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.
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).
> 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.
You will see that in your link "charitable" is printed in bold. Yes, other "exempt purposes" are tacked onto that in US law, if that is reasonable I leave up to you.
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.
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.
* Given that for-profits can be given tax-breaks for (hopefully) good reasons [which are not altruistic];
* 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.
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.
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.
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.
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
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
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.
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.
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.
Nothing you said there is related to for profit hospitals, I live in Sweden and we also have for profit hospitals here, wanting to ban for profit hospitals is just stupid. There have been many in Sweden who want to ban profits in healthcare so that you can't go and get a private doctor, do you really want to do that?
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.
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
> 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
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.
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.
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.
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.
1: https://youtu.be/ZfWVV533RHE
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.
https://www.trtworld.com/article/12748537
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.
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.
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.
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.
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.