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The Ethics of Health-care Organization Ownership

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Who should own health-care systems? Should market forces now control resources that have in most cultures belonged to the social covenant? What are the ethics of health-care ownership at both motivational and behavioral levels?

Health-care organizations (HCOs) in the United States are owned in one of three ways:

  • Not-for-profit (NFP) owned by a community, service or religious group (“voluntary”);
  • For-profit (FP) owned by commercial companies (“proprietary”);
  • Public owned by local, state or federal government agencies (“government sponsored”), but not discussed in this article.

Is health care a public service more akin to clean water and sanitation services, and thus ideally equally available to all? Or, is health care a professional service more akin to legal advice and financial planning, and thus ideally distributed according to one’s ability to pay?

Those who answer that health care is a public service are more likely to believe that HCOs should fall under the umbrella of public and NFP ownership. Those who answer that health care is a professional service are more likely to support FP ownership of HCOs.

What are the motivational ethics distinctions?

NFP systems resonate with social conscience. From their perspective, health care is a social responsibility. NFP HCOs are social institutions primarily answerable to the standards of medical ethics and run by effective business principles. Their core motivation is to improve the health of sick and injured people in the community.

FP systems resonate with the United States’ economic system. Entrepreneurship and investing are valued uses of self and money. FP systems simply mirror this motivation. FP HCOs are business institutions primarily answerable to the standards of business ethics and run by effective investment principles. Their core motivation is to maximize the value of the company.

What are the behavioral ethics distinctions?

Critical ethical distinctions between NFPs and FPs may appear in areas such as quality of care provided, cost of services and access to care.

  • Research appears to show that there is little to no difference in quality of care and services.
  • Research appears to show that in markets where FPs have market dominance, costs are higher than in markets where there is a strong NFP presence.
  • Access to care for the 30 percent of Americans who are uninsured is clearly dependent upon the charity care provided by NFP and public facilities.

The clearest behavioral distinction between NFPs and FPs is how each uses excess revenue— “margin” for NFPs and “profit” for FPs.

A mantra of NFP HCO leadership is “no margin, no mission.” That is, an NFP HCO that does not produce more income than it spends cannot continue to provide services. The margin should be re-invested in facilities, technology, people and community in order to improve the health of the community.

NFPs receive favorable tax treatment and access to certain government subsidies. In return they are expected to provide “community benefits.” The sometimes elusive definition of community benefit includes providing charity and uncompensated care, expanding community health services, improving therapeutic modalities, reducing health-care costs, improving patient access to medical care and supporting training of health-care professionals.

A mantra of FP HCO leadership is “margin is the mission.” That is, an FP HCO that does not produce income for its shareholders cannot continue to exist. The profit must be returned to investors to justify their investment while still retaining sufficient funds for re-investment in facilities, technology and people.

FPs pay taxes on their property and their profit. In addition, their shareholders will pay income tax on their stock profits. These taxes are thought by FPs to establish their moral equivalent to community benefits. Most FPs also provide some level of uncompensated care.

Do NFP HCOs return more dollars to the community than do FPs? There is no reliable measure to answer this question. There is no doubt that the dollars returned by NFPs are more closely aligned with health-care needs since FP’s tax dollars are disbursed over the entire range of public expenditures.

The ownership of HCOs raises ethical concerns at both motivational and behavioral levels. They can clearly be distinguished on the basis of mission and motivation. Research on their behavioral distinctions is equivocal. “Who should own America’s HCOs?” requires on-going ethical, social and political conversation.

Steve Ivy is vice president for values, ethics, social responsibility and pastoral services of Clarian Health Partners in Indianapolis, Ind.