Nonprofit hospitals spend billions on consultants with no clear effect
uchicagomedicine.org
uchicagomedicine.org
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.
I disagree. There may be some exceptions, but generally non-profit hospitals were not set up as for-profit companies because the primary purpose of a for-profit company is to generate value for its shareholders. Not having shareholders, who if large enough have considerable power over you, removes a very large and perverse incentive to put profits over the public the hospital is serving. Instead the profits generated (and non-profits can turn a profit of course) must be re-invested into the business as retained earnings, thus benefitting the public.
IMO, for-profit hospitals should not exist for the same reason that for-profit prisons should not exist.
https://www.europeanceo.com/business-and-management/ikea-com...
It’s clearly fallacious to assume that non-profit is altruistic just because, I don’t know, for-profit is assumed as a premise to be about egotistical money hoarding.
If the reality is different, then maybe there shouldn't be non-profits anymore. In the UK for example, there are no non-profits, there are only charities. And clearly, the expectation of altruism is explicit here.
The tax-exempt status is granted for Exempt Purposes, but not as a matter of altruistic intention: https://www.irs.gov/charities-non-profits/charitable-organiz...
For example, ask your favorite LLM search engine: Can you list non-profits/501(c)(3) that are US defense contractors?
Draper Laboratory and Energetics Technology Center are registered 501(c)(3) corporations. Their primary output is weapons research. RAND Corp, whose name you'd likely recognize, is also a DoD contractor and 501(c)(3).
The NRA Foundation and the Heritage Foundation are also registered as 501(c)(3).
Yeah, organizations like think tanks (Heritage Foundation) are supposed to influence policy/public thought/elite thought. That’s obviously not a for-profit enterprise.
EDIT: My personal feelings about conservative think tanks aside: any and all think tanks are supposed to spread ideas. The altruism is where in that goal? It could be evil, good, neutral. It’s simply a not-for-profit enterprise.
It’s a bit hard to wrap my head around this original idea of altruistic non-profits.
Given that the NRA counts as a non-profit, not sure there is anything reasonable about giving them tax breaks. But hey, you also voted for Trump. Twice.
To be more explicit: Given that for-profits can be given tax-breaks for (hopefully) good reasons, what would be the reason to give non-profits tax-breaks, if not for altruism? After all, as you point out yourself, you can get tax-breaks also as a for-profit, so you don't need non-profits just for that reason.
* therefore non-profits can be given tax-breaks for (hopefully) good reasons [which are not altruistic].
A defense contractor designing missile guidance qualifies for the Exempt Purpose of "scientific."
A megachurch with a private jet qualifies under its "religious" category.
These do not specifically require altruistic intent. Congress chose to subsidize certain categories of activity (religious, scientific, educational, and so on) because it wanted more of that activity produced, regardless of the motives of the people doing it.
Expectations are completely irrelevant. Charities steal, in the UK the largest charities are essentially run as private companies except the shareholders are employees. Same thing with government, there was a unit of the government that spun out to a "non-profit" structure, some of the civil servants ended up becoming shareholders, and they now lobby their friends in the civil service to use their services...afaik, the government is still their only major customer and they were at, for example, all the pandemic meetings. Just generally, the UK has a vast network of these organizations that have a significant role in government policy but are totally outside the government (this is also true, actually even more so, in devolved countries...to a large extent, government policy there is formed by unelected private institutions).
There are no real rules here beyond humans act self-interestedly. No structure will contain this. This happens in for-profit companies with shareholders too. Principal-agent problem.
It may not be wise to assume non-profits exist within the confines of the law that authorizes their continued existence, but I don't see how it's fallacious.
[0]: https://www.irs.gov/charities-non-profits/charitable-organiz...
However once such a tax category was created, there was really nothing to stop the sociopathic MBA class from using them as just another optimization tool in their tax-minimization arsenal. Another example is non-profit schools where the property is owned by the founders and they charge hugely non-market rents to personally extract revenue from the non-profit.
So in current days we have both genuine altruistic endeavors (they still exist) and the predatory ones abusing the system.
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.
Hospitals are opex constrained for things that don’t generate revenue. The operations run lean and are focused on operating. There’s no bench in finance or IT or whatever to figure stuff out. Enter the consultant.
Consulting is often tied to capital spend and most importantly they go away when the job is done.
I submit my thesis. The PE/consultant class. A crust of slime buoyed about on the waves of capital to provide cover for the horrors underneath.
I also am aware of a situation where a pair of business consultants who were meant to be assisting with a software project were diverted (at full rate 1200/day) to assisting with redecorating an office.
I was directly involved, oppositionally, to a pair of business analyst consultants who tried to get a customer of mine to change their (admittedly terrible) vendor selection by repeating security concerns over and over again in the meeting. They never actually got to the point of analysing said terrible vendors terrible integration practices or costing up a migration path. They just banged on about security and contacted us separately after the meeting asking for more details about the security situation.
Basically you get out of it, what you want to get out of it. It depends on the consultant, their education, and the terms of their engagement. I don't know if statistics would be useful in this scenario or how you would control for wildly different outcomes.
Like someone else pointed out, if people are hiring them in order to provide cover for decision making, then maybe the whole thing being a charade is the point.
Well, McKinsey still existing? Too much influence. Otherwise they would have gone like so many other consulting companies.
You are now a fully trained management consultant. (Alan Johnson, Peep Show)
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.
Afaik, their job is to give management the cover managment thinks it needs to do the things it wants to do or thinks it needs to do.
The article claims the study says the billions spent on management consultants didn't move any metrics significantly, other than a small negative change for stroke readmissions.
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).
Apparently the only helicopter noise some residents like is the sound of their own, ferrying them to BFI so they can go to Aspen for the weekend.
My own employer has been burnt by consultants essentially moving the deck chairs around to the tune of $800 an hour
I suspect if someone internally made the same suggestions they'd be shot down, but only because they didn't cost so much
If you want to make progress in USA you must separate the crazy left from the moderate left, if you defend the people who want to ban private medicine then you aren't going anywhere. Those aren't your allies even if they pull in a similar direction, even if they sit in the same party in the two party system.
This is only true where medical service providers have no competition. In fact, the state often facilitates this lack of competition.
That is what it implies, there are many in the world who want to ban for profit healthcare and end pay discrimination between jobs. Nobody would ask that question in earnest, its just a rhetorical question to make a point.
You see the issue here right?
Now.. who pays is the question. Imo it must be the state, because otherwise there are too many perverse incentives.
Why should everything be intrinsically tied to profit in your minds?
State funded anything is not for profit, too.