Consulting Fees vs. Patient Care: The Hidden Cost of Hospital Management Advisors
Nonprofit hospitals in the United States collectively spend billions of dollars each year hiring management consultants. Yet a growing body of research suggests these investments yield little to no measurable improvement in patient outcomes, operational efficiency, or financial performance. A recent study from the University of Chicago and other institutions raises serious questions about the value of this widespread practice.
The Scale of Consultant Spending
According to the study, nonprofit hospitals directed an estimated $5.7 billion to management consulting firms in a single year. That sum exceeds the combined budgets of many state health departments. The money often goes to global giants such as McKinsey, Bain, and Deloitte, but also to smaller specialty firms. Hospitals cite reasons ranging from improving the patient experience to restructuring operations and adopting new technologies.
Where the Money Goes
Consulting engagements typically focus on:
- Strategic planning and market positioning
- Revenue cycle and billing optimization
- Clinical workflow redesign
- Implementation of electronic health record systems
Hospitals also hire consultants for short-term projects, such as preparing for accreditation surveys or launching new service lines.
What the Research Found
The research team analyzed data from more than 2,000 nonprofit hospitals over a five-year period. They compared spending on management consultants against a range of performance indicators, including mortality rates, patient satisfaction scores, readmission rates, and operating margins. The results were stark: no statistically significant association was found between consultant spending and better outcomes.
The Measured Effects
- Clinical quality: Hospitals that spent more on consultants did not show lower mortality or fewer complications.
- Patient experience: Satisfaction scores remained flat regardless of consulting budgets.
- Financial health: Consultant-heavy hospitals actually saw slightly worse operating margins over time.
These findings hold even after controlling for hospital size, location, and prior performance. The authors conclude that the billions spent appear to be money down the drain—at least when measured by the metrics most patients and policymakers care about.
Why Hospitals Keep Hiring Consultants
If consultants don't deliver measurable results, why does the spending continue? The study points to several drivers: pressure from boards to demonstrate decisive action, imitation of peer institutions, and the appeal of external validation. A consultant's recommendation can be used to justify unpopular decisions, like closing a unit or cutting staff. In that sense, the service may be more about organizational politics than objective improvement.
The Booming Consulting Industry
Management consulting in healthcare is a $15 billion annual market. Growth has been fueled by the shift to value-based care, regulatory complexity, and the digital transformation of health systems. Yet the evidence base for many of the interventions consultants promote remains thin. Proponents argue that some benefits—like cultural change or strategic alignment—are hard to quantify.
Calls for Greater Accountability
The study's lead author, a health policy researcher at UChicago, urges hospitals to become more discerning consumers. "Hospitals should demand that consultants demonstrate evidence of effectiveness before engagement—and track outcomes afterward," she said. Some experts have proposed that nonprofit hospitals, which receive tax breaks, should be required to report consulting spending and its results in their community benefit filings.
What Patients Should Know
While the money spent on consultants doesn't directly appear on patient bills, it contributes to the overall cost of care. Rising administrative costs have been linked to higher medical prices. Patients and advocates may want to ask their local hospital about how consultant fees compare to investments in direct care.
Conclusion: A Need for Smarter Spending
The evidence is clear: nonprofit hospitals are pouring billions into management consultants with little to show for it. But the solution isn't necessarily to stop hiring consultants altogether—it's to hire them better. That means setting concrete, measurable goals, demanding evidence-based recommendations, and evaluating impact rigorously. Until then, the billions will likely keep flowing, and patient outcomes will remain stuck in a holding pattern.
Read more about our original study on consultant spending and its implications for healthcare policy.