Question

Not-for-profit healthcare providers undergo more government audits than for-profit providers, according to the Health Care Compliance Association. The survey found that 42 percent of not-for-profit healthcare providers had undergone audits by two different government agencies looking at the same potential problem, compared with 25 percent of for-profit providers that had experienced such audits, according to the survey. The average number of audits reported by for-profit providers was just under four, compared with an average of six audits reported by not-for-profits during a 12-month period, the survey says.

Critical Thinking Questions: Researchers say they are unsure why not-for-profit providers came under more scrutiny from auditors. Based on your knowledge and experience as a health care professional, discuss some potential reasons why you think this is true. If you do not currently work in the health care environment, feel free to discuss your point of view as well, based on your understanding of for-profit and not-for-profit organizations.

Answer 1

A not for profit organization is , by definition an entity, not making any profits and hence not paying any tax. Since, it's not supposed to pay tax, on the back of no profits; any scrutinizing agency will really like to ensure that such companies do not generate profit. And if they do, they should pay tax. This very fact leads to higher scrutiny because:

• Government feels the need for scrutiny to make sure that these companies are really not making money
• Hence, they feel the need to see if there is any concealment of income
• They feel to audit to ensure they should not have overstated the expenses to lower their profits
• And in case they are making profits, then they must pay taxes.

In case of a normal for profit organization, the mandate as well as intent is clear that:

• We are in the market to generate profits
• And we will pay taxes on the profits generated

Since the mandate and intent is clear, of course it will be subjected to lower scrutiny.