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arjie
digdugdirk
Wait... How does Ikea operate using a tax advantaged method?
insane_dreamer
> 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.
keybored
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.
auggierose
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.
aesh2Xa1
I think your position seems reasonable, too. Though intuitive, it isn't the reality.
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).
keybored
Do for-profits become altruistic when corporations get tax breaks? Edit: I’m replying to the “reasonable one” point.
skippyboxedhero
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.
giaour
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...
Eddy_Viscosity2
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.
hahajk
"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.
Spooky23
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.
Avicebron
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.
pocksuppet
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.
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gofreddygo
Consultant... Hmm Reminds me of Barney's P.L.E.A.S.E.[1] acronym for Provide Legal Exculpation And Sign Everything.
dyauspitr
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
rnxrx
Not to be glib, but is there any industry where management consultants have been shown to make a statistically significant difference either way?
protocolture
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.
John23832
The management consulting industry wouldn’t work without them.
Cookingboy
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.
stouset
You missed the joke.
GuestFAUniverse
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.
JTbane
In, fire 30% of the workforce, new logo, out.
You are now a fully trained management consultant. (Alan Johnson, Peep Show)
dgellow
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 :(
dgan
TIL gnome-lib has a meaning outside of programming
nitwit005
Good to know I'm qualified. I am confident I can make no measurable difference.
coffeefirst
In fact, I’m prepared to make no difference 80% faster and 50% cheaper.
shermantanktop
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.
cameron_b
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.
hatthew
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.
bawana
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.
boxed
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.
akramachamarei
What do you mean by the state is the customer? As in they act as a buyer of healthcare for taxpayers? Why would we expect that to be better?
boxed
Yea. I expect it to be better because we have this in Sweden and it's vastly better than the US' system :P But there are many other things that are different of course, so hard to know which is which.
motbus3
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
jimjonescoolaid
False. Consultants made billions of dollars. This is a massive win for the consulting industry.
KLK2019
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).
mchusma
My father used to say "Nonprofit doesn't mean that nobody can make a profit". Seems applicable here.
SoftTalker
Mine had a slight variation, "Nonprofit doesn't mean that nobody can make money".
boznz
There is a very clear effect, the bureaucrats can distance themselves from any unpopular policies or decisions and blame the consultants.
oklahomasports
tedious cliche. these types of consultants arent advising on high level f500 decisions.
toast0
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.
dgellow
I guess AI agents are the new consultants?
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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.