^{Posted on April 25, 2006}

"The Word of Those With Whom We Do Business:" The State of Ethics in Healthcare

Apr. 2006

The prevalence of inappropriate actions in healthcare drives additional margins in the industry’s supply, delivery and financing sectors, says contributor Fred Goldstein. It is at the root of our cost explosion and our healthcare crisis, and is based on an ingrained acceptance of unethical behaviors.

I have worked in healthcare for 20 years as a hospital administrator, an HMO senior executive and, most recently, the president of a disease management company. During this time ‘fve experienced a lot of what is right with the American healthcare system. But I have also seen enough fraud, abuse and unethical behavior to sicken even the heartiest soul. This characteristic of American healthcare is far too prevalent, and it undermines our efforts to control cost, build access and—most importantly—assure quality care. In the late 1980s, I worked for two major hospital corporations that routinely “cooked” their books. At one company it was referred to as “dialing for dollars” because the divisional CFOs would call the hospital controller each month and ask for more earnings. More recently, wefve learned these facts from mainstream news sources:

Pharmaceutical companies have paid for and published studies in distinguished professional journals, but left out results that reflected poorly on their products.

Drugs have been marketed as better than another brand when in fact there have been no head-to-head studies.

Major pharmaceutical distributors have bought drugs through middle men and, though they have been unable to determine the authenticity of the products, re-sold them.

Medical device manufacturers have knowingly distributed products with fatal flaws.

Medical device manufacturers have paid exorbitant gconsultingh fees to surgeons who decide which products their hospitals will buy for implantation into patients.

Many health plans have profited not by managing care, but by ratcheting down rates to doctors and hospitals and forcing employers to pay ever higher premiums.

Many hospitals have illegally paid doctors to increase admissions at their facilities.

Nonprofit hospitals, supposedly mission-driven, have charged uninsured patients three to four times what insurance companies pay, then sued them when they couldnft pay.

Many doctors practice medicine based on their own beliefs, feel that evidence-based medicine is too “cookbook,” and often prescribe procedures based more on financial self-interest than clinical necessity.

Many doctors, hospitals and other providers have consistently and, with little fear of penalty, stolen from Medicaid and Medicare.

Doctors often relent when patients pressure them to provide unnecessary services, even when the physicians know the procedures are inappropriate and costly.

Some “disease advocacy” associations—patients with the disease in question often look to them for unbiased advice—accept large contributions from drug companies, and then do not fully disclose details about their sponsorsf contributions or their drugsf impacts.

Healthcare corporations invest in lobbying because it works, spinning public policy and dollars disproportionately in favor of healthcarefs strongest interests.

Many healthcare executive have enjoyed extraordinary compensation while fraud and abuse occurs, and is even encouraged under their watch.

Unethical behavior exists among healthcare organizations and professionals of all types. Organizations that try to do the right thing are often outmaneuvered by those that do not. Self-interest is often hidden behind a façade of patient concern. “We do this for the patient. If you withhold our services, you will hurt the patient.” Worse, these self serving behaviors have become so common that professional outrage has been dulled. But to save healthcare, we canft just take these acts for granted.

The prevalence of inappropriate actions in healthcare drives additional margins in the industryfs supply, delivery and financing sectors. It is at the root of our cost explosion and our healthcare crisis. And, it is based on an ingrained acceptance of unethical behaviors. The recent movement toward transparency and quality reporting will shine a bright light on some of these practices, and should tone down the environment of opportunism. But many of these behaviors have been well known for years. I have little faith that, with so much money at stake, any reforms can be substantial enough to turn around the industry.

This is especially true if change does not support and engage much more participation from payers and consumers. In 2005, then-Federal Reserve Chairman Alan Greenspan spoke with MBA students at Wharton. He said, “Material success is possible in this world, and far more satisfying when it comes without exploiting others.” He also said, “In virtually all our transactions, whether with customers or with colleagues, with friends or with strangers, we rely on the word of those with whom we do business. If we could not do so, goods and services could not be exchanged efficiently.”

I am not naïve and do not expect that a plea for ethics will have much impact. I believe that a free market, with openly available information, offers a healthier path to a better society for all our citizens. Healthcare is an industry in which, perhaps above all others, we must strive for and reward integrity. However, unless we find a way back to honesty and decency in our commerce—the ethical behaviors that have been the basis of the healthiest civilizations—we wonft achieve the solutions our healthcare system needs. The common interest will continue to be exploited, our market-based system will falter and our healthcare system could well collapse.

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Fred Goldstein is founder and president of Specialty Disease Management, a disease management firm based in Jacksonville, Fla. He may be reached at fgoldstein@specialtydisease.com.