Nonprofit hospitals spend billions on consultants with no clear effect
A new JAMA study reveals that nonprofit hospitals in the US have spent at least $7.8 billion on management consultants over the past decade, yet saw no statistically significant improvements in finances, operations, or patient outcomes. Hacker News commenters immediately seized on the cynical view that consultants primarily provide "blame cover" for executives. This story sparks a familiar debate about the actual value provided by high-paid advisory services in critical sectors.
The Lowdown
A recent study published in JAMA investigates the significant investment nonprofit hospitals make in management consulting services, an industry with outsized influence in American healthcare. Researchers analyzed IRS Form 990 filings from 2010-2022, identifying contracts between hospitals and consulting firms to determine the impact of these engagements.
- Over 20% of all nonprofit hospitals engaged management consultants during the study period.
- The sector spent a minimum of $7.8 billion on these services, with the average hospital investing $15.7 million.
- The study found no statistically significant or systematic changes in key metrics such as net patient revenue, operating margin, cash on hand, or patient outcomes (like readmission and mortality rates).
- The only identified effect was a slight increase in stroke readmissions, suggesting a potential negative impact.
- When other types of consultants (HR, IT) are included, the total spend by nonprofit hospitals rises to over $25 billion.
- The lead author, Joseph Dov Bruch, emphasizes the need for greater caution in how hospitals spend tax-subsidized funds and for more research into the actual impact of these costly services.
Ultimately, the research suggests that while not necessarily a "waste," these massive expenditures on management consultants do not yield the "dramatic efficiencies" or "meaningful improvements" often promised. It underscores a call for increased transparency and accountability in how healthcare institutions allocate their resources.
The Gossip
Consultants as Clandestine Cover
Many commenters immediately jumped to the conclusion that management consultants are hired not for their expertise, but to serve as a scapegoat or provide a veneer of external validation for management's pre-existing decisions. This view suggests consultants offer "blame cover" for unpopular policies, allowing executives to distance themselves from negative outcomes. While one user dismissed this as a "tedious cliche," others reiterated its common perception.
Questioning the Quid Pro Quo
The core finding of the study—billions spent with no measurable positive effect—led to a cynical questioning of the entire management consulting industry's value proposition, especially in the context of nonprofit healthcare. Commenters humorously noted that if the goal is "no measurable difference," many more people would be qualified for the job, highlighting the perceived lack of tangible returns on these significant investments.