Nonprofit hospitals spend billions on management consultants, who have developed a reputation as job-killers. But a new study suggests they have negligible impact on how the institutions are run and how patients are treated.

An analysis of a sample of 306 nonprofit hospitals that first hired management consulting firms from 2010 to 2022 found no major changes in finances, employment levels, or quality of care compared to 513 matched institutions that didn’t hire consultants from 2009 to 2023, reported author Joseph Dov Bruch, PhD, assistant professor of public health sciences at The University of Chicago, Chicago, and colleagues in JAMA.

“At least within this sample and study timeframe, we’re not seeing any benefits or harms,” said Bruch, who conducted the study with colleagues.

Still, the hospitals in the sample — accounting for more than 20% of all nonprofit hospitals — paid at least an average of $15.7 million for the management consulting services, totaling $7.8 billion.

Sparse Research Into Consultant Impact

The researchers found that annual spending on management consultants by the nation’s 2343 nonprofit hospitals nearly tripled from $273 million to $733 million from 2009 to 2023, with firms Deloitte and Accenture each paid $1.2 billion over that period.

Still, “there’s been no systematic evaluation of management consultants within the US healthcare industry,” Bruch said. “This is just an area that has not been subject to much inquiry, let alone any type of systematic evaluation or empirical study. Part of the challenge of studying management consultants is it’s quite difficult to track their usage in any industry, but particularly in healthcare.”

Tax Forms Reveal a Wider Picture

The researchers analyzed IRS Form 990 filings, which require nonprofits to disclose their five largest external contracts above $100,000, and identified 306 hospitals that used consultants for the first time from 2009 to 2023. They created a matched group of 513 hospitals that didn’t disclose the use of management consultants and compared financial performance, operational measures such as staffing and compensation, and quality-of-care measures.

Researchers found no statistically significant difference in almost all of the measurements over time between the hospitals reporting using consultants and those that didn’t.

Despite the reputation of consultants as eager to cut workers, the study found no evidence that they convinced hospitals to embrace layoffs. “We don’t see any evidence of massive job loss,” Bruch said.

Medscape Medical News asked seven major management consulting firms to comment on the study: McKinsey & Company, Guidehouse, Deloitte, Vizient, PwC (PricewaterhouseCoopers), Kaufman Hall, and Boston Consulting Group. The companies either didn’t respond or declined to comment.

The Institute of Management Consultants, a trade group, didn’t respond. The American College of Healthcare Executives also declined to comment.

Rubber Stamps or Simply Ignored?

What’s going on? It’s possible that the consultants just “rubber-stamp” decisions that hospital executives already have in mind, Bruch said.

“There’s also the possibility that they’re providing advice and that advice is not being implemented. Or it’s possible that the advice that they’re providing is not captured in the types of data that we collected.”

The firms may also advise on so many topics that their impact can’t be detected by the study design, Bruch said.

“This study provides the first evidence on the use of management consultants within the US health sector, but it should not be the last word on this topic,” he said. “There certainly does need to be more empirical examination of these actors, not just in health systems, but across the US health sector: nursing homes, health insurance firms, community health centers.”

Study Limitations: Missing Contracts?

In an accompanying commentary, Thomas C. Buchmueller, PhD, and Helen G. Levy, PhD, both professors at the University of Michigan, Ann Arbor, Michigan, praised the study but noted limitations.

For one, “hospitals that engage a consulting firm to improve financial performance are likely to include ones facing financial difficulties, which can have spillover effects on health outcomes and patient satisfaction,” they wrote. “This would mean that the results may understate positive effects that consultants might have on outcomes.”

And, they wrote, the study’s estimates have wide CIs.

In an interview, Nancy M. Kane, DBA, professor emerita of health policy and management at the Harvard T.H. Chan School of Public Health, Boston, noted that the study may have missed many consulting contracts because it only included information from the largest contracts.

Still, Bruch noted that even without the inclusion of smaller contracts, the study provides perspective into the impact of the largest contracts.

Outside Perspective: ‘Giant Waste of Money’

David U. Himmelstein, MD, professor of public health at Hunter College, New York City, praised the “convincing” study in an interview and offered advice: “Don’t hire management consultants. They’re a giant waste of money or even worse.”

He added that consultants are “most commonly called upon to justify what the administration already knew it wanted to do. The common perception of clinicians about consultants is that ‘They borrow your watch and then tell you the time.’”

No study funding was reported. Bruch disclosed having relationships with the Robert Wood Johnson Foundation, Rx Foundation, Commonwealth Fund, Adasina Social Capital, and McKinsey & Company. No other authors reported having disclosures.

Kane disclosed serving on the board of UMass Memorial Health and consults with consumer groups and state and federal agencies on healthcare finance. Himmelstein has no disclosures. Buchmueller and Levy reported having no disclosures.