Chapter 8 Organizational Ethics And The Law There are lots of important concepts in this chapter, be sure to read it and take notes, as some are sure to be on the final exam. Learning Objectives Describe corporate structure. Describe a code of ethics for organizations. Discuss organizational misconduct. Explain respondeat superior and corporate negligence. Describe corporate duties and responsibilities. Describe strategies to restore organizational trust. Corporate Authority Healthcare organizations are incorporated under state law. Governing body. Duties and responsibilities: Described in a corporation’s articles of incorporation. Day-to-day operations are delegated to the CEO. Fiduciary Responsibility Express corporate authority Delegated by statute Implied corporate authority Corporate powers not specifically granted in articles of incorporation Ultra vires acts Acting beyond scope of authority Corporate Ethics Promote responsible behavior Mission, vision, and values Build trust Increase awareness of ethical issues Provide staff Code of ethics Training and education Commitment by organization’s leadership Corporate Compliance Program (1 of 2) Appoint compliance officer. Develop standards of conduct. Assign duties, authority, and responsibility. Communication and education. Implement monitoring and auditing systems. Corporate Compliance Program (2 of 2) Consistency in enforcement of policies and procedures. Reasonable steps in response to offenses. Annual audit of compliance program. Integrity and effectiveness. Maintain management trust on all levels. Unprofessional Conduct Trust and integrity lacking False advertisements Concealing mistakes Surgical procedure cover-up Appearance may not be reality Truthfulness in Advertising Hospitals advertise their quality by how well a third party evaluates them. Often a brief and cursory 3- to 5-day visit Scores as high as 100 were often posted on billboards and/or in local newspapers. One young lady told me, “This hospital [in a small rural town] scored 100. they have the nerve to publish this. They killed my mom. I wouldn’t take my dog there.” Corporate Negligence Occurs when a corporation fails to perform duties and responsibilities it owes directly patients, visitors, and staff. If a duty is breached and a patient is injured as a result of that breach, the corporation can be liable for a patient’s injuries under the theory of corporate negligence. Benchmark Darling Case In Darling v. Charleston Community Memorial Hospital, the court enunciated a “corporate negligence doctrine” under which hospitals have a duty, for example, to provide adequately trained medical and nursing staff. Respondeat Superior Legal doctrine holding employers liable for wrongful acts of their employees. Doctrine also referred to as vicarious liability. For liability to be imputed to the employer: A master–servant relationship must exist between the employer and the employee. ...

1. Chapter 8
Organizational Ethics And The Law
There are lots of important concepts in this chapter, be sure to
read it and take notes, as some are sure to be on the final exam.
Learning Objectives
Describe corporate structure.
Describe a code of ethics for organizations.
Discuss organizational misconduct.
Explain respondeat superior and corporate negligence.
Describe corporate duties and responsibilities.
Describe strategies to restore organizational trust.
Corporate Authority
Healthcare organizations are incorporated under state law.
Governing body.
Duties and responsibilities:
Described in a corporation’s articles of incorporation.
Day-to-day operations are delegated to the CEO.
Fiduciary Responsibility
Express corporate authority
Delegated by statute
Implied corporate authority
Corporate powers not specifically granted in articles of
incorporation

2. Ultra vires acts
Acting beyond scope of authority
Corporate Ethics
Promote responsible behavior
Mission, vision, and values
Build trust
Increase awareness of ethical issues
Provide staff
Code of ethics
Training and education
Commitment by organization’s leadership
Corporate Compliance Program (1 of 2)
Appoint compliance officer.
Develop standards of conduct.
Assign duties, authority, and responsibility.
Communication and education.
Implement monitoring and auditing systems.
Corporate Compliance Program (2 of 2)
Consistency in enforcement of policies and procedures.
Reasonable steps in response to offenses.
Annual audit of compliance program.

3. Integrity and effectiveness.
Maintain management trust on all levels.
Unprofessional Conduct
Trust and integrity lacking
False advertisements
Concealing mistakes
Surgical procedure cover-up
Appearance may not be reality
Truthfulness in Advertising
Hospitals advertise their quality by how well a third party
evaluates them.
Often a brief and cursory 3- to 5-day visit
Scores as high as 100 were often posted on billboards and/or in
local newspapers.
One young lady told me, “This hospital [in a small rural town]
scored 100. they have the nerve to publish this. They killed my
mom. I wouldn’t take my dog there.”
Corporate Negligence
Occurs when a corporation fails to perform duties and
responsibilities it owes directly patients, visitors, and staff.
If a duty is breached and a patient is injured as a result of that
breach, the corporation can be liable for a patient’s injuries
under the theory of corporate negligence.

4. Benchmark Darling Case
In Darling v. Charleston Community Memorial Hospital, the
court enunciated a “corporate negligence doctrine” under which
hospitals have a duty, for example, to provide adequately
trained medical and nursing staff.
Respondeat Superior
Legal doctrine holding employers liable for wrongful acts of
their employees.
Doctrine also referred to as vicarious liability.
For liability to be imputed to the employer:
A master–servant relationship must exist between the employer
and the employee.
Wrongful act of the employee must have occurred within the
scope of his or her employment.
Independent Contractor
Independent contractor is responsible for his or her own
negligent acts.
Relationship established when principal has no right of control
over manner in which agent’s work is to be performed.
Corporate Duties and
Responsibilities (1 of 5)
Appointment of CEO
CEO licensure
CEO responsibilities and challenges
CEO code of ethics

5. Maintain moral integrity
Screen job applicants
Corporate Duties and
Responsibilities (2 of 5)
Credentialing, appointments, and privileging
Ensure competency
False statements
Masquerading as a physician
Discipline of physicians
Physicians reluctant to discipline physicians
Physician privileges suspended
Don’t Let Hospitals Make You Sick
The problem is not that we have an epidemic of negligent
doctors. Rather, it’s that the health-care system has grown so
complicated that there is a greater chance than ever of things
falling through the cracks. . . .
—Dr. Ranit Mishori, Parade Magazine, 2009
Corporate Duties and
Responsibilities (3 of 5)
Provide adequate staff.
Provide adequate supplies and equipment.
Allocate scarce resources.
Provide quality patient care.
Comply with rules and regulations.

6. Corporate Duties and
Responsibilities (4 of 5)
Comply with accreditation standards.
Accreditation and conflict of interest.
Provide timely treatment.
Avoid conflicts of interest.
Situations where one has opportunity to promote self-interests
that could have a detrimental effect on an organization.
Corporate Duties and
Responsibilities (5 of 5)
Provide a safe environment.
Prevent surgical errors.
Runaway elevator.
Prevent of falls.
Protect patients from sexual assault.
Example: Sexual assault in the recovery room.
Decisions That Collide with
Professional Ethics
The principles of autonomy, beneficence, and justice and the
ability to practice what is right according to such principles
often collide when organizations have to, for example, ration
scarce resources. Such rationing may require managers to cut
costs at the expense of quality.
Case 1: Financial Incentive
Scheme (1 of 2)
I am here primarily today to make a public confession. In the
spring of 1987, as a physician, I denied a man a necessary

7. operation that would have saved his life and thus caused his
death. No person and no group has held me accountable for this,
because in fact, what I did was I saved a company a half a
million dollars for this.
—Dr. Linda Peeno, Congressional testimony
Case 1: Financial Incentives
Scheme (2 of 2)
HMO failed to disclose financial incentive system it provided to
its physicians to discourage referrals to specialists.
Discuss the legal and ethical issues.
Case 2: Letter of Recommendation
A former employer who knew that an employee had committed
offensive sexual acts gave a letter of recommendation that
vouched for him without reservation. The employee after being
hired by the new employer injured the student-plaintiff.
Discuss the legal and ethical issues.
Case 2: Legal Issues
Liability may be imposed
Recommendation letter misrepresented truth
Duty to care
Breach of duty
Injury incurred
Causation
Breach of duty was cause of injury
Injury was foreseeable

8. Case 2: Legal Issues (Foreseeability)
Randi W. v. Muroc Joint Unified School Dist., 14 Cal.4th 1066,
929 P.2d 582 (1997):
Defendants could foresee, had they not recommended the
employee, the new employer would not have hired him.
Defendants could foresee that employer would read and rely on
defendant's letters of recommendation and that employee after
being hired by new employer might molest or injure a student
such as the plaintiff in this case.
Case 2: Ethical Issues
First do no harm
Truthfulness
Case 3: Letter of
Recommendation (1 of 2)
Mr. R’s supervisor had received several reports alleging
misconduct between Mr. R and some of the female residents in
the Lee Allan nursing home. The supervisor was unable to
verify them.
Mr. R applied for a supervisory position with Parke County
Nursing Home. Parke County was sent a preprinted reference
form from Lee Allan. Form indicated Mr. R was eligible for
rehire. Form reflected that Mr. R performed his job adequately.
Case 3: Letter of
Recommendation (2 of 2)
Parke County hired Mr. R in part on the basis of a favorable
recommendation from Lee Alan. The claim here is that Mr. R

9. assaulted a patient at Parke County.
The plaintiff asserts that the former employer, Lee Allan,
wrongly gave a favorable recommendation and thus should be
liable for the injury.
Case 3: Legal Issues
Summary judgment was granted in favor of Lee Alan.
The facts did not reflect that Lee Alan had any substantial
information indicating that Mr. R had committed sexual
misconduct with residents at Lee Alan.
Case 3: Human Resources Issues
Passmore v. Multi-Management Svcs., Inc., 810 N.E.2d 1022
(Ind. 2004).
Recommendations should not be filled with rumors and
innuendo instead of facts. Without substantial evidence,
employers would subject themselves to possible defamation
litigation.
Declaring employers liable for negligence in providing
employment references will lead to employer reluctance to
provide information.
Case 3: Ethical Issues
Beneficence
Justice
Fairness

10. Case 4: Surgical Site Infection
Operating room staff observe a 10-inch by 2-inch tear in a
surgical table mattress. It is 2:00 PM and the room has been
prepared for Mrs. Smith’s surgery. A surgical sheet is placed on
the table. The sheet is worn and has several tears in it. Mrs.
Smith is placed on the surgical table.
(Note: Prior to Mrs. Smith’s surgery, a bowel resection was
performed on the same table.)
Discuss the legal and ethical concerns.
Case 4: Legal Issues
Legal issues
Negligence?
Consider the hospital’s responsibility.
Torn mattress is a known infection-control concern.
Body fluids can seep into the mattress.
Recurrent use of the mattress by various patients.
Case 4: Ethical Issues
Ethical Issues
Nonmaleficience (first, do no harm)
Professional codes of ethics
Case 4: Professional Ethics
Operating room staff recognized the mattress should have been
taken out of service but failed to do so. It is common knowledge
that body fluids can seep into a mattress pad and provide a
breeding ground for infections.
Describe how hospital policy should address this issue.

11. Case 5: Defrauding the Government
In States v. Liveoak, 377 F.3d 859 (C.A. 8, Mo. 2004), the
government filed an indictment against 11 individuals and 4
corporations.
In the indictment, the government alleged a healthcare fraud
scheme that involved several residential care facilities and
thousands of claims.
The government alleged that over at least 5 years 15 defendants,
in various conspiracies, defrauded the government by falsely
certifying patients as homebound and submitting false claims to
Medicare and Medicaid.
Case 5: Defrauding the Government
Joinder of Medicare fraud was proper where the charges here
were linked not only by common conspiracy members, but also
by an overall scheme in which each conspiracy member
participated to fraudulently charge the government for
healthcare costs.
Case 5: Legal and Ethical Issues
Legal issues
Fraud
Ethical issues
Trustworthiness
Restoring Trust

12. Effective communication spawns trust and a harmonious
organization.
All the players must work together and understand the role each
plays.
Better the teamwork, better the care.
Results in satisfied patients, families, and staff.
Improving Organizational Performance
Board education
Policies and procedures
Search for best practices
Reduce variation
Ensure continuity of care
Partner with the community
Develop a culture of compassion and kindness
Review Questions
Discuss the governing body’s decision-making authority.
Explain what an ultra varies act is.
Describe the important aspects of a code of ethics for
organizations.
Discuss the various forms of professional misconduct discussed.
Describe corporate negligence, respondeat superior, and
independent contractor.
Describe the duties and responsibilities of healthcare
organizations and how the failure to adhere to those duties and
responsibilities can result in both legal and ethical issues.
Discuss how an organization’s decisions can collide with

13. professional ethics.
Discuss importance of effective communications in building
trust in the healthcare setting.
Review Questions
Hemorrhagic Fever with Renal Syndrome – Russia (07):
Tatarstan
Archive Number 20081002.3106
Published Date 02-Oct-2008
The Republic of Tatarstan in Russia has experienced an
increased incidence in Hemorrhagic Fever with Renal Syndrome
(HFRS) for this year. The current report states the incidence for
2008 is seven times greater than reported for 2007. Between
September 19 and 25, 2008, 29 confirmed or suspected cases
were reported (International Society for Infectious Diseases
[ISID], 2008a). This is in addition to outbreaks reported earlier
this year. According to the Russian Epidemiological
Surveillance System, there were 165 cases reported as of July.
Cases increased from 65 on July 4 to 165 by July 22 (ISID,
2008b). Only one fatality has been reported at this time;
generally, case fatality rates for HFRS range from 1% to 15%.
Approximately 11% of total cases reported so far in 2008 have
occurred in the capital city of Kazan. The majority of other
cases have occurred in rural, forest areas of Tatarstan. The most
recent outbreak of 29 cases has occurred in the following cities:
Kazan (10), Naberezhnye Chenly (8), Nizhnekamiskiy (3),
Almetievskiy (3), Sabinskiy (2), Kukmorshiy (1), and
Bavlinskiy (1) (ISID, 2008a).

14. The Republic of Tatarstan is located in eastern Russia, about
800 kilometers southeast of Moscow (Department of Foreign
Affairs to the President of the Republic of Tatarstan, 2008). As
of 2002, the population of Tatarstan was 3,779,265, with an
urban/rural population of 2,790,661 and 988,604, respectively.
HFRS is endemic to Tatarstan and surrounding republics in
eastern Russia (ISID, 2008a). Other geographic areas with
endemic HFRS include Scandinavia, Western Europe, and the
Balkans. The Puumala virus spread by the bank vole is the
likely cause of the disease in Russia, Western Europe and
Scandinavia. The Dobrava virus is found in the Balkans and the
Seoul virus may occur worldwide. All viruses are part of the
Hantavirus classification. Hantavirus is transmitted to humans
by vector rodents such as voles and field mice (Centers for
Disease Control and Prevention [CDC], 2005).
According to research conducted by Alla Bernshtein and
colleagues of the Chunakov Institute in Moscow, natural
increases and decreases of the bank vole population occur every
three to four years. In years of higher vole populations, the
incidence of human HFRS increases (ISID, 2008c).
Experts speculate a number of factors have contributed to the
rise above endemic levels of human HFRS in Tatarstan and
surrounding regions. First, an increase in the bank vole
population may be a result of climate changes. Less harsh
winters and warmer summers allow for better access to food
sources for the rodents. Second, the new capitalistic Russia has
resulted in increased construction of homes in rural forest areas.
Humans have invaded the natural habitat of forest rodents. This
has increased the potential for contact between the habitats of
bank voles and humans. City dwellers tend to visit their
countryside homes during the summer months of June through
August. The majority of HFRS cases are reported during these
summer vacation months (ISID, 2008b).

15. As mentioned previously, Hantavirus is spread to humans by
rodents. As reported by the CDC (2005), infection occurs when
humans encounter “aerosolized urine, droppings, saliva of
infected rodents or after exposure to dust from their
nests.” Infection may also occur through open wounds, mucous
membranes, rodent bites, and in rare cases through person-to-
person contact. Most cases occur in individuals older than 15
years old, as children under the age of 15 often only show
subclinical symptoms of HFRS.
The incubation period of HFRS is one to two weeks. The CDC
(2005) lists the following symptoms: severe headaches, back
and abdominal pain, fever, chills, nausea and blurred vision.
Fever, hemorrhage, and renal insufficiency are hallmarks of
advanced disease. The disease generally progresses through five
stages: 1) fever lasting four to six days, 2) low blood pressure
lasting a few hours to 2 days, 3) decreased production of urine
for three to six days, 4) diuretic stage lasting two to three
weeks, and 5) recovery that may take three to six months. HFRS
infection is confirmed by clinical symptoms, serological testing,
microscopic inspection for Hantavirus antigen, or presence of
Hantavirus RNA in blood and tissue samples. Depending on the
patient’s fluid and electrolyte status, renal dialysis may be
warranted. Patients may be required to follow sodium and fluid
restricted diet during the oliguric stage followed by a liberal
fluid intake during the diuretic stage. In addition, the
administration of the intravenous antiviral drug, Ribavirin,
lessens the disease severity and improves survival (Bhimma,
Sairam, & Travis, 2008).
The Puumula virus carried by the bank vole is implicated in the
current outbreak of HFRS described above. Bhimma et al.
(2008) contend that prevention of HFRS starts with
environmental control of rodent populations near human
housing communities and structures. Recommendations for

16. prevention include taking precautions such as wearing rubber
gloves while cleaning areas contaminated with rodent droppings
or urine, avoid stirring up dust in rodent areas, and using a
bleach solution with disposable cleaning towels. Storing food
and disposing of trash properly may also prevent rodents from
interacting with human habitats. Humans should take
precautions if sleeping outdoors, working on farm areas or
handling hay where rodents may have built nests (Bhimma et
al., 2008).
In summary, the Puumula virus is a vector carried virus that
falls within the Hantavirus family. It is endemic to eastern
Russia where rodent populations thrive in rural forest areas.
Infection leads to HFRS in humans. Symptoms take one to two
weeks to appear, with initial symptoms of headaches and back
pain that may progress to acute renal failure. The survival rate
is high for infected populations although recovery may take
several months. The Puumula virus is recognized as one of the
less severe forms in the Hantavirus family. Controlling rodent
populations and public education of risks are keys to the
prevention of HFRS.
References
Bhimma, R., Sairam, V. K., & Travis, L. (2008). Hemorrhagic
fever with renal failure
syndrome. Retrieved from
http://www.emedicine.com/ped/TOPIC968.HTM
Centers for Disease Control and Prevention. (2005).
Hemorrhagic fever with renal syndrome.
Retrieved from
http://www.cdc.gov/ncidod/dvrd/spb/mnpages/dispages/hfrs.htm
Department of Foreign Affairs to the President of the Republic
of Tatarstan. (2008). Official
web-site republic of Tatarstan: Geographical location. Retrieved

17. from
http://www.tatar.ru/index.php?DNSID=7285d20214ab4a8019cb
26275358e482&node_id
=797
International Society for Infectious Diseases. (2008a).
Hemorrhagic fever with renal syndrome
– Russia (07): (Tatarstan).Retrieved from
http://www.promedmail.org/pls/otn/f?p=2400:1001:6253137856
52199::NO::F2400_P10
01_BACK_PAGE,F2400_P1001_PUB_MAIL_ID:1000,74203
International Society for Infectious Diseases. (2008b).
Hemorrhagic fever with renal syndrome –
Russia (04): (Tatarstan). Retrieved from
http://www.promedmail.org/pls/otn/f?p=2400:1001:6253137856
52199::::F2400_P1001_
BACK_PAGE,F2400_P1001_ARCHIVE_NUMBER,F2400_P100
1_USE_ARCHIVE:10
01,20080722.2226,Y
International Society for Infectious Diseases. (2008c).
Hemorrhagic fever with renal syndrome –
Russia (05): (Tatarstan, Udmurtia). Retrieved from
http://www.promedmail.org/pls/otn/f?p=2400:1001:6253137856
52199::::F2400_P1001_
BACK_PAGE,F2400_P1001_ARCHIVE_NUMBER,F2400_P100
1_USE_ARCHIVE:10
01,20080730.2337,Y