Nonprofit hospitals may have gotten a raw deal on the millions to billions of dollars they spent on management consulting services, a new peer-reviewed analysis suggests.
The study, published Monday in JAMA, found that, compared with matched hospitals that did not tap outside guidance, those that hired consultants between 2010 and 2022 showed “no evidence of meaningful changes” on average across various measures of their finances, operations, or quality-of-care outcomes.
The 306 organizations that used a management consulting firm for the first time during the study window—which represent just over a fifth of all nonprofit hospitals—spent an average of at least $15.7 million on the services, or a collective $7.8 billion.
“These findings raise questions about the net value that nonprofit hospitals receive from management consulting services and suggest the need to carefully examine the widespread use of management consultants by hospitals and other organizations across the healthcare industry,” the study’s authors wrote in the journal.
They added that “such large outlays have real opportunity costs—for example, among nonprofit hospitals that hired management consulting firms, the average expenditure of $15.7 million could alternatively fund the annual salaries of approximately 46 hospitalists or 167 registered nurses.”
The researchers built their analysis by collecting hospitals’ filed Form 990 tax documents, which require nonprofits to list their five largest external contracts exceeding $100,000 with a short description of each contract. The authors combined these descriptions with other available sources—news stories, public relations materials and other publicly available hospital records—to help characterize the goal of each identified contract.
The researchers also pulled other filings that outline hospitals’ operations and patient outcomes, such as Medicare cost reports and Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) and Medicare claims data. With these, they compared the performances of each hospital with identified management consulting contracts to two non-consultant facilities with similar bed counts, inpatient discharges and initial operating margins.
The researchers found that hospitals’ management consulting contracts lasted 1.4 years on average, with each observed contract costing $6.2 million on average. Hospitals that turned to consultants tended to be similar to their peers terms of net income and inpatient length of stay, but, on average, had lower operating margins, more charity care spending and greater fixed assets.
However, relevant changes between the two hospital groups following a contract weren’t significant across every reviewed financial measure: net patient revenue, operating expenses, fixed assets, bad debt, days of cash on hand, total margin, operating margin, cash flow margin and current ratio.
Of the 108 management consulting contracts researchers were able to characterize, nearly two-thirds look to improve financial performance.
The trend of similar post-consultant performance was also true for most operational outcomes, including inpatient length of stay, total inpatient days, Medicaid inpatient days, number of employees on payroll, average CEO salary, community benefit and overall patient experience score. The exception was the average worker salary, which declined slightly among hospitals that hired a consultant.
On patient health outcomes, there was no relative difference in 30-day mortality and readmission for patients with acute myocardial infarction and pneumonia. Thirty-day mortality was also similar for stroke patients, though there was a relative increase in 30-day readmission with stroke for the consulting hospitals.
The authors described their findings as a starting point for further research into healthcare’s use of management consultants, noting several limitations in their approach that could be masking their impact, including smaller management contracts missed by the Form 990 requirements.
Additionally, “it may be that changes induced by management consultants are simply too small to detect, that they affect dimensions of performance that we did not observe, or that the activities of these contracts are sufficiently varied as to make effects on any individual dimension difficult to discern,” they wrote. “Alternatively, it may be that management consultants are primarily validating decisions or otherwise making recommendations that are very similar to what the hospital would have done without the contract.”
An editorial published alongside the study had a similar read, commending the researchers for building “an impressive database” but suggesting “there is likely more to the story.” Beyond the methodological limitations outlined by the authors, they noted that hospitals’ decision to strike a pricey consulting contract is itself a source of selection bias.
“Hospitals do not randomly decide to spend more than $100,000 on consulting,” they wrote in the editorial. “… One productive direction for future research would be to investigate the factors that predict a hospital’s decision to hire a consulting firm.”
Publisher: Source link
