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The medical services a person receives depend not only on the patients’ health status, the beneﬁts covered by public or private health plans, and the latest developments in medical knowledge but also on the ﬁnancial incentives oﬀered to doctors that encourage them to use or withhold such services. This may compromise the physicians’ loyalty to patients or the exercise of independent judgment on their patients’ behalf (Rodwin 1993). Ethical problems arising from ﬁnancial incentives in the health care system are as old as modern medicine. But their nature is changing along with the transformation that medical care is undergoing in the industrialized countries of the west.
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1. Patient–Physician Relationship
At the core of a health care system there is still the patient–physician relationship. In their relationship with physicians patients are people seeking help. That results in this relationship’s asymmetry, one that is unavoidable to a certain extent. Patients can have neither the technical expertise needed to provide speciﬁc medical services nor the knowledge and skill to determine what care is needed, nor are they able to coordinate and negotiate the complexities of a highly specialized medical system to make sure that the services needed are actually provided. Patients can be very inhibited by disease, by too high or too low an age, by pain, anxieties, and worries; that means they are in special need of protection. Their vulnerability is intensiﬁed even more when they expose their bodies and reveal their most intimate histories, physical and otherwise. Even if patients participate in medical decision-making, they still depend on the physician’s advice and need to trust him or her. All the concepts designed to guide medical care, whose ability to function depends on patients successfully playing the role of a ‘critical customer,’ ignore this asymmetry and the ill person’s resulting need for protection.
In modern medicine, the physician–patient relationship is assuming ever clearer forms of a production process based on a division of labor. The patient, as a suﬀering subject, is at the same time a ‘work-piece object’ and—to diﬀerent degrees—a co-producer. That means he or she is directly impacted by rationalization and bureaucratization processes in the health system, and that any changes can set the course for the patient’s fears and hopes, pain and comfort, life and death.
Medical services are so complex that legal norms alone cannot protect the sick from unnecessarily suﬀering or even dying due to mistakes arising from the physician’s lack of loyalty. Or to put it another way: a large part of successful physician–patient relationships is based not on (undoubtedly necessary but inadequate) statutory norms but on ethical ones that are internalized in the physician’s professional habitus.
2. Ethics And Institutional Structures
Most philosophers, including bioethicists, have so far overlooked or at least underestimated the nexus between acts and the institutions increasingly in control of these acts. As a result, they overlook the fact that the ‘production’ of medical services is not only a work process but also a socialization or learning process, the ethical values of which are learned, reproduced and also modiﬁed and repressed. The moral-molding character of the institutions must be assessed as much stronger and durable than that of professional ethicists. This nexus can be approached with simple behavioral assumptions of the kind proposed by Freidson (1970):
First, (…) whatever motives, values, or knowledge people have come into contact with and have ‘internalized,’ they do not guide the behavior of most individuals unless they are continually reinforced by their social environment.
Second, (…) the environment can, by reinforcement, lead people to forsake one set of motives, values, or knowledge in favor of another.
And third, given the ﬁrst two, the average behavior of an aggregate of individuals can be predicted more successfully by reference to the pressures of the environment than by reference to the motives, values and knowledge they had before entering the social environment. The basis of prediction is from the requirements for social ‘survival’ posed by the social environment and refers to the functional adaptations of the aggregate of individuals who survive. Prediction is, of course, statistically inapplicable to any individual except as a probability value.
The more the power of institutional structures to determine behavior increases, the more signiﬁcant ethical ‘predecisions’ embedded in the structure of medical institutions become.
3. Financial ‘Conﬂicts Of Interest’ (CoI)
It is in this sense that the notion of ‘conﬂicts of interest’ has come into use for discussion of the ethical aspects of pecuniary issues in medical services (Spece et al. 1996). It does not mean a subjective, ‘inner’ conﬂict that arises when interests of equal standing are weighed but ‘a set of conditions in which professional judgment concerning a primary interest (such as a patient’s welfare …) tends to be unduly inﬂuenced by a secondary interest (such as ﬁnancial gain)’ (Thompson 1993). That is the case if the loyalty to patients and/or the independence of professional judgment is compromised (Rodwin 1993).
Primary interests we can deﬁne as the ethics patients expect of loyal physicians in western industrialized countries:
(a) to be loyal to patients,
(b) to act solely in the patient’s interest,
(c) to make their patients’ welfare their ﬁrst consideration, even when their own ﬁnancial interests are opposed,
(d) to keep patient information conﬁdential.
When the ill turn to physicians, they are conﬁdent that the same physician will act in trust as their agent and not primarily in order to enhance their income or to perform as agents for third parties. Secondary interests such as a physician’s ﬁnancial gain and his or her professional career are not illegitimate but should be prevented from dominating. Unlike the situation with ethical dilemmas, only one side of the conﬂicting interests has a claim to priority. This asymmetry between interests is a distinctive characteristic of the concept (Thompson 1993). Conﬂicts of interests are not an expression of misguided behavior but of latent misguided behavior that is built into organizations’ systems of incentives and sanctions. They can inﬂuence action, but they are not acts and they do not ensure disloyalty (Rodwin 1993).
4. Transformation Of The Health Systems
In most western industrialized countries the changing structural context is distinguished by shifts in power from the providers to the payers of medical care. This is expressed in the enforcement of new, prospective forms of ﬁnancing with which expenditures can be limited. Therefore, the ﬁnancial risk of treatment is increasingly shifting to the providers of medical services. That means their ﬁnancial success depends on the extent to which the resources consumed by diagnosis and treatment are lower than the ﬁxed capitation fees, budgets, DRGs (diagnosis-related groups: coding in which hospital procedures are rated in terms of cost and the intensity of services delivered, regardless of the cost to the hospital to provide that service) or ﬂat rates. Since every service was paid for or all costs reimbursed with the traditional, retrospective methods of ﬁnancing, that led for the most part to incentives to increase services. With prospective payment systems, incentives to decrease services now predominate, and that creates speciﬁc conﬂicts of interests.
The pressure of limited possibilities to expand is now intensifying competition among the providers of medical services. The main parameter in this respect is minimization of operational costs. Since they are largely determined by physicians’ decisions, the ability to control and steer the physician–patient relationship becomes the pivotal point of economic success.
The problem has two elements: ﬁrst, the ﬁnancial incentive that rewards certain medical decisions and penalizes others and, second, the degree of inevitability that competition and/or management can compel. That gives rise to diﬀerent combinations of direct inﬂuence on physician–patient relationships via ‘micromanagement’ and indirect inﬂuence via ﬁnancial incentives. As a result, the push–pull eﬀects of ﬁnancial incentives for physicians become ever harder to avoid.
5. Micromanaged Care—Decisions Made At A Distance
Providers exposed to the pressures of prospective ﬁnancing have developed an incalculable number of management tools to control the physician–patient relationship, e.g. the use of medical protocols to assess clinical decisions, retrospective utilization reviews, systems of prospective authorization of services, the introduction of primary care physicians as gatekeepers to control referrals to specialists and hospitals, and many other devices. The crucial factor is that important medical decisions tend to be removed from the sphere of direct contact between the patient and physician and transferred to a management.
Here we are no longer dealing only with a conﬂict between the precept of loyalty to the patient and the interests of the organization. Rather the fact that a management makes decisions in the absence of the sick person is already a contributory factor that changes the substance of the decisions. The moral nature of such ‘decisions made at a distance’ is diﬀerent from decisions made face to face with the other person (Bauman 1989). If a management is to make relevant medical decisions, then questions of suﬀering and pain, misfortune and hope, life and death must ﬁrst be turned into indicators, measurable values, and formalized norms, and thus rendered bureaucratically ‘banal.’ The sick individual’s chances of ﬁnding empathetic loyalty are thus minimized.
6. Monetary Incentives
Monetary incentives are demands on the physician to individually maximize utility: ‘if you choose option A instead of B in your clinical decisions, you will be rewarded/penalized with a higher/lower income.’ Over and beyond the direct impact on income, the incentives also assume a normative character (in terms of both medicine and ethics): if certain decision-related options are ﬁnancially rewarded, they are often considered to be medically appropriate and ethically sound.
The forms of prospective payment are multifarious. In the view of their advocates they lead:
(a) to careful handling of tight resources,
(b) to less overuse of medical services,
(c) to a better quality of services, since, after all, part of the ﬁnancial morbidity risk is imposed on the physician,
(d) to structural changes and integration in a way that maintains the health of the insured population through disease prevention and health promotion,
(e) to innovations resulting in measurable improvements in patient satisfaction, and
(f) they permit this without interfering with the physicians’ freedom to decide, i.e. without creating red tape, simply by changing the conditions in which decisions are made.
Critics counter that conﬂicts of interests resulting from incentives to decrease services (a) could lead to clinically inappropriate decisions and (b) potentially harm the ethical precept of a physician’s loyalty to his or her patients, who expect, after all, an independent clinical appraisal in their interest.
(a) The physicians’ clinical judgement will be biased and loyalty to the sick person may be at stake when certain options involving clinical decisions are ﬁnancially rewarded or sanctioned depending on their cost. For example, in the case of capitation and fund holding, the income of the primary physician drops if he or she refers patients to a specialist, prescribes costly drugs, admits them to hospital, or calls for expensive diagnostic procedures. When individual physicians or small group practices assume the insurance risk in this way, without their number of patients being large enough to compensate for the risk, patients in need of extensive treatment become a threat to their vital interests.
Incentives for underservice should also be avoided since they cannot be an appropriate response to the wrong turns taken by care in the western industrialized countries. For one, there may be overuse in countries like the USA, Germany, or Canada, but at the same time there is also underuse and misuse. For another, such incentives may reduce the extent of certain services, but they cannot substantially alter the ratio of necessary services to unnecessary and harmful ones (Brook and Kosecoﬀ 1988). Since, namely, the pecuniary incentive is blind with respect to what is medically proper, beneﬁcial services have, in principle, the same chance of being reduced or expanded as superﬂuous and harmful ones. Only with respect to one type of monetary incentives does there appear to be acquiescent agreement: when extra earnings are linked to clearly deﬁned and transparent, positive goals (e.g. increasing participation in screenings, house calls, better quality indicators), there will be hardly any possibility for a conﬂict of interests and therefore no risk to the patient.
(b) From an ethical point of view such monetary incentives are an implicit rejection of the sick persons’ expectation that the physician should be their agent. If, namely, medical decisions were only made with a view to the patient’s needs and in keeping with the state of the medical art (as every patient expects and professional ethics prescribe), the type of ﬁnancing would be of absolutely no importance for the physician’s services-related conduct. Regardless of whether a physician receives a ﬁxed salary or payment based on capitation, the services proﬁle would remain the same in every case. The eﬀectiveness of monetary incentives thus stands or falls with the physicians’ readiness to violate their clinical judgment and the ethical precept of loyalty to the patient and instead pursue incomerelated interests (or those of their organization). If they do not do so, all attempts at monetary steering are senseless.
(c) Indirect steering of the patient–physician relationship via monetary incentives to decrease services is not an alternative to the so-called ‘bureaucratic model’ but tends to bring about such a model. Producers of highly complex services like physicians always have more information at their disposal than the controlling management of the insurance company or the provider organization. So they can use it to manipulate the system (‘gaming the system’). Ironically, strong incentives at the level of the physician– patient relationship, with its intimidating implications, produce a spiral of attempts by the physicians to outwit them and by eﬀorts on the part of the other side to increasingly restrict the opportunities to do so, with the result of more regulation and less freedom for doctors and patients alike.
Under the pressure of economic competition, physician–patient relationships thus potentially become part of an organizational machine. The ethical consequence thereof has been formulated by an American physician as follows, ‘I imagine that every doctor in private practice can on occasion think of a patient as a dollar amount couched within a symptom, but I also imagine that doctors regularly pull back from such thinking by virtue of their education and morals. The dangers here are the institutionalization of the impulse to greed by the corporation and the individual physician’s subsequent removal from personal responsibility for carrying out the actions that follow from that impulse’ (Bock 1988).
The conﬂict between the ‘two cultures’ (McArthur and Moore 1997) or between the ethical codes of the profession and those of business is decided in this context in favor of the latter’s dominance. With the help of a comprehensive set of tools, including ﬁnancial incentives, the physician–patient relationship is squeezed into a system whose goal—proﬁtability—is a purely quantitative one. No corporation can earn too much money, its costs can never be ‘too low.’ The tools of monetary incentives can signal ‘more or less,’ but not an objective or human criterion for ‘enough’; nor can they signal the point at which the physician has to stop pursuing his or the health plan’s income interests. So far it has not been possible to counter such boundless systems with any eﬀective controls oriented to protection of the individual patient. In spite of eﬀorts to establish monitoring systems like the HEDIS quality indicators in the US there is no practical system for externally monitoring (e.g. by public agencies) all ‘the subtle ways in which providers, struggling to survive market competition, may stint on services’ (Relman 1993).
7. The Trust Problem
Rodwin (1993) has written: ‘In asking physicians to consider their own interest in deciding how to act, we alter the attitude we want physicians ideally to have. For if physicians act intuitively to promote their patients’ interests, we will worry less that they will behave inappropriately. But if their motivation is primarily self-interest, we will want their behavior to be monitored more carefully’ (p. 153). As already shown, ﬁnancial incentives can only modify physicians’ behavior in the intended sense when they act in their own income-related interest. That has to collide with the patient’s expectation that the physician should place the patient’s welfare over his own interests.
Not only is trust at stake but also a precondition for eﬀective medicine. Interpersonal trust is a prerequisite, for example, for the patient’s willingness: to reveal potentially stigmatizing information about health-related behavior (substance use, sexual practices, etc.), to describe personal feelings and thoughts necessary to diﬀerentiate mental from physical disorders, and to accept treatment practices or prescribed changes in personal behavior that are diﬃcult, painful, or risky (Mechanic and Schlesinger 1996).
It is not only the trust of the individual patient that is at risk. The trust of any and all in society to have a good chance of ﬁnding a loyal physician in case of need is a ‘public good’ and an element of everybody’s standard of living. Public goods are never realized in ideal fashion. But there are respective critical limits. For instance, despite everyday violations we still think of the public good ‘trust in traﬃc safety’ as being assured, for otherwise we would never get into a car again. It would undoubtedly be destroyed if we had to expect, say, that 10 percent of road users would no longer stop when the light turns red. The public good known as trust would be invalidated as a result. Today competing business enterprises enforce their corporate strategies at the sick bed through the micromanagement of care, ﬁnancial incentives to decrease services and sanctions, that increases the risk of ‘ethical externalities’ and thus of the ‘social costs of business enterprises’ in medicine.
When making economic decisions, people will presumably choose the alternative that best serves their interests. But, as economist Amartya Sen points out, before they can do this, they have to make another choice. They must choose to frame their decisions as economic ones that are based on self-interest vs. moral ones that are based on concern for ‘what is right.’ Such decisions are what most people expect from family, friends and—speciﬁcally modiﬁed according to the ethical codes of the profession—their trustees like doctors and nurses (Schwartz 1994).
As shown, institutional developments are subjecting physicians to an economic framework of decision-making with growing eﬀectiveness. Not only that, as socialization agencies institutions are seeing to it that the professional code of ethics is already being usurped by superimposed economic considerations. That is why, at the turn of the twenty-ﬁrst century, people are starting to realize that the patient’s welfare must no longer depend on whether a physician is able to resist ﬁnancial incentives and to ignore or submerge his or her economic interest in order to act in the patients’ interest. Society has to ﬁnd an answer to the principle ethical question of whether the health and life of a patient seeking help is to be decided primarily within an economic framework, and the answer does not have to be expressed solely in the individual physician’s conscience but also in the structure of the institutions. There are no patent solutions here. While in some west European countries there is hardly any consciousness of the problem posed by conﬂicts of interests yet, a public debate about the steps to be taken toward a solution has begun in the United States (cf. biography). Consideration is being given to a broad range of possibilities. One group of proposals has in common that they would like to cap expenditures at the middle or overall social level by way of budgets, while individual physicians are to be paid a ﬁxed salary (possibly supplemented by ﬁnancial incentives tied to positive targets like outcomes and patient satisfaction). Overuse, underuse, and misuse of medical services should be prevented by supportive management as opposed to controlling and sanctioning management. Others would like to defuse the prospective payment systems, e.g. ﬁnancial risk or gain should be limited, ﬁnancial incentives should not directly reward decreased use of services unless there is speciﬁc evidence thereof and monitoring for underuse. Other types of safeguards proposed to protect patients are the disclosure of ﬁnancial incentives, public review boards, creating independent organizations to certify quality measures, appeals boards to review cases of denied care for reasons of costs, the expansion of individual and collective patients’ rights, and the strengthening of consumer organizations.
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