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Ethics in the management of health care organizations.

The future of American health care is already writ large in its present. Health care will be financed, organized, and delivered by and in the context of large-scale institutions. Those who purchase health care-- employers and governments, for the most part--will do so from large managed networks of physicians, clinics, laboratories, hospitals, nursing homes, and hospices. Purchasers will demand--and get--services of documented quality at the best price or they will take their money and patients elsewhere. Physicians will deliver care within institutional contexts and be paid--increasingly, soon perhaps exclusively--by institutions. Patients will receive services within institutional contexts that will have powerful economic incentives to regulate in a very disciplined fashion access of patients to those services. Institutions of health care thus constitute the core of health care, now and for the foreseeable future. The ethics of these institutions must be understood with care by those who manage them, by those who purchase their services, by those who receive care within and from them, and by society generally--if only because so much power is now being concentrated in ways new in the history of U.S. medicine and health care.

Ethics and Its Conceptual and Practical Tools

Ethics is the disciplined study of morality, which concerns human character and behavior, as well as the behavior of institutions--including institutions of self-government, education, and business, as well as health care. Morality is directed to what we owe each other and what we owe institutions and what they owe us. Morality is other-regarding.

Human character is other-regarding in that it concerns the virtues that routinely enable us to discern and act to protect and promote the interests of others, rather than simply to pursue narrow self-interest. Human character also concerns the vices that turn us away from a concern for the interests of others and undermine our capacity to think and act in terms of what we owe others and what they owe us. Human and institutional behavior is other-regarding in that it concerns the obligations that individuals and institutions have to each other and to society.

Morality has a number of sources in a morally pluralistic democracy such as the United States, including law, religions, schooling, family values and traditions, history, professional education and training, and personal experience. These sources of morality are often in conflict about matters of human character and human and institutional behavior. At the same time, none possesses sufficient authority to settle such conflicts.

Ethics aims at settling such conflicts through rational discourse, in terms of which the concerns of competing sources of morality can be adequately translated and addressed. Rational discourse, if it is to be useful, must be disciplined. Not just anything goes. In particular, personal opinion does not go. It and any other proposals regarding human and institutional morality must be subjected to careful analysis and argument, to determine if proposals ought to command respect and consideration for implementation. Philosophy provides that discipline, by insisting on analyses and arguments that are clear, consistent, coherent, applicable, and adequate. The discipline of philosophical ethics results in well-founded accounts of what morality ought to be for human beings and for the institutions that we design, build, and sustain.

Ethics in the management of health care institutions thus complements the other disciplines of management with the discipline of asking, always and again and again, "What ought the morality of health care institutions to be?" The conceptual and practical tools of ethics that are brought to bear to answer this question include the virtues, the concept of an interest, and the ethical principles of beneficence and respect for autonomy.

Virtues concern those habits or traits of character that one ought to develop so that one routinely discerns and acts to protect and promote the interests of others. Virtues have long been a staple of medical ethics, with virtues such as self-effacement, self-sacrifice, compassion, and integrity recently being recognized as central to the moral life of the physician.(1) These virtues blunt the physician's self-interest, turn the physician's attention to the interests of the patient, and move the physician to want to protect and promote the patient's interests.

An interest is a stake that someone has in the outcomes or "issues" of events.(2) Someone can have a stake by virtue of occupying a social role. Thus, someone who is a patient occupies a social role in which he or she has a stake in the health-related outcomes of being seen by a physician and receiving services in a health care institution. Someone can also have a stake because he or she freely values those outcomes. Thus, someone who is a patient brings to his or her care many values and beliefs-- about health, as well as about other matters, such as being a good spouse or achieving salvation--in terms of which the outcomes of health care will be seen by the patient as worthwhile or worthless.

Virtues direct the physician to the interests of the patient, and the interests of the patient are the stakes that the patient has in the issues or outcomes of health care. The ethical principles of beneficence and respect for autonomy help the physician to interpret in clinically applicable terms what it means to protect and promote the interests of this patient in his or her circumstances today.(1) Beneficence captures the social-role interests of the patient. It directs the physician to protect and promote the interests of the patient as those interests are understood from a well-informed, disciplined clinical perspective. Increasingly, practice guidelines will reflect and include beneficence-based clinical judgments about the interests of patients.

Respect for autonomy captures the individual interests of each patient beyond the social role of being a patient. Respect for autonomy directs the physician to protect and promote the interests of the patient from the perspective of the patient's values and beliefs. Whether and how practice guidelines and other institutional policies and practices can incorporate respect for the patient's autonomy is an important ethical issue in the management of health care institutions, e.g., making informed consent a meaningful dialogue and decision making process between physicians and patients rather than a formulaic bureaucratic ritual.(3)

Clinical ethics concerns how the virtues and the principles of beneficence and respect for autonomy can be used by physicians to prevent and manage ethical conflicts that arise in the care of patients. Clinical ethical issues e.g., responding to refusal by a demented patient of life-saving treatment--reach managerial levels in institutions, e.g., in the work of ethics committees and ethics consultants. Such issues are too various and many to address here.

The ethics of managing health care institutions was once based upon clinical ethical considerations alone. Indeed, the ethics of managing health care institutions has a history that reaches back at least two centuries. Eighteenth Century ethics of managing health care institutions is worth considering, because doing so helps us to understand ethics in the management of health care institutions two centuries later.

A Brief History

The modern hospital has its roots in the infirmary, an invention of late Eighteenth Century British medicine and society. With the industrial revolution, there arose a new social class, the working poor. Their health status was of vital concern to the owners of factories--in terms of their interest in having a healthy work force and in charity to the families of the working poor when illness struck adult members of these households. These patients could not pay for their care, and, for a variety of reasons, an institution was invented that would bring these people together in large numbers and bring physicians and surgeons to them. The royal infirmaries were supported on the basis of annual charitable giving--a "subscription"-- of the leading families of the ever-growing cities.

Thomas Percival (1740-1804) was one of the leading figures of late Eighteenth Century Manchester and a physician at the Manchester Royal Infirmary. This new institution had a problem: How to regulate three groups of practitioners--physicians, surgeons, and apothecaries--who were, for the first time, working together in one place in the care of patients. Percival was called upon to address the conflicts among the three groups, in part because he was well-known and had published on various topics in ethics already. Percival was a sophisticated student of major philosophical figures of the British Enlightenment. Indeed, he was one of those figures himself.

Percival published Medical Ethics, which was enormously influential in Great Britain and also in Nineteenth Century American medical ethics.(4) In the course of this remarkable treatise, Percival addresses a topic that the reader will quickly recognize, the use of expensive medical treatment. In the course of addressing this topic, Percival provides one of the first accounts of the ethics of managing health care institutions: "The physicians and surgeons should not suffer themselves to be restrained, by parsimonious considerations, from prescribing wine, and drugs even of high price, when required in diseases of extraordinary malignity and danger. The efficacy of every medicine is proportionate to its purity and goodness, and on the degree of those properties, caeteris paribus [other things being equal], both the cure of the sick, and the speediness of its accomplishment must depend. But when drugs of inferior quality are employed, it is requisite to administer them in larger doses, and to continue the use of them a longer period of time, circumstances which probably more than counterbalance any savings in their original price. If the case, however, were far otherwise, no economy of a fatal tendency ought to be admitted into institutes founded on the purest beneficence, and which, in this age and country, when well conducted, can never want contributions adequate to their support."

Two themes quickly stand out:

* Emphasis on and concern with quality. Percival has a great deal to say about quality--how to identify, document, and improve it.

* An argument on the basis of costbenefit: use of a single or a few doses of an expensive drug may effect a cure rapidly, thus saving the higher costs of many doses of a drug of lower quality. Percival anticipates nicely--by two centuries--a central tenet of total quality management: attention to quality can reduce costs.

Percival goes on to consider the case where a more expensive, higher quality drug is not cost-beneficial. Its use is nonetheless a matter of ethical obligation for the institution and its managers (to which, as well as physicians, surgeons, and apothecaries, Medical Ethics is addressed). This is because the ethics of the institution are the same as the clinical ethics of the physician at the bedside, namely those of purest beneficence. Beneficence directs the physician to protect and promote the interests of the patient from a clinical perspective. (Autonomy-based accounts of the interests of patients were still nearly two centuries in the future.) Purest beneficence means that beneficence is the sole consideration. The economic interests of the institution ought to be in all cases subservient to the interests of the patient, when those interests are reliably defined in a high-quality fashion in well-formed clinical judgment.

Percival goes still further and argues that the managers of the Manchester Infirmary will not, in fact, be taking economic risks. The quality of the institution and its devotion to the purest beneficence will regularly result in subscription support from the community as a matter of the routine obligation of charity of the well-to-do. Thus, basing the ethics of managing health care institutions on the purest beneficence does not jeopardize the economic interests of the institution. Indeed, failure to follow the dictates of purest beneficence in the management of the institution will imperil its economic interests, for it will then be an institution unworthy of routine charitable support.

Already the reader may be rebelling. "We cannot manage health care institutions now on the basis of purest beneficence! says the late Twentieth-Century hospital or institutional manager to Percival. It is crucial to understand why this is the correct response to Percival in our time, if the reader is to understand contemporary ethics in the management of heath care institutions.

What Has Changed?

The watershed event for American institutions of health care occurred in 1983, the year that the federal government introduced prospective payment for hospitalized Medicare beneficiaries. The prospective payment system, based on diagnosis-related groups (DRGs), taught two lessons. The first was that DRG payment separated the beneficence-based (and autonomy-based) obligations of a health care institution to its patients from its economic interests. That is, a model of purest beneficence--the legacy of the royal infirmaries on which hospitals in the American colonies and then the United States were patterned--was replaced by a more complex model in which there was an inherent competition and therefore potential conflict between the obligations of the institution to its patients and its economic interests. This conflict was introduced by the need for payers to control their costs for health care in a slowly growing economy that no longer can marshall the resources to pay for ever-expanding health care costs.

The second lesson was that, given this separation and the imperilment of their economic interests if change failed to occur, institutions were found to be the fulcrum for the lever of changing physician behavior at the bedside. Physicians had to respond to institutional pressure, because the ability of physicians to care for patients and their economic interests both depended on institutions. This is even more the case today and will be relentlessly the case for the indefinite future.

In addition, we no longer share with Percival a confidence in future support from community--from enlightened self-interest or routine charity--for our health care institutions. Indeed, public policy has been to reduce the number of institutions, a process that has only just begun. The moral relationship between health care institutions and their communities is, at best, attenuated, at worst, nonexistent.

Things indeed have changed since Percival wrote on ethics for the management of the Manchester Infirmary. We cannot adopt or even adapt a model of purest beneficence for the management of health care institutions. We face the challenge of fashioning an ethics for the management of health care institution in an environment that Percival would strain to recognize. But the discipline of ethics provides powerful tools for fashioning an effective response to this challenge.

First, institutions that deliver health care must be clear about their fiduciary mission, i.e., their mission to care for patients according to defensible and documentable standards of quality. That is, any institution that delivers health care is a moral fiduciary of its patients; it is rightly expected to place the interests of patients in first place as a rule-- but not without exception, as Percival thought.

The fiduciary character of institutions that deliver health care must be taken into account in public policy. Fiduciary institutions are expensive and often are not economically efficient. Economic efficiency, although important, will not be their primary consideration. We have to decide through public policy whether fiduciary institutions of health care are worth having and, if they are, how we will pay for them.

Second, institutions that pay for care or that manage the interface between purchasers and providers (e.g., managed care companies, fourth-party managers, etc.) need to attend very carefully to this question: "Ought such institutions to understand themselves to be moral fiduciaries of patients?" It is not at all clear that the answer must be "yes." For example, a fourth-party company that prospectively manages patient care for a payer may reasonably understand its role simply to be enforcement of contractually accepted conditions of the payment of health care for the beneficiaries of a plan.

We need to acknowledge that there has emerged in our country a marked ethical heterogeneity of health care institutions. Some deliver health care and are or ought to be moral fiduciaties of patients. Some barter for care or simply provide bureaucratic infrastructure, and these may simply be businesses like any other businesses. They have a duty not to harm their customers without their customers' consent, but they have no positive duties to protect and promote the interests of patients as would a fiduciary institution.

Third, institutions--payers, organizers, and providers alike-are custodians of the moral fiduciary traditions and character of medicine and other health care professions. This obligation is usually and increasingly ignored by health care institutions, a trend that needs to be questioned vigorously.

Fourth, institutions must provide clear and defensible accounts of their legitimate economic interests. Presumably, these interests include managing resources in such a way that the institution's mission is routinely fulfilled, including its obligations as a moral fiduciary of patients and the health care professions. Fiscal stability, capital formation and growth, profit or excess revenues, competition for market share--all of the tools of management--do not by themselves show us how we ought to value those tools. They are valuable in the larger context of what they permit the institution to achieve. That is, ethical reflection provides the context within which to evaluate and set priorities for the management of health care institutions. Vigorous competition among hospitals, for example, may undermine their fiduciary obligations to patients. If so, hospitals ought not to engage in such competition.

Because ethics is the disciplined study of morality, it does its work by asking what morality ought to be. Ethics in the management of health care institutions asks, "What ought the morality of health care institutions to be?" In the analysis offered here, disciplined answers to this question will address each of the four concerns above. It is progress in ethics to know what questions must be addressed. Ethics brings to the other management disciplines the discipline of asking tough questions and seeking thoughtful, well-informed answers. The ethical complexity of our health care institutions does not permit the singular, knock-down answer of a Percival. Indeed, we have just begun to ask the tough questions.

Preventive Ethics

Asking these tough questions in and of our institutions of health care is the primary preventive ethics strategy for health care management. We have learned that most of the ethical conflicts that arise in the care of patients can be prevented, and effectively managed when they persist, through ethically well-informed, practical policies. Those policies, e.g., advance directives to prevent the need for making life-or-death decisions for patients without knowing their preferences, emerged from years of dialogue among physicians and philosophers committed to making institutions work for patients, families, professionals, and institutions rather than against them.

This experience teaches that preventive ethics strategies work when people and institutions begin to think carefully about their obligations, about their legitimate interests, and about why conflicts arise among obligations or between obligations and legitimate interests. Asking these questions leads to answers that, in turn, point in the direction of preventing such ethical conflicts in the first place.

Socrates taught a long time ago that one of the responsibilities of leaders is to cause the right kind of trouble, stirring things up when they ought to be stirred up. The ethical heterogeneity of our health care institutions and the challenge of understanding and managing that heterogeneity will mean that physician executives ought not to assume that we have the ethics of health care institutions figured out. Complacency in such matters sets up the physician executive and his or her institution for ethical conflicts that could be prevented and managed more effectively.

This is an urgent matter in the management of health care institutions. Economic values and survival have a way of overwhelming other values, such as preserving and strengthening the moral fiduciary character of institutions that deliver health care. Ethics insists that neither economic values nor survival are the primary or overriding consideration in the moral life of any institution. This is all the more the case for health care institutions that inherit and seek to preserve the legacy of being moral fiduciaries that is the gift to us from enlightened figures such as Thomas Percival. It is time to be about the task of rewriting his Medical Ethics for the next century.


1. McCullough, L., and Charvanak, F. Ethics in Obstetrics and Gynecology. New York, N.Y.: Oxford University Press, 1994, chapter 1.

2. Feinberg, J. Harm to Others. New York, N.Y.: Oxford University Press, 1984.

3. Wear, S. Informed Consent: Patient Autonomy and Physician Beneficence within Clinical Medicine. Dordracht, Netherlands: Kluwer Academic Publishers, 1993.

4. Percival, T. Percival's Medical Ethics. Leake, C, Ed. Baltimore, Md.: Williams and Wilkins, 1927.

Laurence B. McCULLOUGH, PhD, is Professor of Medicine, Community Medicine, and Medical Ethics, Center for Ethics, Medicine, and Public Issues, Baylor College of Medicne, Houston, Tex, He is a member of the ACPE faculty.
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Author:McCullough, Laurence B.
Publication:Physician Executive
Date:Nov 1, 1993
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