Assignment: Controlled Subsidiary
ORDER NOW FOR AN ORIGINAL PAPER:Assignment: Controlled Subsidiaryypically, healthcare organizations restructure for one or more of the following four reasons, which dictate the corporate restructuring model:
1. Healthcare organizations that need to facilitate the development of a new service may develop a wholly controlled subsidiary corporation. For example, a for-profit healthcare organization may develop a wholly controlled subsidiary not-for-profit corporation, called a foundation, to facilitate education and research. The foundation structure also allows the for-profit healthcare organization to shelter some income from taxes by using the income for purposes that are tax-exempt.
2. Healthcare organizations that need to protect assets may develop a parent holding corporation. For example, for-profit healthcare organizations may develop several parent corporations to layer their liability in the event of malpractice suits. Courts allow only the assets of the organization, and not the assets of the parent corporation, to be introduced during deliberations regarding damage awards.
3. Healthcare organizations that need to maximize patient care and other operating revenues and even nonoperating revenues may develop a quasi- independent sister corporation. In this model, the healthcare organization can control no more than 49 percent of the governing body of the sister corporation. For example, a healthcare organization, either for-profit or not-for- profit, may develop a gift shop whose governing body usually uses the income to benefit the healthcare organization. The healthcare organization believes that the perception of independence on the part of customers, both in terms of who controls the governing body and who controls the employees or volunteers, gives the gift shop an advantage in generating revenue. Customers are more likely to buy gifts in an “independent” corporation than to buy gifts from the healthcare organization that sends them a bill.
4. Healthcare organizations that need to attract additional funds through phi- lanthropy may develop a wholly inde- pendent corporation. In this model, the healthcare organization cannot control any of the governing body. For example, a healthcare organization may develop a foundation whose governing body raises money using relationships established by the healthcare organization. The govern- ing body of the foundation usually uses the income to benefit the healthcare organization, much in the same way that university alumni associations, which are independent from the universities, use their income to benefit universities.
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