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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.
> 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.
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.
Wait... How does Ikea operate using a tax advantaged method?
Complicated legal structures, and favorable treatment by a government who uses it as a form of cultural diplomacy. The tldr is that there's a nonprofit that owns the company that operates as Ikea, while there's some concessions made to a for-profit that owns the IKEA branding.
https://www.europeanceo.com/business-and-management/ikea-com...
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.
By statute, an organization can only exist as a non-profit in the US if it is "organized and operated exclusively for exempt purposes"[0], and non-profit hospitals specifically must operate for charitable purposes.
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...
The concept of having a 'non-profit' tax category was explicitly to allow for (and even encourage the creation of) altruistic endeavors. That's why we have them. I do believe the original motivations for the non-profit category were sincere in this regard.
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.
"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.
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
Consultant... Hmm Reminds me of Barney's P.L.E.A.S.E.[1] acronym for Provide Legal Exculpation And Sign Everything.
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.
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.
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.
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.
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.
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.
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.
There's a third option though: the state is the customer, not the individual. Then private healthcare can work. Insurance companies sort of try to emulate that, but it doesn't really work.
False. Consultants made billions of dollars. This is a massive win for the consulting industry.
There is a very clear effect, the bureaucrats can distance themselves from any unpopular policies or decisions and blame the consultants.
tedious cliche. these types of consultants arent advising on high level f500 decisions.
I guess AI agents are the new consultants?
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".
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.
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.
This is anecdotic but I already worked on a company who fired staff to hire "specialized" consultants who were cheaper and more specialized, only to see their former members to join as consultants.
After years of this practice they also concluded there was no saving nor benefit on the strategy but couldn't rehire the people
This feels like the result of consultancy more often than not
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
"nonprofit hospitals", let it sink in.
I take here "nonprofit" means same as it does with religions.
Most of the hospital consultancy firms tied to nonprofit hospital management/board for 500 Alex.
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.