Alternative Forms of Ownership
Posted on November 28, 2008 - Filed Under Finance
Unlike other sectors in the economy, not-for-profit corporations play a major role in the healthcare sector, especially among providers. As we discussed in Chapter 1, about 60 percent of the hospitals in the United States are private not-for-profit hospitals. Only 15 percent of all hospitals are investor owned; the remaining 25 percent are governmental. Furthermore, not-forprofit ownership is common in the nursing home, home health care, and managed care industries.
Investor-Owned Corporations
When the average person thinks of a corporation, he or she probably thinks of an investor-owned, or for-profit, corporation. Larger businesses (e.g., Ford, IBM, and General Electric) are investor-owned corporations.
Investors become owners of such businesses by buying shares of common stock in the company. Investors may buy common stock when it is put up for sale by a company in what is called a primary market transaction. In such a transaction, the funds raised from the sale go to the corporation.5 After the shares have been sold by the corporation, they are traded in the secondary market. These sales typically take place on exchanges, such as the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), or in
the over-the-counter (OTC) market, which is composed of a large number of dealer/brokers connected by a sophisticated electronic trading system.6 When shares are bought and sold in the secondary market, the corporations whose stocks are traded receive no funds from the trades (corporations receive funds only when shares are first sold to investors).
Taken From : HEALTHCARE FINANCE
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