It's the Administrators, Stupid

Universities are having a hard time lately. They’re beset with protests the like of which we’ve not seen since the Vietnam War days, with animated crowds, sit-ins, violent clashes with police or counter protesters, even storming of administration buildings. Classes and commencements have been cancelled. Presidents of some leading universities seemed unable to clearly denounce antisemitism or calls for genocide when asked to do so in Congressional hearings. Protesters walked out on Jerry Seinfeld’s commencement speech; for heaven’s sake – who walks out on Jerry Seinfeld?

Administrators in Meeting World. Credit: Bing Image Creator

Derek Thompson wrote a great piece for The Atlantic that tries to pinpoint the source problem: No One Knows What Universities Are For. The sub-title sums up his thesis: “Bureaucratic bloat has siphoned power away from instructors and researchers.”  As I was nodding along with most of his points, I found myself also thinking: he might as well be talking about healthcare.

Mr. Thompson starts by citing a satirical piece in The Washington Post, in which Gary Smith, an economics professor at Pomona College, argues that, based on historical trends in the growth of administration staff, the college would be best served by gradually eliminating faculty and even students. The college’s endowment could then be used just to pay the administrators.

“And just like that,” Professor Smith says, “the college would be rid of two nuisances at once. Administrators could do what administrators do — hold meetings, codify rules, debate policy, give and attend workshops, and organize social events — without having to deal with whiny students and grumpy professors.”

It’s humorous, and yet it’s not.

The growth in universities’ administrative staff is widespread. Mr. Thompson acknowledges: “As the modern college has become more complex and multifarious, there are simply more jobs to do.” But that’s not always helping universities’ missions. Political scientist Benjamin Ginsberg, who published The Fall of the Faculty: The Rise of the All-Administrative University and Why It Matters in 2014, told Mr. Thompson: “I often ask myself, What do these people actually do? I think they spend much of their day living in an alternate universe called Meeting World.”

Similarly, Professor Smith told Mr., Thompson it’s all about empire building; as Mr. Thompson describes it: “Administrators are emotionally and financially rewarded if they can hire more people beneath them, and those administrators, in time, will want to increase their own status by hiring more people underneath them. Before long, a human pyramid of bureaucrats has formed to take on jobs of dubious utility.”

All of these administrators add to the well-known problem of runaway college tuition inflation, but a more pernicious problem Mr. Thompson points to is that “it siphons power away from instructors and researchers at institutions that are—theoretically—dedicated to instruction and research.”

The result, Mr. Thompson concludes is “goal ambiguity.” Gabriel Rossman, a sociologist at UCLA, told him: “The modern university now has so many different jobs to do that it can be hard to tell what its priorities are.”  Mr. Thompson worries: “Any institution that finds itself promoting a thousand priorities at once may find it difficult to promote any one of them effectively. In a crisis, goal ambiguity may look like fecklessness or hypocrisy.”

So it is with healthcare.

Anyone who follows healthcare has seen some version of the chart that shows the growth in the number of administrators versus the number of physicians over the last 50 years; the former has skyrocketed, the latter has plodded along. One can – and I have in other forums – quibble over who is being counted as “administrators” in these charts, but the undeniable fact is that there are a huge number of people working in healthcare whose job isn’t, you know, to help patients.

It’s well documented that the U.S. healthcare system is by far the world’s most expensive healthcare system, and that we have, again by far, the highest percent spent on administrative expenses. Just as all the college administrators helps keep driving up college tuition, so do all those healthcare administrators keep healthcare spending high.

But, as Mr. Thompson worries about with universities, the bigger problem in healthcare is goal ambiguity. All those people are all doing something that someone finds useful but not necessarily doing things that directly related to what we tend to think is supposed to be healthcare’s mission, i.e., helping people with their health.  

Think about the hospitals suing patients. Think health insurers denying claims or making doctors/patients jump through predetermination hoops.  Think about the “non-profits” who not only have high margins but also get far greater tax breaks than they spend on charity care. Think about healthcare “junk fees” (e.g., facility fees). Think about all the people in healthcare making over a million dollars annually. Think about pharmaceutical companies who keep U.S. drug prices artificially high, just because they can.

As TV’s Don Ohlmeyer once said in a different context: “The answer to all of your questions is: Money.”

Healthcare is full of lofty mission statements and inspiring visions, but it is also too full of people whose jobs don’t directly connect to those and, in fact, may conflict with them. That leads to goal ambiguity.

Mr. Thompson concluded his article:

Complex organizations need to do a lot of different jobs to appease their various stakeholders, and they need to hire people to do those jobs. But there is a value to institutional focus…The ultimate problem isn’t just that too many administrators can make college expensive. It’s that too many administrative functions can make college institutionally incoherent.

Accordingly, I’d argue that the problem in healthcare isn’t that it has too many administrators per se, but that the cumulative total of all those administrators has resulted in healthcare becoming institutionally incoherent.

Famed Chicago columnist Mike Royko once offered a solution to Chicago’s budget problems. “It’s simple,” he said. “You ask city employees what they do. If they say something like “I catch criminals” or “I fight fires,” them you keep. If they say something like “I coordinate…” or “I’m the liaison…”, them you fire.”

Healthcare should have that kind of institutional focus, and that focus should be around patients and their health, not around money.

Twenty years ago Gerry Anderson, Uwe Reinhardt, and colleagues posited “It’s the Prices, Stupid” when it came to what distinguished the U.S. healthcare system, but now I’m thinking perhaps it’s the administrators.