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.
Assuming that non-profits are altruistic seems fallacious. Granted, I don’t know why they are assumed to be by some; it’s just presented as such because it seems obvious, no arguments need to be given.
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.
I think the assumption about non-profits being altruistic is a reasonable one, because what would otherwise be the justification for giving them tax breaks?
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.
Not sure why this would matter. You know that implication is directional, not symmetric, right?
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.
There are non-profits in the UK. Some of these structures are over 100 years old at this point.
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.
"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.
That’s really only a rather small part of the picture.
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.
Which immediately begs the question, how do you become one of these faceless people waving vaguely in the air saying "fire a whole lot of people, that should mean you spend less right?"
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 think you can only get in this position if you're already playing golf with enough CEOs. Over golf the CEO casually mentions he wants to fire 30% of the workforce but he doesn't want the flak. Then you suggest you could write a consulting report on it.
That’s not the only reason the other reason is these processes and ways of doing things are so bureaucratic and hard to navigate that you actually do need very specialized information from consultants that it’s not easy to come by
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.
My dad ran a crisis management consultancy for years. I just googled a few of his clients and they all survived the process. He would come in, assist with minor layoffs, repair business processes, usually get some software installed/updated back when that was a huge multiplier to a business and then leave when everything was running smooth.
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.
I mean does it work? Other than profit making for the consulting companies?
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.
In the good old time you at least had to spend some time coming up with the inspirational slide deck to explain the meaning of the new logo! Now even that part has been automated :(
If we’re bidding on this job, I can make no difference in zero time for one penny. I will want a minimum of one second of employment though, gotta pay those bills.
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.
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).
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.
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.
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.
A friend of mine worked in one of the consulting practices at IBM. One of the silverbacks there had their own shadow consulting firm complete with offshore resources operating within IBM and their clients. I thought that was particularly brazen/clever.
Why should it be illegal to help people for profit? That is what doctors do, they profit a lot when they help people, they could live on much smaller salaries than they currently have but of course market economics makes it so we want to pay doctors higher salaries than they really need.
People don't seem medical services because they want to, they do it when they need them. It is the only industry where there price list might as well be replaced with "we will take as much as you can afford". No one can afford to be stingy with money with health and live of their loved ones on stake.
It is very asymmetric situation, so it is clear to me why someone would want to ban for profit hospitals.
I think you’re addressing a different point than the person you responded to. They are asking for a positive argument regarding why healthcare itself should make a profit. That doesn’t imply banning profit, or that doctors aren’t compensated at market value
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.
Maybe they could run a fundraiser in Laurelhurst for some of that money. Anything to keep the residents distracted from spending money on business FlightAware subscriptions and fighting the DOH to try to get medical records to "show" that the three airlift helicopters a week that land at SCH are in violation of their community council noise ordinance because they weren't truly "life threatening emergencies" and thus should have landed at UW or Harborview and been ground ferried from there to Children's.
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.
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.
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.
Assuming that non-profits are altruistic seems fallacious. Granted, I don’t know why they are assumed to be by some; it’s just presented as such because it seems obvious, no arguments need to be given.
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.
I think the assumption about non-profits being altruistic is a reasonable one, because what would otherwise be the justification for giving them tax breaks?
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.
Do for-profits become altruistic when corporations get tax breaks? Edit: I’m replying to the “reasonable one” point.
Not sure why this would matter. You know that implication is directional, not symmetric, right?
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.
I’ll ask my mother if I was dropped on the head as a child.
Oh, I am sorry if that was the case. I amended my answer to be more explicit, as I already anticipated that you are not into logic.
There are non-profits in the UK. Some of these structures are over 100 years old at this point.
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.
"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.
That’s really only a rather small part of the picture.
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.
Which immediately begs the question, how do you become one of these faceless people waving vaguely in the air saying "fire a whole lot of people, that should mean you spend less right?"
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 think you can only get in this position if you're already playing golf with enough CEOs. Over golf the CEO casually mentions he wants to fire 30% of the workforce but he doesn't want the flak. Then you suggest you could write a consulting report on it.
Consultant... Hmm Reminds me of Barney's P.L.E.A.S.E.[1] acronym for Provide Legal Exculpation And Sign Everything.
1: https://youtu.be/ZfWVV533RHE
That’s not the only reason the other reason is these processes and ways of doing things are so bureaucratic and hard to navigate that you actually do need very specialized information from consultants that it’s not easy to come by
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?
My dad ran a crisis management consultancy for years. I just googled a few of his clients and they all survived the process. He would come in, assist with minor layoffs, repair business processes, usually get some software installed/updated back when that was a huge multiplier to a business and then leave when everything was running smooth.
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.
The management consulting industry wouldn’t work without them.
I mean does it work? Other than profit making for the consulting companies?
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.
You missed the joke.
Statistically relevant: yes. In a positive way: no.
Well, McKinsey still existing? Too much influence. Otherwise they would have gone like so many other consulting companies.
https://www.trtworld.com/article/12748537
In, fire 30% of the workforce, new logo, out.
You are now a fully trained management consultant. (Alan Johnson, Peep Show)
In the good old time you at least had to spend some time coming up with the inspirational slide deck to explain the meaning of the new logo! Now even that part has been automated :(
TIL gnome-lib has a meaning outside of programming
Good to know I'm qualified. I am confident I can make no measurable difference.
In fact, I’m prepared to make no difference 80% faster and 50% cheaper.
If we’re bidding on this job, I can make no difference in zero time for one penny. I will want a minimum of one second of employment though, gotta pay those bills.
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.
Mine had a slight variation, "Nonprofit doesn't mean that nobody can make money".
There is a very clear effect, the bureaucrats can distance themselves from any unpopular policies or decisions and blame the consultants.
I guess AI agents are the new consultants?
tedious cliche. these types of consultants arent advising on high level f500 decisions.
What do management consultants do?
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.
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.
Like many VC’s that extract wealth from companies to enrich themselves.
That's surely the expected behaviour. Why would a VC provide money if not to get a return?
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.
A friend of mine worked in one of the consulting practices at IBM. One of the silverbacks there had their own shadow consulting firm complete with offshore resources operating within IBM and their clients. I thought that was particularly brazen/clever.
Yep, "follow the money" often explains a lot of things that appear to be bizarre or irrational at first glance.
"nonprofit hospitals", let it sink in.
I take here "nonprofit" means same as it does with religions.
Why should there be any profit in healthcare.
Why should it be illegal to help people for profit? That is what doctors do, they profit a lot when they help people, they could live on much smaller salaries than they currently have but of course market economics makes it so we want to pay doctors higher salaries than they really need.
People don't seem medical services because they want to, they do it when they need them. It is the only industry where there price list might as well be replaced with "we will take as much as you can afford". No one can afford to be stingy with money with health and live of their loved ones on stake. It is very asymmetric situation, so it is clear to me why someone would want to ban for profit hospitals.
I think you’re addressing a different point than the person you responded to. They are asking for a positive argument regarding why healthcare itself should make a profit. That doesn’t imply banning profit, or that doctors aren’t compensated at market value
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.
Maybe they could run a fundraiser in Laurelhurst for some of that money. Anything to keep the residents distracted from spending money on business FlightAware subscriptions and fighting the DOH to try to get medical records to "show" that the three airlift helicopters a week that land at SCH are in violation of their community council noise ordinance because they weren't truly "life threatening emergencies" and thus should have landed at UW or Harborview and been ground ferried from there to Children's.
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.
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.
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.