Cover Story

Got a Problem You Can’t Solve? Hire a Health Care Consultant

You can’t know everything, and neither can your staff. Bringing in outside expertise can be a godsend for health systems, health plans, pharma manufacturers, or governments—if they use it properly. Trouble is, that’s a big “if.”

Timothy Kelley
Senior Contributing Editor

The business intelligence firm IBISWorld says there are 27,612 Americans employed in health care consulting, roughly the population of Kankakee, Illinois. That bit of knowledge is comfortingly precise—until you realize that definitional boundaries apparently vary wildly. The same report puts the industry’s annual revenue at $6 billion, while another source confidently describes it as “a $20 billion business” and we also read that its 2020 revenues are projected to be $14.9 billion. 

Anyway, it’s big, the sector of management consulting that serves the various arms of the health care industry, and a clear consensus says it’s growing. IBISWorld cites 4.8% average annual growth over the past five years; other estimates suggest a faster rise. And no wonder. Health care, which now accounts for about a fifth of American GDP, is complex and fast-changing. An aging population demands more services, as organizations struggle to adapt to new care-delivery and payment models based on “value” while avoiding red ink in a time when fee-for-service volume still largely determines income. And whopping salaries are still being paid for sometimes so-so results. It’s only logical that outside expertise be tapped to help organization leaders to figure out how to achieve the “Triple Aim” of improved health, heightened patient satisfaction, and decreased cost. Often, that means hiring a consultant or a consulting firm.

Lucy Johns

An outside POV a can be helpful, says consultant Lucy Johns.

Of course, the rub is the counter­intuitive dilemma of making that call. We keep hearing that waste needs to be squeezed out of the bloated U.S. health care system. At a time when health care dollars must be spent more leanly and cleanly than ever, you’re proposing to pour a passel of them into the pockets of a stranger who wields neither stethoscope nor scalpel? To add, in effect, another middleperson?

You are if you’re smart—and if you do it right—says Lucy Johns, a member of Managed Care’s Editorial Advisory Board who has been a San Francisco-based independent consultant for decades. “One reason to hire a consultant is that you know there’s a problem and the expertise to solve it is not available in-house,” says Johns. “Another is your organization’s internal politics, which can often be better handled, if bad news or a great opportunity arises, by an objective source.”

Outside—and in

Health care consulting “is a quite massive and diverse universe,” says Allison Hoffman, a former consultant with Boston Consulting Group Inc. who now teaches health law at the University of Pennsylvania. Consultants advise clients about everything from mergers and acquisitions to risk-stratification models to the efficient deployment of clinical troops—and of course the ever-present IT. According to IBISWorld, hospitals and health systems are health care consultants’ biggest clients, followed by pharmaceutical companies, government jurisdictions, medical device manufacturers, and insurers. 

An outside point of view can be helpful in figuring out options, says Johns, “especially in older organizations, which may have staffers who are very long-standing, very reliable and very conscientious—but who just haven’t had to tackle a new problem in a long time.” 

Today there are consultancies—and branches thereof—that focus on specific areas such as data analytics or revenue capture, says Howard Forman, MD, a practicing clinical radiologist who directs the health care management program at Yale’s School of Public Health and teaches at its School of Management. The stance of the consultant as the outsider who parachutes in is also changing. “What we’re seeing more and more of with a lot of the larger health systems and even health plans is the development of internal consulting firms,” says Forman. They provide strategic guidance and finance expertise like the outsiders, but work for the organization and can be used in different roles.

It wasn’t too long ago that medicine faced up to the fact that much of what doctors did was guided by tradition instead of being evidence-based. Today, as best practices and treatment protocols rule in clinical medicine, other areas are gaining respect as empirically based too. “There’s legitimate science to business and management,” says Forman, “and bringing in expertise in marketing, competitive strategy, finance, and so on is just as valid as the new scientific expertise that care providers and scientists offer.” Twenty years ago there was a cultural prejudice against these nonclinical fields as lacking rigor, he says, but today that has given way to respect for “the fact that there are a lot of qualified professionals out there who can help us do our jobs better.”

That doesn’t excuse an assembly-line approach to consulting. Says Johns: “You need somebody who’s going to treat your problem as unique and interesting and will bring to bear a lot of experience that seems relevant.” She recommends that hiring consultants whose résumés show they’ve had line managerial responsibility with substantive achievements in an organization—a criterion, ironically, that would have barred her from her own first consulting gig years ago.

“The key problem with consulting,” she says, “is people who say they know things and you discover they really don’t. I’ve found in my career that a lot of people who are interesting, well-educated, curious and skeptical don’t know the nitty-gritty. I had to learn that nitty-gritty for myself. Fortunately I got into the business in an era when knowing the nitty-gritty didn’t require a lifetime [of work experience]—or a new degree.”

Johns has one more piece of wisdom for those seeking advice from a consultant: Be ready to follow it. “Effective consulting depends not only on the quality of the consultant, but also on the quality of the leadership the consultant is working for,” she says. “That leadership, having recognized the problem and agreed to spend the money, needs to be committed to carrying out what the consultant says needs to be done. Otherwise it is a complete waste of time and money and contributes to the impression that consulting is a racket. Sometimes it is. But a lot of those times it’s because the leadership, finding the politics was intractable, decided about a proposed action, ‘This is gonna hurt too many people’ or ‘It’s too expensive and we don’t like it’ and did not act.”

Maybe the real take-home lesson about consultants in health care is that they must not only offer subject-matter expertise (if necessary through the hiring of “subconsultants” who assist them with content) but also provide what Chicago-based consultant Kevin Thilborger of Huron calls “a view from 30,000 feet.” (See “6 Consultants Have Their Say,” on the next few  pages). Says Thilborger: “We want them to be able to say to clients, ‘OK, if you do this project, it’s going to impact nine other areas. Have you thought of all these things?’”

Admit it: You may need a consultant these days not just for specialized knowledge or special implementation. You may need a consultant to help you think

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