Ethics and Corporate Social ResponsibilityLearning Objec.docx

Ethics and Corporate Social
Responsibility
Learning Objectives
After reading this chapter, you should be able to:
• Discuss the differences among ethics, morals, and values.
• Describe the purpose of the American College of Healthcare
Executives code of ethics.
• Demonstrate an understanding of ethical issues and behavior.
• Analyze the various unethical behaviors that tempt managers
and HSOs.
• Identify ethical dilemmas and an approach to coping with
them.
• Discuss the nature of corporate social responsibility (CSR)
and the role of HSOs in being econom-
ically, legally, ethically, philanthropically, and environmentally
responsible.
Chapter 10
Boris Lyubner/Illustration Works/Getty Images
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CHAPTER 10Section 10.1 Ethics, Morals, and Values
Ethics and socially acceptable ethical behavior should be
embedded into the way people
are brought up and the way healthcare business and clinical
students are trained. But the
sad fact is that unethical behavior does occur in HSOs more
than it should. This chapter
will clarify the distinctions between ethics, morality, and
values, what unethical behavior
is and is not, situations that make it difficult to be ethical and
how to cope with them, and
the degree to which ethics can be taught.
The chapter also discusses corporate social responsibility
(CSR)—what it is and the
extent to which HSOs have a duty to be socially responsible.
Finally, the physical envi-
ronment (air, land, water) is—or should be—an important
stakeholder for HSOs. What
does the responsibility to safeguard the environment mean, and
what role should orga-
nizations play?
10.1 Ethics, Morals, and Values
The terms ethics, morals, and values are often confused or used
interchangeably in every-
day speech. Before discussing ethics in more detail, it is
important to establish definitions
of what each means and the differences among them. A
traditional definition of ethics is
the art and discipline of applying principles to analyze and
resolve moral dilemmas
(Rossy, 2011).
The Josephson Institute of Ethics, a

nonprofit organization based in Los
Angeles, defines ethics differently
but perhaps more aptly for the busi-
ness world: “Ethics is about how we
meet the challenge of doing the right
thing when that will cost more than
we want to pay” (quoted in Maxwell,
2003, pp. 23–24).
This definition gets to the heart of
why “doing the right thing” is some-
times so difficult: We are unaware
of the associated cost. The Institute
breaks down the definition into two
parts: (1) the ability to discern right from wrong and (2) the
commitment to do what is
right and good (Maxwell, 2003). People and organizations need
to develop a standard to
follow and possess the will to uphold it, an ongoing struggle for
both. This struggle is
evidenced by recent studies suggesting that hospitals
aggressively pursuing programs to
reduce surgical complications could experience a negative cash
flow due to shorter hos-
pitals stays and fewer reimbursable services (Krupka, Sandberg,
& Weeks, 2012; Eappen
et al., 2013). Doing the right thing for patients may be the
wrong thing for the financial
health of the organization.
© vitanovski/iStock/Thinkstock
Business and ethics may seem to be mutually exclusive,
but as John Maxwell pointed out, “There’s only ethics.”
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A moral person knows right from wrong and chooses right; an
immoral person knows the
difference too but chooses wrong, while an amoral person either
does not know the differ-
ence between right and wrong or does not care. This description
includes notions of bad
versus good. Both require societal and cultural norms of right
and wrong, and, because
these evolve over time, what is “right” is far from clear.
Values are the tenets most important to people and the ways that
govern how they choose
to live their lives. That statement also applies to organizations
(see Chapter 2). Some peo-
ple have been known to die in order to preserve a value very
important to them (like
freedom, or protecting another’s life); at the other end of the
scale are people who think
nothing of inflicting harm on others if their cause warrants it
(such as killing rival gang
members to defend “turf”).
Ethical Behavior and Conduct
Virtually every HSO has an ethics code of behavior and some
type of code of conduct,
which more accurately might be called a moral code. While a
significant percentage of
organizations—more than 85%, according to one count—has
developed codes of conduct,
this apparently has little effect on whether or not employees

adhere to it: There is no
proof that codes of conduct actually influence ethical behavior
(Rossy, 2011). An example
of a less-than-successful code was that of HealthSouth, a
Birmingham, Alabama-based
national chain of outpatient rehabilitation centers. Started in
1984 as one rehabilitation
center, it grew rapidly into a national chain with more than $3.5
billion in annual sales.
When sales started to falter in 1996, cofounders Richard
Scrushy and Aaron Beam cooked
the books to the tune of $2.8 billion to distort the picture of its
financial health so it could
maintain its stock price (“Financial Statement Magic,” 2010).
Beam left HealthSouth in
1997 and was later convicted of bank fraud and sentenced to
three months’ imprison-
ment and a $275,000 fine. In 2003, Scrushy was indicted on 85
counts of fraud related to
accounting practices at HealthSouth. He was ultimately
acquitted of the fraud charges
but was later convicted of political bribery, for which he was
sentenced to 88 months in
federal prison.
That such actions would be considered unethical seems clear.
But what if someone acts
unethically by mistake, simply out of ignorance? Here, ethicist
Gerard Rossy distinguishes
between an unethical act and an ethical “mistake”—the
difference, he says, is the intent
behind the action. An unethical act is carried out with the full
knowledge that it is legally
and morally wrong because it violates clear corporate codes of
ethics or laws and regula-
tions. An ethical mistake, on the other hand, is unintentionally

unethical; the individual
or group later sincerely regrets this act and would have acted
differently had they known
(Rossy, 2011).
The following three key factors differentiate unethical actions
from ethical mistakes:
• Intent—Were you aware that what you were doing was wrong?
Did you feel the
need to hide or disguise your motives?
• Remorse—Are you sorry for your actions because they were
unethical? Or are
you sorry you got caught?
• Accountability—Are you willing to admit your mistake and
accept the conse-
quences? Are you willing to do your best to set things right?
(Rossy, 2011)
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Professional Obligations
Many people working in healthcare are licensed or certified. In
addition to denoting that
a person is competent to do his or her job, licensure and
certification obligates the individ-
ual to a specific code of ethical professional conduct. The
American College of Healthcare
Executives (ACHE) states that healthcare executives “have an

obligation to act in ways
that will merit the trust, confidence, and respect of healthcare
professionals and the gen-
eral public. Therefore, healthcare executives should lead lives
that embody an exemplary
system of values and ethics” (ACHE, 2011, para. 4). The ACHE
code of ethics describes
the healthcare executive’s responsibilities to the profession of
healthcare management, to
patients or others served, to the organization and its employees,
and to the community
and society.
Physicians, nurses, pharmacists, and other licensed or certified
professionals who provide
direct patient care have strict standards of ethical conduct that
outline primary clinical
duties, responsibilities, and obligations. For example, the code
of ethics for pharmacists
adopted by the American Society of Health-System Pharmacists
covers the following
eight principles:
• A pharmacist respects the covenantal relationship between the
patient and
pharmacist.
• A pharmacist promotes the good of every patient in a caring,
compassionate,
and confidential manner.
• A pharmacist respects the autonomy and dignity of each
patient.
• A pharmacist acts with honesty and integrity in professional
relationships.
• A pharmacist maintains professional competence.

• A pharmacist respects the values and abilities of colleagues
and other health
professionals.
• A pharmacist serves individual, community, and societal
needs.
• A pharmacist seeks justice in the distribution of health
resources. (2007, p. 1)
Ethical codes of conduct for medical professionals address more
than the business side
of healthcare delivery. There are bioethical issues relating to
patient care—moral issues
involving healthcare decision making such as a patient’s right to
refuse medical care
and end-of-life care. There are clinical ethics that involve
dilemmas in clinical practice.
Research ethics involves the protection of research subjects, and
public health ethics
focuses on identifying, weighing, and balancing moral interests
at stake in various public
health actions. This chapter will focus solely on business ethics.
Be aware, however, that
medical ethical issues as well as professional morals and values
can influence the culture
of the organization (see Chapter 2).
The next four sections focus on business ethics, amplifying the
nature of ethical issues
and dilemmas, revealing the unprecedented extent of unethical
behavior, offering some
guidelines for dealing with ethical dilemmas, and discussing the
extent to which ethics
can be taught.
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CHAPTER 10Section 10.2 Ethical Issues and Behavior
10.2 Ethical Issues and Behavior
The chairman of AOL Time Warner Book Group was having
dinner in New York one eve-
ning with John Maxwell, a prominent author on leadership
issues from a Christian per-
spective, and he suggested that Maxwell would be the perfect
fellow to write a book on
business ethics. “There’s no such thing,” replied Maxwell.
When asked what he meant, he
said, “There’s only ethics” (Maxwell, 2003, p. xi). Maxwell was
referring to the ethics of
reciprocity, often referred to as the Golden Rule. This
conversation spawned the title of the
book Maxwell came to write: There’s No Such Thing as
Business Ethics: There’s Only One Rule
for Making Decisions (2003).
People get into trouble when one set of ethics or values governs
their private lives and
another their working lives. For example, a typical employee
might say, “I’m an honest per-
son, but it is okay to pad my expense
report because that’s what everyone
in the organization does.” In fact,
many people are ethically duplici-
tous without realizing it. As Maxwell
says, “The same person who cheats
on his taxes and steals office supplies
wants honesty and integrity from the
corporation whose stock he buys, the

politician he votes for, and the client
he deals with in his own business”
(Maxwell, 2003, p. 13).
Ethical issues arise whenever people
are tempted to behave unethically or
not do the right thing. Maxwell lists
the five most common situations that
give rise to unethical responses:
© Catherine Yeulet/iStock/Thinkstock
The pressure to achieve results is one reason for unethical
behaviors such as “cutting corners” or “bending the rules.”
Discussion Questions
1. Does obeying the law make a person “moral,” and breaking it
“immoral”? Discuss the
reasons for your answer.
2. Can ethics vary from industry to industry? If you think so,
provide an example of an indus-
try in which principles, norms, and standards of conduct are
different from the healthcare
industry, and provide as much detail as you can (even
anecdotes).
3. How are principles of business ethics and principles for
ethical treatment of patients
similar? How are they different?
4. Are there situations where business ethics and professional
ethics could conflict? Discuss
the reasons for your answer.

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CHAPTER 10Section 10.2 Ethical Issues and Behavior
• Pressure to achieve results when things are not going as
planned, which is why
people often cook the books, cut corners, or bend the rules.
Students often cheat
to get higher grades, executives manipulate information to
increase stock prices,
physicians order unnecessary diagnostic tests to increase
revenue. Many of us are
under pressure—in 2005, the Ethics Resource Center conducted
a national survey
of U.S. employees and found that 10% of them at all levels
reported feeling pres-
sure to compromise ethical standards (Trevino & Nelson, 2007).
• The desire for pleasure (if it feels good, do it) leads people to
live beyond their
means, abuse drugs (of all kinds), suffer divorce and broken
homes, and so on.
Executives who have achieved an elevated compensation level
may do what-
ever they must to preserve their lifestyle. The consequences are
never worth the
promise of the temptation and are almost always regretted later.
• Abusing the power a person has been given. This, too, can act
like a drug: “Hav-
ing power is like drinking salt water. The more you drink the
thirstier you get”
(Maxwell, 2003, p. 80). Powerful executives may develop a
sense of entitlement.

They believe that they and the institution are one, so they can
take what they
want when they want it (Maxwell, 2003). Those who want to
keep their power at
all costs are also most likely to compromise standard ethical
behavior to do so.
• While pride itself is not a bad thing—after all, we have all
been brought up to
take pride in ourselves, our work, our family, and our country—
having an exag-
gerated sense of pride and self-worth (hubris) is destructive.
Pride is essentially
competitive; one is proud only of being richer, smarter, or
better looking than
others. If everyone else were as rich, smart, or good looking,
there would be
nothing about which to be proud. If your goal is to outdo
everyone else, then
your focus is entirely on yourself and your own interests
(Maxwell, 2003). “Pride
can blind you to your own faults, to other people’s needs, and to
ethical pitfalls
that lie in your path” (Maxwell, 2003, p. 86).
• Priorities. German poet and novelist Johann Wolfgang von
Goethe said, “Things
that matter most must never be at the mercy of things that
matter least” (quoted
in Maxwell, 2003, p. 86). Is being liked by others the most
important thing to you?
Is keeping your job more important than doing the right thing,
such as blowing
the whistle on some malfeasance? Do you know what your
priorities are?

There are three areas in the business world in which ethical
issues are commonly
encountered:
• Human resources. An obvious example of this type of ethical
issue is discrimina-
tion, which can lead to rampant unfairness. Sexual and other
types of harass-
ment may take the form of an individual in a hierarchy taking
advantage of
his or her position to use power to control others lower in the
organizational
structure. Harassment may also occur between peers and result
in a hostile work
environment for those who are the objects of the unwanted
attention. Conflicts
of interest may take many forms such as bribes and kickbacks,
inappropri-
ate influence, and the use of privileged information to bestow
favor on special
friends or interests.
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CHAPTER 10Section 10.3 Unethical Behavior
1. This section introduced the notion that people behave
unethically rather than bear the
costs of ethical behavior (an economic reason). Do you think
this is prevalent in HSOs today?
Why or why not?

2. We have all heard of the Golden Rule: “Do unto others as you
would have them do unto
you.” According to John Maxwell, it is the only guide to ethics
one needs. Do you agree?
3. Assuming you do the “right” thing all or most of the time,
how do you know it? Elaborate on
your answer as best you can.
4. Ethics exist in law, business, medicine, and other spheres of
life, even politics. Other than
the settings in each sphere, would you say that the concept of
ethics was the same or differ-
ent in all spheres? Discuss.
• Consumer confidence. In many business situations, a person
may be privy to
confidential information that he or she may not reveal
regardless of his or her
position. To breach that confidentiality and divulge such
information is a serious
ethical violation, not to mention a violation of federal privacy
laws if the dis-
closure involves patient information. When services are
misrepresented, hyped
beyond the benefits they provide, or false claims are made, this
transgresses
truth in advertising ethical boundaries. In the medical
professions, there is an
ethical obligation to base all actions on the best interest of the
patient. A physi-
cian recommending treatments to a patient for which the only
motivation is the
physician’s ability to bill for that treatment would be a violation
of the physi-
cian’s ethical responsibility.

• Use of organizational resources. These issues range from what
may seem to be
mundane to the extremely serious. Many people do not give a
second thought
to making personal calls from work, taking a long lunch or
break, or taking first
aid supplies from the supply room for personal use. All of these
are examples of
stealing organizational resources. Using business letterhead for
personal reasons
or allowing a personal view to be construed as the
organization’s stance are mis-
appropriations of the HSO’s reputation. Most people would
clearly recognize
the ethical wrong in falsifying data to make an organization’s
financial results
look better or receive approval for a new drug (Trevino &
Nelson, 2007).
The root problems in most of these instances are lack of respect
and self-interest.
10.3 Unethical Behavior
Every day brings reports of some new ethical violation or the
disposition of a case brought
against someone or an organization for unethical behavior.
Unethical behavior consists
of conduct undertaken to benefit a person or organization while
knowingly (or being
oblivious to the possibility of) harming others. Behavior is still
considered unethical if
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the act is wrongful, whether or not it
results in harm; for example, a deceit-
ful representation would be consid-
ered unethical even though not acted
upon. Allowing a known impaired
professional to continue to care for
patients is unethical, yet studies have
shown that only 37% of nurses who
work with a colleague suspected of
being impaired due to drug or alco-
hol abuse will report that concern to
supervisors (Kunyk & Austin, 2010).
Many cases involve greed, like
schemes to defraud Medicare. Sum-
marized in Case Study: False Claims
to Medicare is an example of a recent
case that involves fraudulent Medi-
care billing.
© studio_77-28/iStock/Thinkstock
If it is known that a professional is abusing drugs or
alcohol, it would be unethical to allow him or her to
continue caring for patients.
Case Study: False Claims to Medicare
When Orisbel Espinosa Hernandez acquired the durable medical
equipment company Active Medical

Solution
s (AMS) and the out-
patient rehabilitation facility Total Care Therapy Specialists
(Total
Care) based outside of Miami and Jacksonville, respectively, he
was able to obtain the Medicare numbers of beneficiaries as
well
as the names and Medicare provider numbers and names of phy-
sicians. He used this information to submit fraudulent claims to
Medicare.
Between November 2005 and September 2008, the average
monthly amount AMS billed to Medicare was approximately
$4,871 for all services. After AMS was acquired by Hernandez
in 2008, between October and December of that year, it billed
$1.5 million to Medicare (average monthly amount of $500 mil-
lion). After Total Care was acquired by Hernandez, the facility
billed Medicare for approximately $1 million for therapy
services
that were either never performed or were not necessary.

In July 2009, Hernandez was indicted on charges of healthcare
fraud, mail fraud, aggravated iden-
tity theft, and false statements related to healthcare matters.
Investigators believe that Hernandez
caused his two companies to submit approximately $2.5 million
in false claims to Medicare. On
February 20, 2013, Hernandez was arrested at Miami
International Airport after arriving on a flight
from Cuba. He was awaiting criminal prosecution as of
December 2013 (Office of Inspector Gen-
eral, 2013a).
©Alan Diaz/AP/Corbis
A federal agent seizes files
from a home health agency in
a nationwide crackdown on
Medicare fraud that occurred
in 2012.
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Not all unethical behavior can be attributed to an individual
acting out of the prospect
of personal gain. Organizations may collectively make unethical
decisions that result in
harm to others. In May 2012, Concord Hospital in New
Hampshire was fined $205,000
for hazardous waste violations involving improper disposal of
pharmaceutical, alcohol,
solvents, and used oil hazardous wastes and failure to follow
certain hazardous waste
management practices (New Hampshire Department of Justice,
2012).
It is worth repeating the idea that consumers do not expect
HSOs to act like a business.
They expect healthcare organizations to care more about their
patients than financial reim-
bursement or insurance contracts. Patients place a large degree
of trust in HSOs, and thus
these organizations are typically held to a higher standard than
other industries (Morri-
son, 2006). Although baseless, for-profit HSOs may be tarred
with the brush of unethical
behavior in the interest of making profits. Some consumers are

particularly concerned
about the quality of patient care at for-profit HSOs because of
the cost-containment incen-
tives facing administrators, physicians, and employees in these
organizations. Studies
of healthcare quality at for-profit and nonprofit HSOs have not
verified these concerns
(Schlesinger & Gray, 2005). In addition, a survey of 558 for-
profit and nonprofit orga-
nizations conducted in 2007 by the Ethics Resource Center
found that 55% of nonprofit
employees had observed workplace misconduct, which was only
1% lower than those in
for-profit organizations (“Ethics Eroding,” 2008). There is also
fear that hospitals driven
solely by profit motives will be less inclined to provide care to
indigent patients and those
with inadequate insurance coverage, although this has not been
substantiated (Salinsky,
2007). Are CEOs of for-profit HSOs primarily motivated by
profit? Not according to a
2012 study of four CEOs of for-profit Medicaid managed care
organizations in Colorado
and New Mexico. The executives indicated that social
responsibility is their major motiva-

tor when making decisions. On the financial side, a predictable
rate of profit rather than
actual profit is viewed as most important (Waitzkin, Yager, &
Santos, 2012).
An ethical concern that may not be as obvious as the preceding
examples, because the harm
is harder to identify, has to do with the immensely complicated
“fine print” that we seem
to confront on an increasing basis. Every time a consumer
receives healthcare services, he
or she is required to sign various consent and privacy
notification documents. Although
state and federal regulations often dictate the verbiage on these
documents, there may be
clauses that consumers do not understand or terms they agree to
only because their medi-
cal needs are immediate and urgent.
Unethical HSOs take advantage of these circumstances in
various ways—for example,
by overcharging for services, selling patient information to
pharmaceutical companies,
improperly billing insurance companies, and the like.

It may be simplistic to say that people cheat, lie, fudge, and line
their own pockets because
they can, or because it is unfortunately more acceptable
nowadays, or because no one will
find out. But is this not at the heart of ethical behavior—to do
the “right” thing, even when
no one is looking? Doing otherwise is unethical, and there must
be many more unreported
instances where people and organizations intentionally get away
with such behavior,
thus, in their minds, legitimizing it. Kirk O. Hanson, professor
at the Markkula Center for
Applied Ethics, Santa Clara University, suggests that hospital
governing boards regularly
monitor for ethic risks such as the following (Hanson, 2012):
spa81202_10_c10.indd 287 1/15/14 3:51 PM
• Cost cutting without sufficient consideration
• Hiding data when facing requests for transparency
• Manipulating financial or quality data reported to external

groups
• Exaggerating marketing claims
• Raising funds with excessive promises
• Hiding data from physicians
and accountable care organi-
zations and other partners
• Avoiding confrontation of
inappropriate physician
behavior
• Hiding financial reserves
allegedly for a “rainy day”
• Temptations faced by pur-
chasing officials
Hospitals or other HSOs that fail to
“do the right thing” can put patient
safety at risk, as evidenced by the sit-
uation described in Case Study: Crim-
inal Responsibility for Choosing Profits
Over Patient Safety.

MedicImage/Universal Images Group/Getty Images
An anesthetist injects a local anesthetic into a patient’s
back. Healthcare services must be reasonable and
“medically necessary” in order to be reimbursed by
Medicare and Medicaid.
Case Study: Criminal Responsibility for Choosing Profits Over
Patient Safety
In the early 1990s, United Memorial Hospital (UMH) in
Greenville, Michigan was experiencing
financial difficulties. In August 1993, UMH recruited Dr.
Jeffrey Askanazi to provide full-time anes-
thesia services in hopes of attracting other physicians to join its
staff and thus increase revenue.
Dr. Askanazi provided anesthesia services and also performed
pain management procedures.
According to hospital records, the number of pain management
procedures performed by Dr.
Askanazi rose from 24 in January 1994 to 230 in December of
that same year. By September 1994,
UMH’s senior leaders began to receive complaints about Dr.
Askanazi. Nurses, staff physicians,
and patients raised questions about the quality of Dr.

Askanazi’s practices and frequency of proce-
dures performed (for instance, performing the same procedures
on patients without benefit and
frequently without conducting a sufficient examination to make
an accurate diagnosis). The UMH
leadership team dismissed these concerns, saying that Dr.
Askanazi generated significant income
for UMH. Complainants were told to keep their concerns to
themselves or leave the hospital.
In May 1995, UMH board members became aware of the
complaints but were rebuffed by man-
agement when they asked for additional information or
requested that an outside expert review
Dr. Askanazi’s work. The CFO reported to the board that Dr.
Askanazi’s work “had a favorable finan-
cial impact on hospital operations,” and the CEO advised the
board that Dr. Askanazi’s practice
generated approximately one third of the hospital’s income, so
it was not advisable to hurt his
reputation in any way (United States v. United Mem Hosp.,
2003, p. 6).
(continued)

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Patient Safety
(continued)
The additional profits generated by Dr. Askanazi’s pain
management procedures contributed greatly
to a significant rise in UMH’s net income, which grew from
$424,101 in 1993 to $2,187,215 in 1994.
In 1995, Dr. Askanazi partnered with the UMH physician chief
of staff and the physician director of
the emergency department to build a free-standing clinic for the
purpose of providing additional
pain management services. These same doctors were involved in
reviewing the quality of care
provided to patients at UMH and did not recuse themselves from
evaluating Dr. Askanazi’s hospital
practices. Other physicians at UMH continued to complain
about Dr. Askanazi’s practices but were

told by the CEO that the comments were not welcome.
The physician committee responsible for overseeing and
regulating physician practices at UMH
finally sought the opinion of an outside expert regarding the
appropriateness of the procedures
performed by Dr. Askanazi. This expert was unable to complete
the review because many of Dr.
Askanazi’s patient records were found to have very scant
documentation. Eight months after
receiving this expert’s report, the physician committee merely
counseled Dr. Askanazi to improve
his record documentation.
In July 1996, one of Dr. Askanazi’s patients died following one
of his questionable procedures. This
patient had undergone more than 22 of Dr. Askanazi’s
procedures in a 1-year period. The medical
examiner determined the patient died from a puncture to her
cervical spine, which caused respira-
tory distress and eventual death. One day after the patient’s
death, the hospital provided copies
of 80 of Dr. Askanazi’s patient records to the Peer Review
Organization of Michigan (a group that
contracts with Medicare to evaluate healthcare quality). After

reviewing these records, in Novem-
ber 1996 this group found several quality concerns and issued a
report noting that “continuing to
allow invasive procedures without objective evidence of
improvement in pain level, narcotic use,
functional improvement or return to work is not warranted” (p.
9). By this time Dr. Askanazi had
voluntarily resigned his medical staff membership after meeting
with the UHM board attorney.
The Department of Justice (DOJ) in the western district of
Michigan criminally prosecuted UMH
for overbilling by one of its nonemployee anesthesiologists. On
January 8, 2003, UMH entered a
guilty plea that, among other requirements, obligated UMH to
pay a fine of more than $1,050,000
for “medical necessity fraud.” Medical necessity fraud occurs
when the procedures provided (e.g.,
tests or lab studies) do not meet medical necessity criteria.
Medicare and Medicaid pay only for
those services that are reasonable, medically necessary, and
used for diagnostic and therapeutic
purposes in connection with healthcare services provided to
beneficiaries. In addition, the hospital
agreed to plead guilty to wire fraud, reimburse third-party

payers $750,000, pay $12,500 to the
DOJ, and perform other nonmonetary relief.
The crux of the government’s case was that, notwithstanding
information learned through quality
review and many complaints from patients received by the
hospital, the leadership team allowed
the hospital to continue to bill and collect its fees, certifying
each time that the services were medi-
cally necessary when, in fact, the hospital knew they were not
and chose to ignore evidence of
Dr. Askanazi’s behavior and thwart legitimate efforts by the
medical staff to correct it (United States
v. United Mem Hosp., 2003).
(continued)
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CHAPTER 10Section 10.4 How to Approach Ethical Dilemmas
Patient Safety

(continued)
Questions for Critical Thinking and Engagement
1. Assume the role of a consultant hired by United Memorial
Hospital. Prepare a briefing
on the critical ethical issues involved in this case. What
recommendations would you
make to the hospital board relative to public concerns about
employee ethics, patient
safety policies, and the impact of the hospital’s reputation
following this egregious case?
1. List as many reasons as you can as to why an HSO would be
interested in being ethical. Clas-
sify the reasons in terms of whether they represent moral or
economic motivation.
2. Do you think business executives, particularly CEOs, have a
general public image of behaving
selfishly and unethically? Do you think that reputation is
deserved? Discuss.

3. Imagine you are looking for a job. Is the organization having
an ethical culture or behavior
important to you? If so, how would you go about determining
this?
4. Imagine you are hiring people. Your organization is proud of
the fact that it makes a profit by
being ethical. How would you ensure you are hiring people with
a similar ethos?
5. Cite some examples of trust in business from your personal
experience or from reading the
newspapers. What happens when trust is lost?
6. What other sectors of the healthcare industry have exhibited
unethical behavior? Cite
examples to justify your choices.
10.4 How to Approach Ethical Dilemmas
Every person will be faced with ethical dilemmas throughout
life; it is inevitable. By defi-
nition, the “right answer” is elusive. An ethical dilemma arises
when a person is presented
with a choice (ordinarily of action) in which one consideration
is the rightness or wrong-

ness of the action (Abraham, 2012). Some ethicists evaluate the
action in itself, whatever
the consequences. Consider a situation in which a person is
attempting to shoot someone
but realizes too late that the gun is not loaded; the act is
unethical even though the tar-
get did not die. Others focus their evaluation on the
consequences. For example, lying,
which is a “bad” act, may have good consequences. Within the
workplace, the “right
thing to do” is usually complicated by time pressures and
conflicting financial and politi-
cal demands, and it often comes with a price tag. While we
never seem to have the right
answer when we need it, there are five questions we can ask
ourselves when faced with
an ethical dilemma that might well help us avoid making the
wrong decision:
1. What’s in it for me? How will I benefit? How will my friends
and family benefit?
What are the costs, whether in terms of money, time, work, or
reputation? To
understand what motivates your self-interest in a scenario, it
can help to con-

sider how comfortable you would be sharing your true motives
publicly.
spa81202_10_c10.indd 290 1/15/14 3:51 PM
2. What decision or action would lead to the greatest
good for the greatest number? This presupposes
that one knows and understands the legiti-
mate interests and values of others. John Stuart
Mill’s classic work on utilitarianism holds
that the preferred decision is the one that will
return the highest net social benefit to all stake-
holders (those people who might be affected
by the outcome) (Mill, 1906). Value conflicts
can make achieving such a noble outcome dif-
ficult; how do we define the “greater good”?
Many environmental and air-quality regula-
tions, for example, are motivated by a desire to
protect the general public and act on its behalf.
3. What rules, policies, and social norms (written or

unwritten) apply in this situation? Immanuel
Kant, the German philosopher, believed that
moral decisions should follow a principle
he called the Categorical Imperative: Act as
though the rationale behind your action were
to become general law, binding on everyone.
Patricia Werhane, director of the Institute for
Business and Professional Ethics at DePaul
University, asks the following germane ques-
tions implied by such a rule-based perspective:
• Does the action set positive or negative precedents?
• Is the action acceptable to others?
• Can the action be applied to similar situations?
• Does it respect, or at least not disparage, human dignity?
(Werhane, 1994)
4. What are my obligations to others? To understand this, one
has to appreciate the
role of reciprocity and trust in society. The Golden Rule—“Do
unto others as you
would have them do unto you”—and its various iterations in
multiple cultures
is one illustration of reciprocity as a universal norm; implicit in
this view is that

people have to trust one another. How do you feel when
someone you’ve previ-
ously helped rejects your request for help? Will you ever forget
when someone
you have helped many times does not reciprocate?
5. What will be the long-term impact on me and on important
stakeholders? This requires
looking at the big picture and ensuring that your self-interest is
aligned with
the interests of others and the greater society. In other words,
doing what is also
right for others is part of one’s true self-interest. The motives of
environmental-
ists are perhaps the most obvious illustration.
Tanya Constantine/Blend Images/Thinkstock
Reciprocity is a human norm and exists in
all human cultures.
spa81202_10_c10.indd 291 1/15/14 3:51 PM

These five questions in fact constitute a framework for
identifying ethical dilemmas and
can help one think through any potential conflicts among
various values and responsibili-
ties to others. The following three criteria will help you to
choose from and resolve those
conflicts:
• Importance. Which questions are most applicable to the values
that are important
to you and your organization in this situation?
• Balance. If you must compromise among your values, what
scenario is the best
tradeoff?
• Acceptance. How will your decision and its underlying
rationale fare if submitted
to public scrutiny? (Rossy, 2011)
Remember to ask all five questions before making a decision.
Keep your values center
stage and in focus. Weigh short-term against long-term

consequences. Be persistent and
patient; resist the temptation to find a quick but probably wrong
solution. Trust your
instincts, but be willing to ask others for advice. Finally, be
brave: The ethical answer
may not always be the most politically popular. As a way of
thinking through the ethical
criteria just presented, consider the following examples of
common, everyday situations
that many employees face in Case Study: Everyday Ethics, and
answer the related questions.
Case Study: Everyday Ethics
• Sheryl often takes home pens, pencils, printer paper, and
other small office supplies for
her personal use—even though she does not perform any work
from home. Is Sheryl’s
behavior ethical or unethical? Why or why not? Is there any
“gray area” to what Sheryl
is doing? In other words, under any circumstances, is her
behavior ethical? What are
the potential consequences of Sheryl’s behavior to others? To
her organization? How
about to herself?

• Eric is the director of health information management in a
hospital that is currently
selecting an electronic health record (EHR) system. He
discovers that the hospital’s IT
director, one of the people involved in the project, is a close
friend of a person working
for a vendor that has submitted an EHR system proposal. Is the
activity that Eric has
learned of unethical? Why or why not? If Eric is reasonably
sure that the information
he’s learned is accurate, would it be unethical if he chose not to
disclose it to the exec-
utive in charge of the project? Why or why not? What are Eric’s
options?
• In order to retain and grow market share, John, the hospital
CEO, asks Peggy, the qual-
ity manager, to post inaccurate quality measurement data results
on the hospital’s
website—making the hospital’s quality score look better than it
is. John justifies this
decision by saying, “I’m very hopeful the hospital will soon be
able to achieve the good
results being reported on the website.” What are the potential

consequences of John’s
request? Is John’s behavior unethical, or is he just doing what it
takes to stay competi-
tive in a tough economic climate? Peggy wants to be loyal to
her employer but feels
uneasy complying with John’s request. If she posts inaccurate
data on the hospital’s
website, is her behavior unethical? What are Peggy’s options?
(continued)
spa81202_10_c10.indd 292 1/15/14 3:51 PM
The fact that all employees at some time or another may face
ethical dilemmas raises
the question of whether ethics can be taught and, by extension,
whether students can be
taught to respond to ethical dilemmas in thoughtful, rational
ways. Today, every health
services administration school and medical professional
curriculum includes courses in

ethics or requires discussion of ethical issues to be a part of
every class. Judging by the
results, however, the requirements have not made much
difference. In one study, 82% of
college alumni reported cheating while completing their
undergraduate education (Yard-
ley, Rodriguez, Bates, & Nelson, 2009). Emphasizing ethics in
school and expecting aca-
demic ethical behavior is important because there is a positive
link between academic
dishonesty and workplace cheating (Lucas & Friedrich, 2005).
Case Study: Everyday Ethics (continued)
• Suzanne works in the billing office of
an outpatient clinic. She discovers that
some physicians routinely copy and paste
electronic patient notes from previous
visits into the notes for current visits.
This can cause serious billing errors if the
cloned information is incorrect. Suzanne
expresses her concerns to the clinic man-
ager. Although the manager is aware of
potential inaccuracies in the bills and
understands the ramifications of filing

false claims, he tells Suzanne that it is
unlikely any errors will actually be discov-
ered. Is the decision of the clinic manager
unethical? Why or why not? If Suzanne
chooses not to pursue the issue any further and submits bills
that are occasionally
inaccurate, is she acting ethically? What are Suzanne’s options?
Are there any risks to
Suzanne should she decide to expose her employer’s billing
practices? Do the benefits
of blowing the whistle on clinic policy outweigh the risks?
• Cathy gets to work in the morning at the required hour and
spends about 20 minutes
having coffee with her friends before heading to her desk. Cathy
then spends the first
hour of her day checking her personal email, Facebook account,
and even online dating
sites. By about 10:00 a.m. she starts working, but she keeps
Facebook and her personal
email account open throughout the day. Is Cathy’s behavior
ethical or unethical? Is
there any “gray area” to what Cathy is doing? In other words, is
her behavior accept-
able? Would the answer be different if she is able to complete

her assigned tasks and
meet deadlines?
• Joan works in the communicable disease surveillance unit of
the county health depart-
ment. While reviewing reports of diseases, she notices an
increased incidence of Giar-
diasis (an intestinal illness caused by a microscopic parasite)
among workers at a local
restaurant owned by her father-in-law. Instead of alerting her
superiors, she phones
her father-in-law to tell him of this problem, which, if made
known to the public, could
affect the restaurant’s business. Is Joan’s behavior ethical or
unethical? Why or why
not? Would the answer be different if the outbreak of Giardiasis
had not been at a res-
taurant but at a business not involved in preparation of food for
sale to the public?
Fuse/Thinkstock
Taking long coffee breaks with coworkers
even though one manages to get one’s work
done is a behavior that falls into an ethical

“gray area.”
spa81202_10_c10.indd 293 1/15/14 3:51 PM
Yet, as it turns out, most people are taught values early in life.
If they do have a set of
values that includes honesty, fairness, and selflessness, being
around others who dismiss
their values out of self-interest will quickly erode them. Parents
will attest to changes that
take place when their teenage children begin paying more
attention to their peer group
than to them. Peer behavior affects cheating behavior. Students
are more likely to cheat if
they observe other students cheating (O’Rourke et al., 2010).
The same is likely to be true
for employees who observe unethical behavior by others in their
workplace. It becomes
really challenging when people learn that in order to “win”
(whether it is passing a test or
climbing the career ladder), they have to sacrifice their values

and ethics. In the mid-1990s,
Joseph Badaracco, an ethics professor at Harvard Business
School, did some research on
MBA graduates who had taken an ethics course at Harvard and
faced ethical dilemmas
in the business world. Half of these graduates worked for
companies with official ethics
programs. He wrote:
Corporate ethics programs, codes of conduct, mission
statements, hot lines,
and the like provided little help . . . the young managers
resolved the
dilemmas they faced largely on the basis of personal reflection
and indi-
vidual values, not through reliance on corporate credos,
company loyalty,
the exhortations of senior executives, philosophical principles,
or religious
reflection. (Badaracco & Webb, 1995, p. 9)
These managers had learned their personal values from their
family upbringing, not from
ethics courses.

To conclude, the values and ethics
ingrained in us from a very early age
by our parents and family are the
most reliable indicator of how we will
fare when ethically tested later in our
careers, no matter what those careers
are. However, even people with good
values and ethics can, when thrust
into morally and ethically want-
ing workplaces, behave unethically.
When told by your manager to fudge
some data or do something else that’s
wrong, do you comply in order to
remain in his or her good graces, or
do you stand your ground and risk
not only your prospects but also your
job? And when you are a few years
from retirement, do you succumb to
such demands or lose everything,
knowing that getting another job at
your age is highly unlikely? Thankfully, many HSOs have
developed an ethical system
and culture that encourages employees not only to behave
ethically, but also to want to

behave ethically. One way that organizations can teach,
encourage, and promote ethical
behavior is to create and model social responsibility and good
citizenship through their
policies. Corporate social responsibility policies will be covered
in the next section.
© LuckyBusiness/iStock/Thinkstock
It has been shown that peer behavior affects cheating
behavior, even early in life; students are more likely to
cheat if they observe other students cheating.
spa81202_10_c10.indd 294 1/15/14 3:51 PM
CHAPTER 10Section 10.5 Corporate Social Responsibility
10.5 Corporate Social Responsibility
Corporate social responsibility (CSR) is about the “human face”
of your organization—its
values and behaviors and how it aligns these with those of
stakeholders. Stakeholders of
an HSO include consumers, employees, purchasers, regulators

and accreditation groups,
suppliers, investors, communities, and society as a whole. All
HSOs work to improve and
maintain consumer and community health, and those needs
should be addressed as part
of the strategy formulation process.
CSR was conceptualized by Archie B. Carroll of the University
of Georgia as a pyramid
that represents various kinds of social responsibility (see Figure
10.1). Economic respon-
sibilities, at the base of the pyramid, are met by all well-
managed organizations; the ones
that are not well managed fail or are acquired. The economic
responsibility is to make as
much profit as possible in order to stay in business and grow
(which creates wealth and
jobs). For a nonprofit HSO, the economic responsibility is to
have sufficient net revenue
to stay in business in order to fulfill its mission. Then follow, in
order of importance,
legal, ethical, and philanthropic responsibilities. The pyramid is
useful because it not only
provides a structure for discussion but also demonstrates the
complexities of the topic—

different people perceive CSR to mean different things.
1. Consider the case of a highly profitable HSO that is awarding
its top management generous
compensation packages with guaranteed bonuses. Its rank-and-
file employees, however, do
not get raises or bonuses or otherwise realize the effects of such
impressive organizational
performance. In fact, the profit is achieved by keeping labor and
other costs down. Is this an
ethical issue? Do such organizations perceive it as an ethical
issue? Why or why not?
2. The role of unions has been to give a voice and some power
to employees as stakeholders.
Have they balanced the ethical issue? Do you see the rise in
power of unions as a bad thing
because they constrain what management can do and increase
labor costs? Discuss.
3. If an HSO did not have an ethics or compliance officer, to
whom would someone report a
breach of organizational ethics? What if the alleged perpetrator

were that person’s manager?
4. When are ethics and ethics standards especially important in
HSOs?
5. Organizations often require that their employees work
overtime or work long hours. If you
worked for such an HSO but had young children or elderly
relatives to care for, you might
find that your job would be jeopardized if you declined working
additional hours. Is it uneth-
ical for a manager or an organization to expect so much of
employees despite their needs as
parents or caregivers, or other life outside work? Discuss.
spa81202_10_c10.indd 295 1/15/14 3:51 PM
Figure 10.1: Corporate social responsibility pyramid
Adapted from Carroll, A. B. The pyramid of corporate social
responsibility: Toward the moral management of organizational

stakeholders.
Business Horizons, 34(4).
Corporate social responsibility is illustrated as a pyramid that
represents various kinds of social
responsibility.
Legal Responsibilities
HSOs are duty bound to honor the law and not break it in
whichever location they do busi-
ness. This is called their legal responsibilities. Many
regulations and laws are enacted to
protect the public and the public good, and there are a plethora
of federal government
agencies responsible for enforcing them, including the
following:
• Environmental Protection Agency for protecting the
environment
• Food and Drug Administration for ensuring the quality and
safe use of medical
products including drugs, biologics, medical and radiation-
emitting devices, and

special nutritional products (e.g., infant formulas)
• Internal Revenue Service for collecting taxes owed the federal
government
• National Labor Relations Board for minimizing unfair labor
practices and ideally
preventing them from happening
Philanthropic Responsibilities
Ethical Responsibilities
Legal Responsibilities
Economic Responsibilities
spa81202_10_c10.indd 296 1/15/14 3:51 PM
• Occupational Safety and Health Administration for ensuring
safety in the

workplace
• Securities and Exchange Commission for ensuring the proper
functioning of the
securities industry (online and stock exchanges) and the
integrity of financial
reporting for public companies
• The U.S. Consumer Product Safety Commission, while not a
government agency,
still has the authority to ensure the safety of consumer products
sold in the
United States.
• The U.S. Department of Health and Human Services regulates
many aspects of
healthcare services including health information privacy rights,
protection of
patients from discrimination in certain healthcare and social
service programs,
and human research protections.
• The U.S. Nuclear Regulatory Commission ensures the safe use
of radioactive
materials, such as those used in nuclear medicine, to protect

people and the
environment.
In addition, HSOs are subject to myriad legal
requirements found in state and local regulations.
These agencies came into being to enforce appro-
priate regulations and laws to prevent orga-
nizations from inflicting harm on particular
constituencies—patients, employees, stock and
bond holders, the environment, and so on. Orga-
nizations know about these laws and the conse-
quences for breaking them; it is their obligation to
be aware of the laws. Despite this, they may com-
mit both errors of commission (they know about
the laws but still try to circumvent them) and
omission (they are not aware of particular laws
or their consequences or do not agree with them).
But are these laws effective? Do they succeed in
changing the behavior that is at the root of much
malfeasance?
As far back as 1975, Christopher Stone (1975) of
the University of Southern California Law School
explored this very topic. He found maximiza-

tion of profits to be the dominant characteristic of corporations
and that, by and large,
corrective actions by the law in terms of fines and penalties for
wrongdoing had little
effect on changing behavior. They were perceived as a “cost of
doing business” so long
as they were a relatively small percentage of profits, so firms
simply paid them and then
went about business as usual. In 2003, HCA Inc. (formerly
known as Columbia/HCA
and HCA—The Healthcare Company) paid the largest fine in
history—$1.7 billion—for
a variety of unlawful practices, including false claims it
submitted to Medicare and other
federal health programs, cost report fraud, and the payment of
kickbacks to physicians
(U.S. Department of Justice, 2003).
© Everett Kennedy Brown/epa/Corbis Wire/Corbis
The Food and Drug Administration ensures
the quality and safe use of medical products.
spa81202_10_c10.indd 297 1/15/14 3:51 PM

To make penalties so severe as to jeopardize an organization’s
ability to continue to
provide services and possibly force it out of business would be
counterproductive and
perhaps viewed as overregulation. Stone made persuasive
arguments in his book that
the law, as part of the punishment for specific kinds of
wrongdoing, should insert into
the corporation a probation officer or trustee, answerable to the
court, to make sure that
procedures are changed and that the problem does not recur.
This has been the trend in
the settlement of large healthcare compliance violations. The
Office of Inspector General
(OIG) of the Department of Health and Human Services (HHS)
no longer lets offending
organizations just pay a fine. Instead, HHS requires corporate
integrity agreements that
include expensive postsettlement monitoring in exchange for
not being excluded from
participation in Medicare, Medicaid, or other federal healthcare

programs. A comprehen-
sive CIA typically lasts 5 years and includes requirements to
• hire a compliance officer/appoint a compliance committee;
• develop written standards and policies;
• implement a comprehensive employee training program;
• retain an independent review organization to conduct annual
reviews;
• establish a confidential disclosure program;
• restrict employment of ineligible persons;
• report overpayments, reportable events, and ongoing
investigations/
legal proceedings; and
• provide an implementation report and annual reports to OIG
on the sta-
tus of the entity’s compliance activities. (OIG, 2013b, para. 2)
It seems that laws and regulations play a necessary but far from
sufficient role in trying
to get organizations to behave more responsibly; so long as
HSOs can absorb the costs
incurred when they are indicted, in all likelihood they will
continue to do whatever they

want in pursuit of profit. The best solution, as Stone surmises,
is for organizations and
individuals to want to behave ethically. While a good number
do, that number is not
nearly large enough.
Ethical Responsibilities
Ethical behavior is especially critical in healthcare
organizations—the need for profits
does not excuse illegal, immoral, or unethical behavior
(Rolland, 2009). Notwithstanding
the ethics of individuals within an HSO, some organizations
may be reluctant to become
ethically responsible on their own. These HSOs are typically
pushed to do so by critics or
investors. Leaders in healthcare organizations accredited by The
Joint Commission are
specifically required to provide care, treatment, and services “in
accordance with licen-
sure requirements, laws, and rules and regulations” and “be
financially sustainable, serve
its community, and behave ethically” (Governance Institute,
2009, p. 15).

Ethical responsibilities refer to the general responsibility to do
the right thing and avoid
harming others. An example of ethical concerns that can arise
even in small HSOs involves
healthcare workers providing services to family members,
friends, and neighbors. Care-
givers must take precautions not to breach the patient–provider
relationship; patient
information must be kept private. Violation of this trust not
only infringes on patient
rights; it can also expose the HSO to legal ramifications.
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When HSO leaders design strategic and operational plans, they
must carefully examine
the interrelationship of cost, quality, and access to care.
Donabedian (1982) describes these
factors as the triad of healthcare. When costs are cut, for
example, quality as well as access
may be adversely affected. When access is limited, quality can

be compromised. Substan-
dard quality can result in higher healthcare costs and so on.
Socially responsible HSOs
consider the impact of their decisions on the community as a
whole, not just on the future
of the organization.
Corporations and researchers developed a new idea—instead of
being socially respon-
sible, why not be socially responsive? As long as an
organization was “responsive” to
the demands of society and tried to anticipate and meet these
demands, it did not have
to worry about being “responsible.” In other words, it would
have no obligation to be
moral or ethical. Corporate social responsiveness is primarily
pragmatic and perverts the
connection between ethics and strategy. It is simple, easy, and
wrongheaded (Freeman &
Gilbert, 1988, p. 90). It conveniently sidesteps the true notion
of responsibility.
Unless an organization’s culture and public declarations put a
priority on behaving ethi-
cally, individual managers and staff members may have a hard

time being true to their
values—swimming against the tide, so to speak. It is much
easier to “go along” if it is
okay with everyone else. In the rare instance when it is not
okay, that individual will
tender his or her resignation and join an organization whose
values are aligned with the
individual’s own.
Philanthropic Responsibilities
Philanthropic responsibilities encompass the organization’s
participation in activities
that promote human welfare and goodwill. These take the form
of donations of time or
money to any of a number of deserv-
ing causes, charities, and civic-
related projects. However, because
such activities may be voluntary, fail-
ure to be philanthropic is not consid-
ered unethical, and some do not even
consider it a responsibility (Trevino
& Nelson, 2007).

For hospitals to be tax-exempt chari-
table organizations, providing com-
munity benefits is required under
section 501(c)(3) of the Internal Rev-
enue Code. According to IRS reports
and the American Hospital Associa-
tion, in 2011 hospitals delivered more
than $41 billion of uncompensated
care to patients and uncounted bil-
lions more in community services
and programs designed to promote
health and wellbeing (AHA, 2013).
Pascal le Segretain/Sygma/Corbis
Many healthcare organizations have significant corporate
social responsibility programs, which enables them to
contribute to relief organizations such as Doctors Without
Borders.
spa81202_10_c10.indd 299 1/15/14 3:51 PM

Beyond what is required of tax-exempt organizations, many
HSOs feel it is their duty to
“give back” to society and to contribute where the need is
greatest. For example, in 2012 a
group of healthcare professionals and church representatives in
Yamhill County, Oregon
opened a free clinic. The intent was to meet the healthcare
needs of the many people in the
community lacking health insurance or with low socioeconomic
status. Although there is
a federally qualified health center in the county, the waiting
lists are long and a shortage of
primary care physicians makes it difficult for people even with
private health insurance to
get the services they need. The clinic, located in the First
Baptist Church in McMinnville,
Oregon, provides free medical care, social services, and
spiritual support to members of
the community (http://www.mcminnvillefreeclinic.org). The
clinic is open for 4 hours
two Saturdays a month and is staffed by volunteer physicians,
nurses, social workers,
mental health counselors, emergency medical technicians,
medical assistants, and others.

In addition to healthcare professionals donating their time, the
local hospital and other
HSOs help support the clinic with free supplies and donations.
ZoomCare, a for-profit network of neighborhood urgent care
clinics in Idaho, Oregon, and
Washington, formed a foundation for the purpose of providing
free access to healthcare
for low-income individuals and families. On the second
Wednesday of every month, the
ZoomCare Foundation supports free clinic appointments from
6:00 to 9:00 p.m. at one of
its Portland, Oregon clinics (ZoomCare, 2012).
In the United States, there is a tradition of philanthropy on the
part of wealthy individuals
and businesses. In support of this, the federal tax code includes
tax incentives to do so.
Many of the wealthiest individuals and families in the United
States are prolific givers.
Bill Gates tops the list, having given generously to the Bill &
Melinda Gates Foundation
over the years to help remedy the disparities in human health
between the developed and
developing world (Trevino & Nelson, 2007). Other forms of

philanthropy support the arts
(such as symphony orchestras, opera companies, and museums),
city beautification proj-
ects (such as commissioning a work of art or a garden),
scholarships for students, research
facilities at universities, hospitals, libraries, and so on.
Many high-profile healthcare organizations have significant
corporate social responsibil-
ity programs. For example, following the devastating 2010
earthquake in Haiti, Nashville,
Tennessee-based Hospital Corporation of America (HCA)
contributed $1 million to relief
organizations including the Red Cross and Doctors Without
Borders and also donated
needed medical supplies (“HCA Pledges,” 2010). Philanthropy
goes beyond “doing the
right thing” because it is something no one has a right to expect
but something for which
everyone is thankful.
Environmental Responsibilities
Externalities are costs (or benefits) to society that are not
reflected in the costs of an organi-

zation’s goods, services, or overall cost structure (Kuttner,
1999). Air and water pollution
is a simple example. Historically, it was cheaper for such
businesses to pollute than not to;
profits won out over the harm being done to society. The only
way to protect society was
spa81202_10_c10.indd 300 1/15/14 3:51 PM
http://www.mcminnvillefreeclinic.org
through regulation. Thus, despite the aversion that HSOs have
for regulations, not all are
bad; some force an ethical standard on organizations that
otherwise would be ignored.
Because environmental responsibilities were not included in the
pyramid shown in
Figure 10.1, one should not assume that they are “less
important” or of a “lower order”
of responsibility than philanthropic responsibilities. On the
contrary, they are a vital part

of corporate social responsibility and becoming more so with
each passing year. It is
estimated that each day U.S. hospitals and health systems
produce 14,000 tons of waste
(plastics, chemicals, paper, food, needles, packaging, and
electronics) (HHI, 2013). This
waste affects the environment and health of people in local
communities. Managing
this waste responsibly must be a priority for all HSOs.
A growing number of HSOs are becoming more environmentally
responsible—lead-
ing two scholars to label the phenomenon business’s new
megatrend (Lubin & Esty,
2010). In 2000, the Environmental Protection Agency (EPA)
and the American Hospital
Association partnered on a nationwide project to reduce harmful
hospital waste, includ-
ing a goal to virtually eliminate all mercury waste generated by
hospitals (EPA, 2000).
This “Hospitals for a Healthy Environment” project transitioned
into today’s “Practice
Greenhealth,” a nonprofit organization that provides training
and resources to assist
HSOs in creating better, safer, greener workplaces and

communities.
While organizations are motivated by current pressures and
existing laws to “clean up
after themselves” in the short term, they may resist making
investments in greener work-
places. Groups such as Practice Greenhealth and the Healthier
Hospital Initiative (HHI)
are showing HSOs how these investments pay off. The 2012
Milestone report from the
HHI involving more than 350 hospitals documents how reducing
the HSO’s environmen-
tal footprint lowered costs and improved community health
(HHI, 2013). While there are
no clear answers to solving our environmental problems,
becoming aware of the prob-
lems is a first step, followed closely by HSOs getting together
to try to mitigate them.
Sustainability
The concept of corporate sustainability has recently been
introduced into the lexicon of
organizational responsibilities. “Sustainability relates to the
maintenance and enhance-

ment of environmental, social and economic resources, in order
to meet the needs of
current and future generations” (Gilbert, Stevenson, Girardet, &
Stren, 1996, p. 11). The
characteristics of a sustainable HSO include the following
(Shrivastava & Kennelly, 2013):
• Minimizes the use of nonrenewable resources and seeks to use
renewable
resources at a rate that does not exceed the rate at which they
are renewed.
• Collaborates with other people and groups in the community
to meet social
needs such as individual health and well-being, nutrition,
education, and shelter.
• Manages its financial resources to effectively promote
environmental and social
sustainability.
spa81202_10_c10.indd 301 1/15/14 3:51 PM

CHAPTER 10Summary & Resources
1. In your opinion, what is the most pressing corporate
responsibility facing HSOs? Explain
your choice.
2. In your opinion, does the threat of criminal prosecution and
large financial fines for filing
false Medicare and Medicaid claims sufficiently deter HSOs
from this illegal practice?
Why or why not?
3. What are some particular advantages for HSOs that promote
human welfare and goodwill
through philanthropic activities, besides giving people a warm,
fuzzy feeling?
4. Based on your perception from reading the papers and
listening to the news over the past
few years, what has accelerated interest in environmental
responsibilities of corporations?
Has it been the growth of environmental “watchdogs,” investor
activism, or consumer

pressure? Discuss your thinking.
5. How do corporate social responsibilities, as outlined by
Archie B. Carroll, compare to the
concepts of corporate sustainability?
Summary & Resources
Chapter Summary
• Ethics is about how organizations meet the challenge of doing
the right thing
when it will cost more than they want to pay, which is a better
definition for
the business world than the traditional conception of ethics as a
philosophical
approach to complex moral dilemmas.
• Morality is knowing the difference between right and wrong
and choosing right.
Someone who is immoral also knows the difference but chooses
wrong. Values
are tenets that are important to individuals or groups and the
ways that govern
how they choose to live their lives.

• An unethical act is done with the full knowledge that it is
legally and morally
wrong. Unethical behavior consists of conduct undertaken to
benefit a person
or organization while knowingly—or being oblivious to the
possibility of—
harming others. Behavior is still considered unethical if the act
is wrongful,
whether or not it results in harm.
• Why do people behave unethically? In most instances, people
and organizations
who behave unethically are motivated by self-interest. Often
they justify such
behavior by claiming that others are getting away with it.
Organizations overly
focused on profits may justify unethical behaviors in pursuit of
those profits.
• Ethical issues arise whenever people are tempted to behave
unethically or not
do the “right” thing. When faced with an ethical issue, asking
yourself five ques-
tions might help you avoid making the wrong decision: (1) What

is in it for me?
(2) What decision or action would lead to the greatest good for
the greatest num-
ber? (3) What rules, policies, and social norms apply in this
situation? (4) What
are my obligations to others? (5) What will be the long-term
impact on me and on
important stakeholders?
spa81202_10_c10.indd 302 1/15/14 3:51 PM
• It is naïve to think that business ethics can be taught either in
the workplace or
in school. Research has shown that such courses make little if
any difference and
that one’s values and ethics are molded early on in life by one’s
parents, fam-
ily, church or religious group, and so on. Those values and
ethics turn out to be
the most reliable indicator of how we will fare when ethically
tested later in our

careers, no matter what those careers are. However, even people
with good val-
ues and ethics can, when thrust into morally and ethically
challenged cultures,
behave unethically.
• Corporate social responsibility (CSR) is the idea that business
has a duty to serve
society as well as its financial interests. CSR can be viewed as a
pyramid. At the
base is economic responsibility, which is in essence the
obligation of a corpora-
tion to make profits, provide jobs, and pay taxes. Organizations
are also duty
bound to honor the law.
• Ethical responsibilities encompass the more general
responsibility to do what’s
right and avoid doing undue harm to others. Philanthropic
responsibilities
involve the organization’s participation in activities that
promote human welfare
and goodwill. Many HSOs feel it is their duty to “give back” to
society and to
contribute in times of emergency or disaster, or to fund

community health and
social-wellbeing activities. Philanthropy goes beyond “doing
the right thing,”
because it is something no one has a right to expect but
something for which
everyone is thankful.
• Environmental responsibilities involve an organization
accepting responsibility
for and reducing the adverse environmental effects stemming
from its opera-
tions. While a growing number of HSOs are voluntarily
becoming more environ-
mentally responsible, others must be forced to do so by
regulations.
Web Resources
http://healthierhospitals.org
The Healthier Hospitals Initiative, a collaboration of world-
renowned industry experts,
has developed a suite of “how-to” guides for HSOs seeking to
reduce their environmental
footprint.
http://josephsoninstitute.org

The Josephson Institute of Ethics is a nonprofit organization
where you’ll find free articles
and book excerpts on business ethics topics, including ethics in
the public sector.
http://oig.hhs.gov/compliance/101/index.asp
The Office of Inspector General, U.S. Department of Health and
Human Services, hosts
a website that contains free educational resources to help
healthcare providers, practitio-
ners, and suppliers understand the healthcare fraud and abuse
laws and the consequences
of violating them.
spa81202_10_c10.indd 303 1/15/14 3:51 PM
http://healthierhospitals.org
http://josephsoninstitute.org
http://oig.hhs.gov/compliance/101/index.asp
http://oig.hhs.gov/compliance/corporate-integrity-
agreements/index.asp

Human Services, maintains
a website that describes corporate integrity agreements,
including sample agreements.
http://oig.hhs.gov/fraud/index.asp
Human Services, oversees
fraud investigations of false claims submitted to Medicare and
Medicaid. The 2003 corpo-
rate integrity agreement between the U.S. Department of Health
and Human Services and
HCA Inc. can be found on this site.
https://practicegreenhealth.org
Practice Greenhealth is a nonprofit organization that provides
training and resources to
assist HSOs in creating better, safer, greener workplaces and
communities.
http://www.ache.org
The ethics website of the American College of Healthcare
Executives contains a free Ethics
Toolkit, policy statements, and an ethics self-assessment.

http://www.ahia.org/index.php
The Association of Healthcare Internal Auditors is a network of
experienced healthcare
internal auditing professionals who come together to share
tools, knowledge, and insight
on how to assess and evaluate risk within a complex and
dynamic healthcare environment.
http://www.ama-assn.org/ama/pub/physician-resources/medical-
ethics.page?
The Ethics Group of the American Medical Association works
to improve patient care and
the health of the public by examining and promoting physician
professionalism. If you are
looking for guidance or insight on ethical issues in medicine
today, the AMA Ethics Group
offers relevant resources to help you, such as the Code of
Medical Ethics.
http://www.ama-assn.org/resources/doc/ethics/organizational-
ethics-2000.pdf
This link will take you to the publication Organizational Ethics
in Healthcare: Toward a Model
for Ethical Decision-making by Provider Organizations, in an
Institute for Ethics National

Working Group Report convened by the Institute for Ethics at
the American Medical
Association. It was published in June 2000.
http://www.apha.org/membergroups/primary/aphaspigwebsites/e
thics
The Ethics Special Primary Interest Group of the American
Public Health Association pro-
vides opportunities to connect and collaborate with colleagues
from a wide variety of
disciplines who are committed to advancing public health ethics
in practice, teaching, and
research.
http://www.corporate-sustainability.org
The website of the Alliance for Research on Corporate
Sustainability includes articles on
sustainability and links to other corporate sustainability
resources.
spa81202_10_c10.indd 304 1/15/14 3:51 PM
http://oig.hhs.gov/compliance/corporate-integrity-
agreements/index.asp
http://oig.hhs.gov/fraud/index.asp

https://practicegreenhealth.org
http://www.ache.org
http://www.ahia.org/index.php
http://www.ama-assn.org/ama/pub/physician-resources/medical-
ethics.page?
http://www.ama-assn.org/resources/doc/ethics/organizational-
ethics-2000.pdf
http://www.apha.org/membergroups/primary/aphaspigwebsites/e
thics
http://www.corporate-sustainability.org
Key Terms
bioethical issues Questions concerning
basic human values such as the rights to
life and health, the rightness or wrongness
of certain scientific developments such as
cloning and stem cell research, and soci-
ety’s responsibility for the life and health
of its members.
corporate integrity agreements Legal
arrangements between an HSO and the

U.S. Department of Health and Human
Services that require the HSO to undertake
defined obligations for a set time period
(usually 5 years).
corporate social responsibility (CSR)
The idea that business has a duty to serve
society as well as the financial interest of
stockholders.
corporate sustainability An organiza-
tion’s ability to maintain and enhance
environmental, social, and economic
resources in order to meet the needs of cur-
rent and future generations.
economic responsibility Making prof-
its so that the organization grows and
endures while providing jobs and paying
taxes.
environmental responsibilities An orga-
nization’s obligation to reduce the adverse
environmental effects stemming from its
operations.

ethical responsibilities Obligations that
encompass the more general responsibil-
ity to do the right thing and avoid doing
undue harm to others.
ethics The art and discipline of applying
principles and frameworks to analyze and
resolve complex moral dilemmas; how we
meet the challenge of doing the right thing
when it will cost more than we want to pay.
externalities Costs (or benefits) to society
not reflected in the costs of an organiza-
tion’s goods, services, or overall cost
structure.
legal responsibilities Where organiza-
tions are duty bound to honor the law (in
whichever location they do business) and
not break it.
philanthropic responsibilities Voluntary
acts, entailing company involvement in
causes and events that promote human

welfare and goodwill.
triad of healthcare The three factors of
cost, quality, and access to care.
values The tenets most important to peo-
ple and organizations and the ways that
govern how they choose to live their lives.
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