Nonprofit hospitals spend billions on consultants with no clear effect

Realistically, non-profit hospitals aren't non-profit because they are altruistic in some sense. It's because that is a tax-efficient structure for them. Given that, the participants in the structure must have a mechanism to extract money from the machine. It's a bit of a cynical view, but I believe many non-profits are organized in this fashion and their vendor contracts are the mechanism of value extraction.

Besides the big tax advantages for the business, there are programs like the 340B Drug Pricing Program - that allow non-profit hospitals to acquire drugs at much lower cost which they can then sell to patients at normal cost. Tools like this make it useful for non-profit hospitals to acquire for-profit hospitals and effectively instantly tune up their margins, which they in fact do.

That makes this just a business operating using a tax-advantaged method, somewhat like Ikea. I think the confusion occurs when people assume 'non-profit' is a public charity that gives away money. In practice, it's just a business structure with certain advantages and constraints.

"Hospitals navigating challenging financial and regulatory landscapes may call on these specialists for advice on strategic planning, cost-cutting, reorganizations, or revenue-boosting initiatives."

I think it's been stated in this thread, and I learned it reading the comments on HN, but consultants are not hired to optimize processes but instead to provide decision insurance. If you take a big risk by yourself and it goes poorly, your job and reputation are on the line. If you hire a consulting firm that advises you take the risk, and report that the risk is properly characterized and understood, and then it goes wrong - well sometimes the best laid plans fall victim to circumstance.

The whole premise of 'for-profit' healthcare stinks to high heaven. Regardless of hospitals calling themselves 'non-profit', they behave like profit seeking enterprises. This is the ultimate corporate double speak.

The bottom line is that - people do not get to choose their illness. So a capitalist model in Adam Smith's sense where people get to 'choose' their 'insurance' based on price and benefit is an illusion. It would be like having identical futures contracts on a commodity from different brokers with the only difference being the commission structure. The underlying product is the same and in fact regulated by law.

Legally, are non profits allowed to do mergers and acquisitions ?The hospitals are becoming monolithic monopolies.

Not to be glib, but is there any industry where management consultants have been shown to make a statistically significant difference either way?

Good to know I'm qualified. I am confident I can make no measurable difference.

Can't access the paper, but I'm curious how they measured statistical significance. I wonder how much to interpret the result as "we didn't measure any effect" (which is a largely meaningless conclusion) versus "no effect exists." The latter wouldn't be a rigorous statement, but it seems to be the conclusion we are being led towards.

False. Consultants made billions of dollars. This is a massive win for the consulting industry.

One contributing factor I experience is that keeping competent, opinionated, leadership who are a good fit is an expensive proposition, and the "hold fast" position will always be challenged by whatever board is scrutinizing the budget/plan/forecast. The only play where no top brass has to catch a parachute is to bring in a consultant to scrutinize the business, read the crystal ball, and pitch a plan to weather the coming storm. Medicare funds are dust in the wind, Covid-era opportunities are dead and over, and the big axe has swung so much it needs sharpening. None of these are easy decisions to make and the result of "we're still doing what we're doing" is success.

I did a brief review of the publication. I do think its hard to isolate consulting engagement with broad measures on financial performance, and claims based patient outcomes.

With that being said, consultants have no skin in the game, and thier incentives are aligned more towards executive relationship management and seeking out new opportunities for revenue vs. achieving aspirational metrics that ultimately matter to a health system.

I work in medtech and a model that I am more hopeful for is attaching consulting servics with capital purchaes. (e.g. siemans, GE). This model puts skin in the game from the manufacturer as outcomes and ultimately future revenue is tied to being able to show improvement on key clinical, financial, and operational metrics.

Curious to see if this study design can be applied under this scenario (search for press releases regarding signed partnerhsips with medtech and examine a narrower set of outcomes identified in those press releases).

My father used to say "Nonprofit doesn't mean that nobody can make a profit". Seems applicable here.

There is a very clear effect, the bureaucrats can distance themselves from any unpopular policies or decisions and blame the consultants.

They're just part of the machinery for extracting money from these "nonprofits". Take a closer look at anything these paragons of virtue spend money on, and you'll find rot in every last minute detail of their day-to-day operations.

Most of the hospital consultancy firms tied to nonprofit hospital management/board for 500 Alex.

I have never seen them consultants that provide a value commensurate with the prices they charge. They seem more like a proxy for fraud. When I worked at PayPal, there was a director who had an army of Deloitte consultants who just so happened to be from her husband's team at Deloitte. It was a clear conflict of interest and even though execs were aware, nothing was ever done. I imagine that's going on all over the place.

"nonprofit hospitals", let it sink in.

Don't care. I'm going to name and shame. I worked at Seattle Children's Hospital in tech for a short time. The insane amount of self congratulatory back patting to mask incompetence and tolerance of mediocrity wasted billions that could have gone to patient care. What I witnessed there was damn near criminal.

The existence of non-profits, and the possibility that they might be net-beneficial to society, is counter to the dominant religion of the day. Profit motive = good, other motive = bad. Welcome to UChicago.

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There's no such thing as a nonprofit. It's really just a question of whether or not the money goes to the shareholders or the management.