Between 1975 and 2010, the number of physicians in the United States grew by 150%, roughly keeping pace with population growth. During that same period, the number of healthcare administrators grew by 3,200%.
No, that’s not a typo.
That alone is shocking, but new research published in JAMA adds another layer even more infuriating. It turns out that many of those administrators aren’t even doing their own jobs. They’re hiring consultants to do it, to the tune of $7.8 billion between 2010 and 2022. Furthermore, the consultants aren’t improving anything.
We Built an Administrative Empire
Administrative costs in U.S. healthcare are staggering by any measure. Estimates suggest they account for somewhere between 20 and 30 percent of all healthcare spending in this country. Administrative expenditures at U.S. hospitals grew 87% from 2011 to 2023, outpacing direct patient care growth. And in 2023, hospital administrative costs reached $687 billion, compared to $346 billion in direct patient care. Twice as much money just for administration. And it’s not just going to the managers watching productivity on a spreadsheet from their office. Hospitals are now paying money, and lots of it, to outsource to consulting firms.
A new cohort study in JAMA examined what happened to 306 nonprofit hospitals that hired management consulting firms for the first time between 2010 and 2022, compared to matched hospitals that didn’t. The researchers tracked finances, staffing, operations, and patient outcomes. There was no statistically significant improvement in any of the outcomes. Nonprofit hospitals collectively spent at least $7.8 billion on management consultants during this period, and got nothing for it.
Some hospitals would have been better off with nothing.
A 2022 New York Times investigation found that Providence Health, a large nonprofit health system, had developed an internal program called “Rev-Up” in collaboration with McKinsey & Company. This program instructed administrative staff to pressure patients about payment before informing them they might qualify for charity care. In the year after Rev-Up launched, Providence’s spending on charity care dropped from 1.24% to below 1% of its total expenses.
The state of Washington ultimately sued Providence. The settlement: $157.8 million in refunds and debt relief for patients who had been unlawfully charged. Instead of increasing revenue, they lost far more than they spent on consulting.
Shifting Priorities
Something else is happening on the clinical floors. Healthcare workers are burning out. Short-staffing has become the norm. We are constantly asked to do more with less. But instead of addressing any of it, hospitals hired consultants.
Administrators look at healthcare workers the way a lot of businesses do: replaceable. To some extent anyone is, but many healthcare jobs require years of education and training. You’re limited to the pool of licensed doctors, nurses, pharmacists, etc. When there is a mass exodus, what happens when people are no longer there to replace the ones that left?
Hospitals learned this the hard way during the COVID pandemic. As burned-out nurses left bedside positions in droves, hospitals turned to travel nurses to fill the gaps, but travel nurses aren’t cheap, especially when in high demand. At the peak, travel nurse packages hit $10,000 per week. Nationally, the tab for pandemic-era staffing shortfalls ran into the tens of billions.
Outside the pandemic context, replacing a single registered nurse costs a hospital an average of $56,300. Hospitals lose between $5.2 and $9 million per year to nurse turnover alone. Replacing a single physician is estimated to cost between $500,000 and $1 million after factoring in recruitment, signing bonuses, and the months of reduced productivity. Every time a healthcare worker reaches his or her breaking point and leaves, the hospital spends the equivalent of a small consulting contract just to get back to where they started.
Make it Make Sense
How did we get here? Understanding why requires looking at the system itself, and the people running it.
Complexity in healthcare billing and compliance creates a self-reinforcing market. Every new regulation, payer contract, or documentation requirement generates demand for someone to manage it. Some of that complexity is genuinely unavoidable. Hospitals operate in a heavily regulated environment, and the rules exist for real reasons. But the accumulation of requirements produced a system so focused on measuring care that there’s less time to provide it. The patient in room 4 isn’t a billing code or a quality indicator. She’s a person, and the clinician who knows her best is the one drowning in paperwork.
Additionally, many of the people now running hospitals have never set foot on the front lines. The pipeline into healthcare administration increasingly runs straight from an undergraduate degree into an MHA program, and these programs openly market themselves to people with no healthcare background whatsoever. Only 6% of U.S. hospitals are led by a CEO with a medical degree. Though administration and medicine are genuinely different skill sets, making decisions affecting patients should involve someone who has some investment in that process. The nurse who made a mistake because she was overworked and the floor short-staffed risks losing her license. The administrator who approved the cuts to staff doesn’t.
Even among administrators who did come from clinical backgrounds, many have been removed from practice long enough that bedside reality has become abstract. It’s easier to make a day shift pharmacist fill in for a night shift spot nobody is applying for when you’ve never driven home after a 12-hour shift wondering if you missed something. It’s easier to think your productivity metrics look good when you’ve never had to choose which call light to answer first because you couldn’t get to both. It’s easier to cut a nursing FTE on a spreadsheet when you aren’t the one at 3am with two patients crashing and not enough hands.
Patients First
For what it’s worth, I do not think all administrators are inherently unnecessary. I currently work for a pharmacy benefit manager, so I am, technically, one of them. I understand that hospitals are complex organizations and they do need people to manage contracts, navigate regulations, coordinate operations, and think strategically about the future. Good administrators are real, and they matter.
However, the operative word is good. Any administrator worth their salary should be able to point to something concrete: a process that works better, a cost that came down, an outcome that improved. And I am not talking about the outcomes you exaggerate to make your resume look good. I mean real outcomes.
Billions of dollars flowed to consulting firms. We should have seen something to show for it. But we didn’t.
The goal isn’t to eliminate administration. It’s to stop letting it grow unchecked while the patient-facing side of healthcare erodes. Every dollar that goes to a non-essential administrator role or consulting firm that delivers nothing is a dollar that should have gone to safer staffing, better training, or better retention.
In my ideal world, we bring back administrators who came from the floor, and require them to stay on it. It’s not enough that you have an MD, RN, PharmD, or other healthcare degree/license. You have to actually use it. Just one or two shifts a month, seeing firsthand what their decisions look like from the other side of the spreadsheet. I suspect a hospital run by people who still occasionally have to be those people would make different decisions.
Sources:
- The Price of Advice — Do Management Consultants Deliver Value to Nonprofit Hospitals? — JAMA Editorial, 2025
- Changes in Nonprofit Hospitals’ Finances, Operations, and Quality of Care After Using Management Consultants— JAMA Cohort Study, 2025
- Hospital Administrative Expenditures Exceed Direct Patient Care by Nearly 2x — Trilliant Health, 2025
- They Were Entitled to Free Care. Hospitals Hounded Them to Pay. — The New York Times, 2022
- AG Ferguson: Providence must provide $157.8 million in refunds — Washington State Attorney General, 2024
- Understanding and Fixing the Growing Divide Between Physicians and Healthcare Administrators — Physician Leadership Journal, 2019
- 2026 Cost of Caring Report — American Hospital Association, 2026
- COVID-19’s Impact on Nursing Shortages, the Rise of Travel Nurses, and Price Gouging — Health AffairsForefront, 2022
- NSI National Health Care Retention & RN Staffing Report — NSI Nursing Solutions, 2024
- The cost of physician turnover — Becker’s Hospital Review, 2023
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