Case Analysis Of Ethical Conduct

The nonprofit hospital has the duty to provide healthcare to its poor and indigent citizens. They charge these patients list prices for their healthcare services. This subgroup of the population functions without the security of healthcare benefits and is expected to pay the highest prices for their care. The hospitals that operate as their area’s not for profit facility accepts tax dollars to support its operations and to provide charity care within the community. This seemingly contradictory situation becomes the ethical dilemma that faces this nation.

Why are the not for profit hospitals permitted to charge the full price of healthcare services to the uninsured, and then pursue aggressive collection tactics to collect for the services? Part of the requirement of the not for profit hospitals is to provide substantial charity care to their needy population sector. The rewards for this charity care are the tax-exempt status the facility enjoys on its revenues and the ability to issue municipal bonds for capital improvements. The refusal to provide these services or to use abusive collection tactics may lead to the revocation of their tax-exempt status.

Class action lawsuits have resulted in accusing nonprofit hospitals with excessively charging uninsured patients more than insured patients and utilizing questionable collection tactics. The recent result of the class action case against Resurrection Health Care Hospitals forced them to change their billing structure, reduce charges to all uninsured, and provide charitable financial assistance to patients to pay hospital charges (Clifford Law Offices, 2009). The potential 220,000 claimants will be able to have bills recalculated and receive refunds if over paid based on the new formula (Clifford Law Offices, 2009). The facility must discount hospital bills for the uninsured and provide the highest discount to those with limited funds. The assistance program limits the amount of the bill to no more than 10 percent of the patient’s income (Clifford Law Offices, 2009). The hospital is prohibited from placing a lean on the patient’s home to collect payments. These strategies give the uninsured a discount more in line with their ability to pay and are reflective of a charity care hospital.

The Provena Covenant, a 270 bed hospital in Illinois, recently lost their tax exempt status when it was determined that their collection tactics were questionable (Richmond & Smith, 2005). The Illinois Department of Revenue considered the facility as “not charitable” as a result of these practices (Richmond & Smith, 2005). The Senate Finance Committee proposed legislation that would mandate nonprofit hospitals to specific levels of charity care in order to retain its tax exempt status (Schroeder, 2009). They would be required to conduct a periodic needs analysis, follow established processes for bill collections, and will not refuse care due to a patient’s indigent status (Schroeder, 2009).

The goal of The Fair Debt Collection Practices Act is to eliminate the actions of the abusive tactics utilized by debt collectors and to protect the consumer. Several Congressional findings have provided the basis for this enactment. There is evidence that these practices are a contributing factor to personal bankruptcies, loss of jobs, marital problems, and privacy invasions (FTC, 2006). They determined that the existing laws do not adequately protect the consumer from the bill collectors’ abusive practices (FTC, 2006). The debt collection process can be effective without the adoption of abusive or humiliating tactics (FTC, 2006).

Recent research has indicated that employees that exhibit Machiavellian characteristics tend to agree with these questionable situations (Richmond & Smith, 2005). Employees that have adopted this Machiavellian personality are impersonal, rational, and strategy focused. The possibility of handling collection procedures unethically may result. The nonprofit hospital is at risk of loosing its tax exempt status from the unethical decision making processes with employees that demonstrate these traits. They demonstrate that the low Mach may benefit the billing collection process. The low Mach is subject to social influence, focuses on the person, and accepts and follows direction (Richmond & Smith, 2005). The ability of employees to show empathy with the patients would support an ethical work environment.

The assignment of the appropriate discount for healthcare services for the poor or indigent patient results in the alignment of their ability to pay their bills. The adoption of higher discounts and financial assistance for the low income patient is the ethically responsible strategy for nonprofit hospitals. The strategies to create ethical behavior should include: a code of ethics, compliance program, customer complaint line, and employee training programs. The creation of an ethical work environment will promote the actions of employees to be more empathetic to their patients, thereby fulfilling the nonprofit’s mission of charity care.

Case II: Westwood Imaging Centers

The physician self referral (Stark Law) and the anti-kickback statutes are important provisions for managing potential fraud and abuse of physicians. The substantial financial incentives associated with diagnostic imaging have made them highly subject to abuse. The Westwood Imaging Centers has offered a flat rate per scan for referrals from physicians. The physician is then responsible for billing the Medicare, Medicaid, or the third party payer. Westwood has proposed to refer to the arrangement as a “per use, nonrecurring lease agreement.” This agreement is attempting to qualify for an exception that allows a physician to self refer if the both the equipment and procedure is conducted in the doctor’s office. This deal brings up the question about the legality of the self-referral to Westwood and its ethical implications.

The Stark Law (I, II, and III) is the provision that governs the self-referral activities of physicians. It is illegal for a physician to refer a patient to a facility in which he or an immediate family member has a financial interest or compensation arrangement (Stark Law, 2010). The goal of the Stark legislation is to remove the potential conflict of interest from the healthcare decision process. There are exceptions to the Stark Law that many equipment leasing and management companies have targeted for business opportunities. The physician of a group practice may refer patients for imagining services (MRI, CT, or PET) that are located within their office. The most recent legislation requires the physician to further provide the patient with a written notice that these imaging services may be obtained elsewhere (Stark Law, 2010). This notice must include a list of other imaging facilities in the immediate area (Stark Law, 2010).

The per-use lease arrangements that were permitted in Stark I & II are now prohibited in the Stark III legislation (Stark Law, 2010). These prohibited lease agreements are considered per click or on demand leases because of the limited usage of the imaging equipment and their susceptibility to abuse. The final rule did not prohibit time-based leasing or block time leases. The cautionary note is that the leasing of very small blocks of time could cause the lease to be considered a per click arrangement and that is prohibitory. The block of time must be substantial enough to not face the risk of being considered per click usage, thereby not allowed by the Stark Law. The Westwood proposal would need to be changed from a per use agreement to a time based lease.

The possible overutilization of diagnostic imaging has given rise to cleverly designed business models that cover illegal or fraudulent behavior. The anti kick back statutes prohibit the provider from receiving inducements for the referral of this reimbursable service. The lease agreement of the imaging services must not be written to appear as a kickback or highly discounted services to the physicians. The leased time must be specifically contracted and payable whether the slotted time is utilized or not. This shifts the risk of overutilization to the provider rather than the imaging service and would better control excessive referrals. The basis for the Stark Law is to prevent the conflict of interest business situations for providers, and the overutilization of these services of which the physician may have a financial interest. The possibility of a provider increasing their usage of imaging services because it will supplement their income becomes the ethical dilemma. This ownership could influence the clinical decision process and increase their overall usage of more costly image testing.

The overall increased utilization of imaging places a larger burden on this nation’s healthcare expenditure. The overutilization of imaging is supported by a recent study that estimated the number of MRIs doubled from 1995 to 2004, and the CT scanners increased more than 50 percent (MedPac, 2009). The volume of imaging services paid per Medicare beneficiary increased twice as fast as the total of all other physician services from 2000 to 2007 (MedPac, 2009). The Government Accountability Office (GAO) reported close to an eightfold variation on in-office imaging services nationwide (MedPac, 2009). The results of a recent MedPac (2009) study reveals that a physician that self refers imaging, results in significantly more total tests ordered than the non-self referring provider. He also has a higher spending per episode than the non-self referring provider. The evidence shows that the self referral of imaging has not only a financial benefit for the referring physician, but also has increased the overall healthcare spending. The providers should carefully review these findings when considering the proposal from Westwood. The ethical issues associated with the overutilization of image testing should be weighted against the future risk of decreased reimbursements from Medicare, Medicaid, or third party payers.