Nonprofit hospitals face relentless pressure. Rising labor costs. Shrinking margins. Demands for community benefits that justify their tax-exempt status. Many turn to high-priced management consultants for answers. A major new study suggests they get very little in return.
More than one in five nonprofit hospitals hired management consultants between 2010 and 2022. Collectively those organizations spent at least $7.8 billion. The average hospital laid out $15.7 million. Yet when researchers compared them with similar hospitals that skipped the consultants, they found no meaningful gains in finances, operations or patient care.
The analysis, published this week in JAMA, offers the first large-scale empirical look at these contracts. It relied on IRS Form 990 filings, which require nonprofits to disclose their five largest outside contracts exceeding $100,000. Machine learning helped identify those tied to management consulting. The team then matched 306 hospitals that began such engagements for the first time against 513 similar facilities that did not.
Results proved stark. No statistically significant improvement appeared in net patient revenue. Operating margins stayed flat. Days of cash on hand showed no boost. Inpatient length of stay barely budged. Claims-based measures of 30-day mortality for heart attacks, pneumonia and stroke revealed nothing meaningful. The lone exception was a small rise in stroke readmissions. That finding failed to hold up under different statistical tests.
“This initial analysis suggests that consultants may deliver neither the dramatic efficiencies they promise nor the harms that critics sometimes fear,” said Joseph Dov Bruch, the study’s lead author and an assistant professor of public health sciences at the University of Chicago. He added in the University of Chicago Medicine release, “It’s not necessarily a waste, but we don’t have evidence of meaningful improvements.”
The contracts themselves lasted 1.4 years on average. Each one carried a typical price tag of $6.2 million. Nearly two-thirds of those with enough public detail aimed at improving financial performance. Hospitals that signed on tended to start from weaker positions. They posted lower operating margins. They devoted more to charity care. They carried heavier loads of fixed assets.
Opportunity costs loom large. That average $15.7 million expenditure could have covered the annual salaries of roughly 46 hospitalists or 167 registered nurses, the authors noted in coverage by Fierce Healthcare. Such figures matter when hospitals defend their tax advantages by pointing to community investments.
Spending has climbed steadily. Nonprofit hospitals paid $273.2 million for these services in 2009. By 2023 the annual total reached $732.9 million. Broader consulting categories that include information technology and human resources push the 15-year figure above $25 billion.
Critics have long questioned the value. Management consulting firms advise on strategy, cost reduction, revenue cycle tweaks and reorganizations. Their influence in health care exceeds that seen in most other industries. Yet concrete proof of superior results has remained elusive until now.
The researchers remain cautious. They acknowledge that effects might exist but prove too small to detect with current data. Some changes could appear in dimensions the study did not measure. Or consultants might simply confirm decisions hospitals would have made anyway. “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 authors wrote in JAMA.
An accompanying editorial praised the team’s creation of a detailed database yet called for deeper investigation. Hospitals do not hire consultants at random. Selection bias likely plays a role. Future work should explore exactly why certain facilities reach for outside help.
Bruch developed the project partly from conversations with students. Many ask whether consulting offers a genuine path to fixing health system inefficiencies. Until recently, solid evidence stayed scarce. “Our study urges hospital executives toward greater caution about how money is spent on management consultants, and it demonstrates the need for additional research on how these contracts may or may not meaningfully impact health systems,” he said.
The findings land amid broader scrutiny of hospital finances. Expenses have outpaced price growth in recent years. Labor costs continue their ascent. Medicare payments often fall short. Employers and insurers press for lower rates. In that environment, every major expenditure draws fresh attention.
Nonprofit status brings expectations. Hospitals must provide community benefits that offset the taxes they avoid. When millions flow to consultants without visible payoff, questions arise about priorities. The dollars could have gone to direct patient care. Or facility upgrades. Or expanded charity services.
Of course, not every contract fails to deliver. Some hospitals may achieve targeted wins in narrow areas. Others might gain intangible benefits such as executive confidence or external validation. The study cannot rule those out. But on average, across hundreds of organizations and years of data, the needle did not move.
Transparency remains limited. Form 990 disclosures capture only the largest contracts. Smaller engagements slip through. Public details on specific goals or outcomes prove rare. The researchers call for greater accountability around how tax-subsidized dollars get used.
Modern Healthcare reported the annual spend jumped from $273 million in 2009 to $733 million in 2023, confirming the upward trajectory detailed in the JAMA paper. That coverage highlighted the absence of statistically significant financial gains despite the outlay.
Docwire News similarly noted the lack of measurable impact across financial performance, operations and quality metrics. Its summary echoed the core finding that more than 20 percent of nonprofit hospitals turned to consultants with little to show for the investment.
The study adds hard numbers to a debate that has simmered for years. Hospitals operate in a complex market. Consultants promise clarity and expertise. Boards and executives often feel they cannot afford to ignore that promise. Yet this evidence suggests many can. And perhaps should.
Bruch and his colleagues from the University of Chicago, UCLA Anderson, Brown University and the University of Wisconsin plan further work. They hope to examine other types of consulting. They want to understand long-term effects. Most of all they seek to give hospital leaders and policymakers better tools for deciding where scarce resources belong.
For now the message lands clearly. Billions spent. Little changed. The consulting habit in nonprofit hospitals deserves a harder look.
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