The parent organization is under no legal obligation to bail out the entity that has run into trouble. It is a common case that one of the entities or even a subsidiary hospital would run into financial problems that could tie the owners to large debts but due to the application of the law, the parent organisation is safe.

Fourth, through the corporate structure in place, the organization has its entities and subsidiaries operating in various regions of the country. This allows for expansion of business into these regions on top of being able to reach and serve as many people as possible. Presently, the Kaizer Permanente operates in most of the country serving over 8 million Americans.

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Finally, due to the vast number of health facilities under the organization, common management and planning allows for specialization among the health facilities. Health sectors that would otherwise be ignored are put into focus by client demands. In conclusion, it is quite evident that through employing multi corporate structures in its management, the Kaizer Permanente has grown a lot and still continues to grow. The application of this model in healthcare organization is undoubtedly quite beneficial.

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