When McKinsey Comes to Your Hospital

More corporate jets, less health care.

Photo credit: Brook Ward

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Pittsburgh’s local Action News Four recently reported that the University of Pittsburgh Medical Center (UPMC), the region’s dominant hospital system, leased a $50 million corporate jet just months before laying off 1,000 workers. Those layoffs included clinical staff, even though the hospital initially denied that any health care workers were among those let go.

“While UPMC has their staff running a food bank for other employees due to low wages, they are spending $50 million on a jet for executive trips to Ireland, Italy, Croatia, San Francisco, Boca Raton and Palm Beach,” said Rep. Summer Lee, who represents the Pittsburgh area in Congress. “I guess fair pay and safe staffing didn't fit in the overhead compartment?”

UPMC is a notorious monopolist, with some 40 hospitals, an insurance network, and a host of other investments under its banner, and it uses its power in the Pittsburgh region to corner the local labor market, degrade working conditions, hoover up tax preferences, and ultimately undermine the care provided to patients. It’s a “non-profit” that is building a global empire of facilities and paying its executives tens of millions of dollars annually.

You can read a fuller take on all the ways in which UPMC’s monopoly power causes problems here, but suffice to say, leasing a corporate jet to fly the brass all over the world while laying off workers and cutting wages is very much keeping in character.

But I’m not writing this week solely about UPMC being a cartoonish corporate clown show. The jet episode reminded me that, according to some recent reporting, the hospital is being aided in its work by another malignant actor, McKinsey & Company, a consulting firm that is behind many scandalous corporate power excesses. It has a deep, abiding love of hospital consolidation, of which its work with UPMC is just one manifestation.

In fact, if you want to help your local hospital system, you could do far worse than ensuring McKinsey never comes within 100 miles of its administrative offices.

I borrowed the title of this post from the book “When McKinsey Comes to Town,” which details the consulting firm’s long history of helping the worst corporate and public entities — from big tobacco to Pharma to despotic regimes — profit from the harms inflicted on an unsuspecting public, while outwardly claiming to be a noble consulting outfit whose advice changes the world for the better. As the New York Times’ review of the book put it, “The portrait this book creates is one of a company chasing profits, spreading the gospel of downsizing and offshoring, its leaders virtually unmoored from any guiding principles or moral code.”

Indeed, advocating for layoffs is a key part of the McKinsey playbook, which it dresses up — much like the folks behind the bipartisan push to abandon antitrust law starting in the 1980s — as a quest for “efficiency.” A 2013 book on McKinsey said it may be “the single greatest legitimizer of mass layoffs [of] anyone, anywhere, at any time in modern history.” As one former McKinsey employee put it, “Even at its best, much of the work is about increasing investors’ share of the profits by reducing labor’s share.”

Which brings us back to UPMC. According to Fierce Healthcare, a health care policy and politics publication, the recent layoffs at UPMC were the result of a collaboration with McKinsey to identify “opportunities” for “short-term organizational restructuring” as part of a larger “transformation.” Shortly before that, UPMC arbitrarily cut the wages of its traveling nurses corp, another move that reeks of McKinsey.

McKinsey’s history with hospital systems from the Bronx to California is littered with the same sort of stuff: Lay off workers, wrench more money out of the hands of patients who can’t afford it, close community-based facilities and make patients range farther for care, and ultimately, merge smaller systems into larger health care behemoths of the sort that UPMC has become.

A 2019 treatise from McKinsey entitled “the hospital is dead, long live the hospital,” provides a good look into the firm’s thinking: It extols the virtues of larger facilities and vertical integration, including hospital system’s acting as insurers, even though doing so creates massive conflicts of interest. The piece also includes a lot of advice around minimizing a hospital’s workforce, especially by relying on machines to handle many services, including dispensing drugs.

McKinsey is simply a very consistent booster of health care consolidation, pushing for more mergers and more acquisitions, and then letting monopolists wreak havoc.

To be clear, I don’t mean to imply that McKinsey is some shadowy cabal driving hospital consolidation all by itself. In fact, I think it’s mostly the opposite: McKinsey’s work product consists of 23-year-old Harvard grads making bank by feeding CEOs what they want to hear, which is the conventional wisdom about bigger being better in health care. McKinsey’s main utility is crafting a permission structure by which those CEOs can hose patients and workers, extract more resources from communities, and enrich themselves while blaming everything on market conditions, outside forces, and the consultants whose advice they just have to take to survive.

In recent decades, the bipartisan consensus has been that hospital consolidation is a necessity: Data have shown that case to be incorrect, but it carries on nevertheless. McKinsey isn’t creating the wave so much as charging everyone else to ride on it.

Fortunately, lawmakers in diverse communities have wised up to these dynamics and are taking steps to push back. In Pennsylvania itself, the state House of Representatives recently approved a bill to create a strong state antitrust statute alongside a notification regime for health care industry mergers, and that same body is considering a bill to beef up the state attorney general’s ability to examine and block hospital mergers. Other states have taken strong steps to rein in hospital consolidation, and state attorneys general, alongside the Federal Trade Commission, are more focused on health system consolidation than they’ve been in a long time.

Making the McKinsey’s of the world irrelevant won’t undo the damage it wrought, of course, but it’s a good first step in the larger effort to ensure that communities can access health care near their homes, on their terms, for a reasonable price.

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