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Profit distribution in privately funded healthcare - Reallocating costs and setting up internal transactions in the organizational structure of a healthcare organization

Lent, Tim van (2013) Profit distribution in privately funded healthcare - Reallocating costs and setting up internal transactions in the organizational structure of a healthcare organization.

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Abstract:Privately funded healthcare organizations offering insured healthcare are currently hindered by legislation preventing them to distribute profits directly to its shareholders. This was the main problem to be solved in our research. In this thesis we present a feasible solution to overcome it, applicable for many years to come. Not only is this thesis highly relevant for the organization where it took place, it also is very valuable for current and new privately funded healthcare organizations. It offers guidance and flexibility allowing an adequate solution that is viable for years. We have reviewed this problem from a legal, fiscal and social perspective. An extensive research yielded the following boundaries and requirements for the solution:  From a legal perspective the solution needs to be valid under current and future legislation. Also it should be taken into account that outsourcing of core activities means that the profit distribution restriction also applies to the entity carrying out the healthcare activities.  From a fiscal perspective transfer prices should be in line with the market if internal transactions are considered. Also a fiscal unity should be formed for both the corporate income tax and the value added tax to prevent double taxation.  From a social perspective the solution is only valid if no structural losses occur in entities and the profit level of the entity carrying out the healthcare activities should be in line with the market.  Furthermore the solution should be durable, requiring no drastic changes in upcoming years. The amount of upkeep should be minimal. The solution that fits best within these boundaries and requirements is to determine internal transactions within the holding structure. We considered multiple internal transactions, and reallocated activities and corresponding costs between the structure of legal entities. I developed an Excel-tool that allows for much flexibility to optimize the amount of revenues free of the profit distribution restriction while still staying within the stated boundaries. Furthermore I devised a distribution model that makes a strong case towards the Dutch authorities regarding the type of internal transactions and the height of the financial result in the entity carrying out the healthcare activities. The model developed allows that all profits within the hospital group are eligible for distribution in approximately the next 12 years and shareholders are able to see a return in the form of dividends after 7 years.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
Link to this item:http://purl.utwente.nl/essays/64415
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