The financial management of the healthcare industry is a very complex topic for a number of reasons. Even more than other industry, healthcare financial management must delicately balance accounting practices while maintaining ethical conduct. While the average person is rightfully horrified at a company cooking their books, it is almost understandable as a result of capitalism unchecked by ethical considerations for both those within and without the company. However, healthcare is consistently at odds with profitability: what is best for a hospital is not always best for its patients. Fortunately, there are a number of financial and ethical principles that a healthcare organization can use as a template for their own behavior.
As complicated as healthcare financial management can be, it can be discerned into four key elements: “fund management, portfolio management, active and passive management, and…mismanagement” (Bloch 2010). Many of these aspects border on the self-explanatory: existing funds have to be used to buoy the organization while bringing in continued returns, the portfolio must be robustly diverse to continue a steady flow of income in uncertain economic times. Additionally, it will ideally have a combination of active management (comprised of portfolio managers conducting active research into fluctuating markets) and passive management (allowing the portfolio to essentially mirror mutual and exchange-traded funds). Of course, the most self-explanatory element of all is mismanagement: having so many fingers in so many financial pies is designed to mitigate the risk that one person’s investment misstep may bring an entire organization toppling down.
As one might expect, unchecked capitalism can have a variety of negative consequences for a great number of people…even to the lay person, Enron and the credit fallout from the burst of the housing bubble have illustrated just how much the solidity of unethical conduct can shatter the glass houses in which all of us live. What, then, are the basic principles of financial ethics? While it varies from organization to organization, Pinnacle West (2009) has developed a code of ethical conduct for their business executives that provide a good template. It includes “the ethical handling of actual or apparent conflicts of interest between personal and professional relationships,” acting in “good faith,” providing timely (and full) disclosure to entities within and without the company, protecting “the confidentiality of non-public information about the Company and its customers,” promptly reporting any perceived errors in the design and function of the business and, perhaps most obviously, complying with “applicable government laws, rules, and regulations.”
Pinnacle West provides a solid ethical example because, simply put, it is equally concerned with the company as well as its potential effects on the outside world. The notion of unchecked capitalism typically arrives from the idea that the sole purpose of a company is its own well-being. Therefore, when the beginning and end of the moral spectrum is profitability, then the idea of cooking books is of no concern to a corrupt Enron executive: he is protecting the well-being of the company, despite the potential hazards to others. Additionally, as illogical as it may sound, part of the strength of Pinnacle West’s definitions is that they are left somewhat broad: rather than seeking to delineate the exact circumstances one will encounter and the exact ethical response they should have, they lead off with notions such as “good faith” and “comply with regulations,” which simultaneously covers most circumstances while leaving little wiggle room for moral interpretation.
Obviously, these general principles become that much more magnified in the realm of healthcare. For instance, unchecked capitalism and the Hippocratic Oath are often directly at odds: it is difficult to do no harm while turning away someone for insufficient insurance, for example. And unchecked capitalism from the top can affect how business is conducted at every level of a hospital’s operation. Thankfully, measures are being taken to prevent the latter: as the Wall Street Journal Health Blog writer Katherine Hobson (2010) points out, “Head honchos at medical societies and top editors at their associated journals will have to sever direct financial ties with industry as part of new ethics rules.” While this does not tighten belts as much as it initially sounds (after all, there are still generous forms of extra-compensation for top-level executives) but it shows a willingness on the part of the healthcare industry to acknowledge that conflicting interests are inherent whenever the intersection of ethics and profit exists, and it exists throughout the entirety of the healthcare industry.
Healthcare ethics and healthcare finances are, unfortunately, two aspects of the same being that are doomed to be at war with each other in perpetuity. As long as the healthcare industry exists within the context of capitalism, it must operate by those rules as well…and no matter how many ethics are thrown at the notion, the overriding principle of capitalism is always profitability first. In this sense, the Hippocratic Oath is followed more abstractly: in the financial reality of these uncertain economic times, sometimes a dozen patients must be turned away so a hundred more can be treated. However, the good news is that the development of healthcare ethics in relation to financial management is that it continues to evolve, and will continue to evolve, to a point that the industry is ready for a better system under which to thrive. While President Obama’s healthcare reform has received less than stellar reviews from a great many entities, it has brought the problems of America’s healthcare into the lens of the public eye. Under such scrutiny lies the hope that a perfected healthcare system is not only an achievable goal, but one that is currently being developed by various entities all over the world. Perhaps in this perfect future, the fusion of profitability and ethical conduct will no longer be the pipedream of the young, but the reality of all.
Bloch, Brian (2010). “The 4 Key Elements of a Well-Managed Portfolio.” Web. 14 August 2010.pag
Hobson, Katherine (2010). The Wall Street Journal: Health Blog. “Medical Groups Sign on to
Tough Ethics Rules.” Web. 14 August 2010. n. pag.
Pinnacle West (2009). “Code of Ethics for Financial Executives.” Web, 14 august 2010. n. pag.