161Cultura LimitedSuperStockEthical Resource Allocati.docx

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Cultura Limited/SuperStock
Ethical Resource Allocation 8
Learning Objectives
1. Understand the need to make ethically defensible rationing
decisions in health care.
2. Analyze different methods of allocating health care
resources.
3. Describe the steps decision makers must take to achieve
moral authority through procedural justice.
4. Identify the ethical basis for setting utilization limits.
5. Understand the concept of medical futility.
162
CHAPTER 8
“How can a society or health plan meet population health care
needs fairly under resource limita-
tions?” (Daniels, 2008, p. vii). This compelling and
controversial question gives rise both to health
policy discussions and political debates. As enactment and
implementation of the Affordable Care

Act has proceeded, public and political discourse has become
heated whenever allocating scarce
resources—negatively labeled health care rationing—is
discussed. One common allegation was
that the ACA would severely impede Americans’ freedom of
choice in health care by empowering
expert panels (rather than treating clinicians) to make decisions
about the care individuals could
receive. A prominent political candidate went so far as to
suggest that “death panels” would be
set up by the government to “pull the plug on grandma” (cited
in Viebek, 2012), and this concept
remains prominent in the public’s mind. (Figure 8.1 shows how
Americans view the ACA.)
Figure 8.1: Negative views of ACA continue to outpace positive
Given what you know about the Affordable Care Act, do you
have a generally favorable or generally
unfavorable opinion of it? This was the question asked during a
June 2013 health tracking poll collected by the
Kaiser Family Foundation. Although the law is still under
development, why are more people opposed to it?
Source: Kaiser Family Foundation. (2013). Negative views of
ACA continue to outpace positive. Retrieved from ht
tp://kff.org/health-reform/poll-finding/kaiser-health
-tracking-poll-june-2013
The United States’ health system under the ACA does, in fact,
ration health care. However, this
phenomenon is not new or the result of a political agenda.
Health care rationing is an inevitable
feature of modern health care systems all over the world.
Whenever the need or demand for any
product or service outstrips its availability or supply, some form

of rationing will occur. In recent
decades, the most common rationing mechanism in U.S. health
care has been economic: Those
with the means or the third-party coverage to afford care went
to the front of the queue, while
poor and uninsured Americans were less likely to receive
needed care.
In areas other than health care, this aspect of modern
civilization is not usually morally trou-
bling or tragic. Consider the difference between someone
wanting a unique work of art and an
163
CHAPTER 8
organ transplant candidate. Both are seeking scarce and
valuable “products” for which demand is
greater than supply. Yet one is a luxury, while the other may
save someone’s life.
The ethical allocation of health care resources is likely to
become even more important in the
near future because two phenomena will increase demand for
health care services. First, the baby
boomer generation, those born between 1946 and 1964, will turn
65 at the rate of 10,000 per day
for the next 16 years (Pew, 2010). This enormous cohort, which
now constitutes about one fourth
of the entire population, will suffer from age-related health
issues in growing numbers. Because
baby boomers will be eligible for Medicare at age 65, they will
place additional stress on a health

care–funding mechanism that is often characterized by fiscal
distress. (Figure 8.2 shows the pro-
jected population growth of persons 65 and older.)
Figure 8.2: Elderly population growth in the United States,
1900–2040
Baby boomers are aging, which means the population of senior
citizens in the United States is growing
exponentially. This means the health care needs for the elderly
will also increase significantly. Is the
United States prepared to handle a shift in resources?
Source: U.S. Administration on Aging. Retrieved from ht
tp://aoa.gov/AoARoot/Aging_Statistics/future_growth/future_gr
owth.aspx
164
CHAPTER 8Section 8.1 The Moral Challenge of Resource
Allocation
The second increase in demand for health care services will
stem from changes introduced by the
ACA, which could increase third-party coverage through
Medicaid and commercial health insurance
by as many as 45 million individuals (APHA, 2013). The newly
insured are not likely to have a high
incidence of catastrophic health problems, but many of them
will have unmet health care needs,
which will increase demand and competition for services
(Decker, Kostova, Kenney, & Long, 2013).
Health care resource allocation must meet ethical standards and

be perceived as equitable in
order to have both moral authority and public legitimacy.
Health care administrators, who are
increasingly called upon to justify their decisions, will benefit
from pausing to consider the factors
that meet both of these criteria as demand exceeds both supply
and the nation’s willingness to
dedicate additional resources to health care.
In this chapter we will take a close look at ethical questions in
resource management and alloca-
tion. We will analyze some of the difficult decisions health care
administrators face, and we will
consider what tools or strategies are ethically and legally
required when setting priorities. We will
also look at lessons from history that might help prevent some
of the problems that befall this
aspect of health care management.
8.1 The Moral Challenge of Resource Allocation
Resource allocation in health care has been the subject of
extensive research and expertise. Resource allocation policy
analysis frequently
investigates organ transplants (Beauchamp & Chil-
dress, 2009). Although organ allocation decisions
and policies are logical and reasonable and are not
intended to discriminate against any individuals
in need of this precious resource, American organ
transplantation guidelines have ethically problematic
effects. For example, a patient who lives within the
allowable travel time for two transplant centers may
be wait-listed at both as long as the individual fulfills
the other requirements. A patient who lives else-
where, however, may only have access to one wait list
(Beauchamp & Childress, 2009). Conversely, someone

who has access to a private jet that is available at a
moment’s notice may qualify for the organ lists of
numerous transplant centers, as did billionaire Steve
Jobs when he received a liver transplant in Memphis,
Tennessee, despite living more than 2,000 miles away
in Palo Alto, California (Grady & Meier, 2009).
Apart from the potential consequences of not receiv-
ing scarce health care resources, what makes the pru-
dent and equitable allocation of such resources a moral
imperative? In Chapter 2, as well as in
subsequent chapters, we studied the special duties that the goals
of health care impose on health
care administrators—duties that do not arise for commercial
business managers. The objectives
of medicine, along with the special moral and human
importance of health and health care, make
the health care leader’s attention to ethical stewardship of
resources a fundamental priority.
Aphp-St Antoine-Garo/Phanie/SuperStock
Organ transplants are an area of medicine
that can pose serious ethical dilemmas for
health care workers.
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CHAPTER 8Section 8.2 Procedural Justice in Resource
Allocation Decisions
Fundamental Moral Questions in Resource Allocation
How can leaders make ethically defensible resource allocation
decisions while honoring moral

obligations to patients, organizations, and communities? To
determine the underlying obligations
for just resource allocation, two ethical questions must be
considered when deciding how to dis-
tribute services and benefits in health care organizations:
1. Procedural justice: What do ethics require of the processes
and policies that help deter-
mine resource allocation?
2. Distributive justice: When are health and health care
inequalities unjust and in need of
correction?
Both questions address the issue of setting priorities: How do
we align priorities with the ultimate
ends of medicine as well as democratic deliberation about
values? We will examine each of these
questions in the sections that follow.
Stop and Clarify: Rationing
The term rationing is often used to describe rules that unfairly
or unjustly limit access to a resource
that potential recipients deserve and to which they would
otherwise be entitled. Technically, how-
ever, rationing will occur whenever there is a product, benefit,
or service that is limited and for which
demand outstrips supply. Even simple methods for allocating a
scarce resource among those who
want it—such as a first-come, first-served policy—are rationing
processes, since they determine who
will receive the resource and who will not. Ideally, system-wide
rationing, also called macroallocation,
should be transparent and explicit in order to avoid allegations
of injustice or capriciousness. Histori-

cally, however, Americans have been reluctant to have explicit
discussions of “rationing,” particularly
in health care (Beauchamp & Childress). Health care rationing
typically occurs case by case, based on
the judgment of the treating physician; this type of rationing is
also called microallocation.
8.2 Procedural Justice in Resource
While there is a clear moral obligation for the leaders of health
care organizations to meet the health care needs of patients and
communities, this moral duty cannot, in many instances, be met
perfectly. It is often impossible to meet all of a population’s
genu-
ine health needs, because resources are too scarce or too
expensive. The moral question then
becomes “How can we meet the health care needs of our
patients and communities fairly and
justly when we cannot meet them all?” (Daniels, 2008, p. 13).
Chapter 1 explained that for the justice principle’s requirements
to be met, any formal procedures or
mechanisms by which a person attempts to resolve dilemmas
must themselves be fair and equita-
ble. Thus, health care administrators have a duty to craft
resource allocation policies and procedures
that maximize the chances of fair and equitable treatment. It is
important to note, however, that nei-
ther procedural nor distributive justice necessarily means that
everyone must be treated the same.
Modern conceptions of justice (based on Aristotle’s definition)
require people in similar situations
to be treated similarly and people in different situations to be
treated differently. This means

166
inequality is sometimes the fair and just outcome of ethical
resource allocation. For example, the
egalitarian moral philosopher John Rawls (1971) argued that it
would be fair to construct a system
that unequally distributes goods, but only if by doing so the
least well-off (the poor, for example)
would benefit disproportionately.
Another reason just processes are fundamental to health care
rationing is that those who make
such rules and impose them on others are held accountable by
their community and patient pop-
ulation. Next, we will examine methods for establishing fair
processes and determining who holds
the moral authority.
Stop and Clarify: Triage
In clinical settings, the term triage refers to “a process of
developing and using criteria for prioritiza-
tion” (Beauchamp & Childress, 2009, p. 279). Medical triage
weighs clinical considerations, in contrast
with rationing, which addresses social issues. For example,
hospital emergency departments do not
treat patients on a first-come, first-served basis, but rather give
priority to those in greatest need of
immediate care. Another example of triage occurs in battlefield
medicine, where resources are tradi-

tionally focused on those who are likely to survive if they
receive timely care, rather than those with
the most serious wounds (Beauchamp & Childress, 2009).
Crafting Fair Processes
The really difficult health care resource allocation decisions
arise when we can meet one person’s
health care needs only if we do not meet the needs of another
person (Daniels, 2008). Some will
argue that health care resource rationing decisions are best left
to the expertise of health care
practitioners, policy experts, and economists. Questions of
medical necessity, futility, and cost-
benefit analysis are empirical and the province of experts.
However, while enlisting health experts
is necessary for a just and equitable resource allocation policy,
it may not be sufficient. Relying
solely on health care professionals can lead to the development
of rules that are unresponsive
to the needs and values of communities
that will be most directly affected.
For these reasons, many commenta-
tors have agreed that any health care–
rationing scheme will need to earn its
moral legitimacy from a democratic
and deliberative process in which those
affected by the limiting rules will have
their voices heard along with the experts.
Four approaches to resource alloca-
tion are presented in the following text:
allocation by expert panels, community
consensus, lottery, and court order. This
list does not exhaust all the possibilities,

but it illustrates the wide variation in
approaches to procedural justice found
in contemporary U.S. health care.
Blend Images/SuperStock
Procedures must be in place to ensure the most ethical
distribution of limited health care resources.
167
Case Studies in Resource Allocation
A. Allocation by expert panels versus community consensus
Allocation by expert panels
In the 1980s Oregon was among the many states where tax
revenue lagged behind expenses. Increas-
ing numbers of Oregonians sought the health coverage provided
by the state through its Medicaid
program, and there was a growing public debate about how to
make the best use of limited state
resources for health care (Crawshaw, Garland, Hines, & Lobitz,
1985). As in most states, Medicaid was
the second most expensive line item in Oregon’s state budget
(Zoloth, 1999). In early 1987, faced with
a large budget shortfall, Oregon’s state legislature chose to
reduce or eliminate coverage for services
that, in the findings of an expert panel, were either too costly
for the amount of benefit received or
had very little benefit regardless of the cost.

One of the first benefits to be cut by the new plan was organ
and tissue transplants. Coby Howard,
the 7-year-old son of an unemployed Oregon woman, was
receiving the standard treatment for his
lymphocytic leukemia in 1987 when his illness worsened. The
only treatment with any prospect of
prolonging Coby’s life was a bone marrow transplant. Since
Coby was enrolled in Medicaid, the new
allocation policies meant that the transplant was no longer
covered, and his family could not afford
the $100,000 cost.
Media coverage brought the nation images of the adorable 7-
year-old asking for money on a street
corner to cover the operation, causing a public outcry against
what was characterized as a callous
bureaucratic policy. The media attention helped raise money for
Coby’s bone marrow transplant, but
contributions only amounted to $85,000 by the time Coby died
(Zoloth, 1999).
Press reports of other Medicaid patients who were denied
benefits raised more political rancor.
Although the state legislature attempted more expert and
professionally led Medicaid reforms to
address the furor that the Coby Howard case had stirred, there
remained enormous public distrust for
policy makers’ apparent “elitism, provider subjectivity, and
political exclusion,” and their “closed door
decision-making” (Zoloth, 1999, p. 34).
Allocation by community consensus
Oregon’s legislature decided to pay more attention to grassroots
public discourse in order to articulate
Oregonians’ health care values and benefit priorities. The

resulting democratic deliberation articu-
lated principles for resource allocation (Oberlander, Marmot, &
Jacobs, 2001).
Purpose Of Health Services:
1. The responsibility of government in providing health care
resources is to improve the
overall quality of life of people by acting within the limits of
available financial and other
resources.
2. Overall quality of life is a result of many factors, health
being only one of these. Others
include economic, political, cultural, environmental, aesthetic,
and spiritual aspects of a
person’s existence.
3. Health-related quality of life includes physical, mental,
social, cognitive, and self-care func-
tions, as well as a perception of pain and sense of well-being.
4. Allocations for health care have a claim on government
resources only to the extent that no
alternative use of these resources would produce a greater
increase in the overall quality of
life of people.
(continued)
168

Case Studies in Resource Allocation (continued)
5. Health care activities should be undertaken to increase the
length of life, the health-related
quality of life, or both, during a lifespan.
6. Quality of life should be one of the ethical standards when
allocating health care resources
involving insurance or government funds.
Why Priorities Need to be Set
7. Every person is entitled to receive adequate health care.
8. It is necessary to set priorities in health care, so long as
health care demands and needs
exceed society’s capacity, or willingness, to pay for them. Thus,
an “adequate” level of care
may be something less than “optimal” care.
How to Set Health Priorities
9. Setting priorities and allocating resources in health care
should be done explicitly and
openly, taking careful account of the values of a broad spectrum
of the Oregon populace.
Value judgments should be obtained in such a way that the
needs and concerns of minority
populations are not undervalued.
10. Both efficiency and equity should be considered in
allocating health care resources. Effi-
ciency means that the greatest amount of appropriate and
effective health benefits for the
greatest amount of persons are provided with a given amount of

money. Equity means that
all persons have an equal opportunity to receive available health
services.
11. Allocation of health resources should be based, in part, on a
scale of public attitudes that
quantifies the tradeoff between length of life and quality of life.
12. In general, a high priority for health care activity is one
where the personal and social
health benefits:costs ratio is high.
13. The values of the general public should guide planning
decisions that affect the allocation
of health care resources. As a rule, choices among available
alternative treatments should
be made by the patient, in consultation with health care
providers.
14. Planning or policy decisions in health care should rest on
value judgments made by the gen-
eral public and those who represent the public and on factual
judgments made by appropri-
ate experts.
15. Private decision makers, including third-party payers and
health care providers, have a
responsibility to oversee the allocation of health care resources
to assure their use is con-
sistent with the values of the general public.
After broad discussions that included detailed cost-benefit
analyses, a final list prioritizing Medicaid
benefits was given to the Oregon legislature in 1991. The
democratically derived list included 709 dif-
ferent health care benefits ranked in order of perceived value.

The process after that was relatively
simple: Starting with number one on the list, the projected cost
of each benefit was deducted from
the state’s Medicaid budget until funding ran out. The first 567
priorities on the citizens’ list became
the new Oregon Medicaid benefit package, and the cut-off point
in the list of services was adjusted to
fit the Medicaid budget in each budget cycle (Oberlander et al.,
2001). This unusual combination of
community consensus and technical expertise stabilized the
political environment for Oregon’s health
system but did not achieve cost savings and proved difficult to
enforce.
(continued)
169
Case Studies in Resource Allocation (continued)
Discussion Questions
1. What lessons does the Oregon Medicaid benefit struggle of
the 1980s and 1990s provide
health care organization leaders today?
2. What ethical protections are provided by a public,
transparent, deliberative process for
health policy making?
3. On a spectrum between strictly utilitarian cost-benefit

analyses on the one hand and popu-
lation surveys of what people value and desire on the other,
where do you think health
administrators should make policy?
B. Two other approaches: Allocation by lottery and by court
order
Allocation by lottery
Oregon continues to be an exception among U.S. states in its
willingness to make health care allocation
decisions explicit. In 2008 funds became available to make
Medicaid coverage available to an additional
10,000 Oregonians, but 90,000 were potentially eligible, so the
state again faced a wrenching deci-
sion (Baicker et al., 2013). The Oregon Health Authority
decided to make Medicaid coverage available
through a random drawing that determined who was eligible.
The resulting natural experiment has
garnered great interest in the health policy community (Baicker
et al., 2013), but the extent to which
Oregonians feel that it represents a fair approach to the
allocation of scarce resources is far from clear.
Allocation by court order
A recent example of an allocation mechanism comes from the
2013 case of Sarah Murnaghan, a
10-year-old cystic fibrosis patient awaiting a lung transplant. At
the time of her initial eligibility for the
list of prospective transplant patients, the national organization
responsible for transplant policy did
not make children younger than 12 eligible for the much larger
pool of potential transplants available to
adults (Goodnough, 2013). Her family, along with that of an 11-
year-old cystic fibrosis patient, brought
suit against the Department of Health and Human Services and

were successful: On June 10, 2013, a
federal judge ordered that the two children be placed on the
adult waiting list (Ladin & Hanto, 2013).
The national policy-making organization then voted to allow
expert review of children under 12 who
were waiting for lung transplants to determine whether they
might be eligible for the adult waiting
list. While clinical specialists voiced concern that nonmedical
intervention was dictating policy, the
expert review found Sarah to be a candidate for the adult
waiting list, and she received a double lung
transplant (Ladin & Hanto, 2013).
Discussion Questions
1. What ethical principles support the use of a lottery to
determine access to scarce health
care resources? What principles would argue against using a
lottery?
2. How would you evaluate the use of a court opinion to
determine health care resource allo-
cation? When do you think it would be appropriate?
Utilitarian,
economic analysis
Democratic,
value preferences
170
CHAPTER 8Section 8.3 Distributive Justice in Resource

8.3 Distributive Justice in Resource Allocation Decisions
The processes for developing resource allocation policies must
carry moral authority, but the policies themselves are also
assessed to determine whether they follow the ethical princi-
ples of distributive justice. The concept behind distributive
justice is that individuals receive
the appropriate type and quantity of goods and benefits
(Beauchamp & Childress, 2009; Rawls,
1971). This topic is among the most controversial in U.S. policy
and politics because of the conflict
between principles of free market capitalism and social justice.
In the 2012 presidential campaign,
for example, candidates disagreed openly on whether more
affluent Americans should provide
financial support for fellow citizens in need (Leonhardt, 2010).
Beauchamp and Childress (2009) list six principles that could
serve as guidance for meeting the
criteria of distributive justice:
1. To each person an equal share;
2. To each person according to need;
3. To each person according to effort;
4. To each person according to contribution;
5. To each person according to merit;
6. To each person according to free-market exchanges. (p. 243)
While these principles seem radically incompatible, we can find
examples of each in relevant sec-
tors. Social welfare benefits are distributed on the basis of need,
employment options on the basis
of merit, and public education on an equal basis, while many
medical goods are exchanged in the

free market, hourly wage employees are rewarded for effort, and
many retirement benefits reflect
employee contributions.
Setting Limits
To allocate health care resources in keeping with ethical
principles of distributive justice, health
care leaders must acknowledge the need to set limits. The
combination of high cost and escalat-
ing demand means that neither government-funded programs nor
employer-sponsored health
care benefits can extend to every possible treatment. Americans
often resist acknowledging these
facts for reasons that include concern that they will be denied
essential, lifesaving care.
In countries with strong traditions of social solidarity and
universal health care coverage, a reason-
able level of consensus mitigates the concern that one person
will be denied care that another
person would receive; for example, because he or she can afford
it. In the United States, there is
no assurance that if one person agrees to do without a health
care service, the savings will accrue
to the benefit of someone in greater need. The savings is, in
fact, likely to benefit the owners or
executives of the health plan, particularly in the case of
publicly traded companies.
171

Determining Medical Futility
The need to set limits in health care is not just a function of the
practical need to choose who will
receive access to resources when demand exceeds supply. Limit
setting is also complicated by a
fundamental tension between two competing ethical values in
medicine: “1) the desire to achieve
a valuable end, and 2) the desire not to waste time or resources
trying to accomplish something
that cannot be accomplished” (Trotter, 2007, p. 8). These two
values clash in cases of what is
sometimes termed “medical futility,” a
term that, as Beauchamp and Childress
(2009) note, has been used in such vary-
ing circumstances as to become nearly
meaningless. They suggest instead the
term “clinically nonbeneficial treatment”
(Beauchamp & Childress, 2009, p. 167),
but even that term implies a determi-
nation of clinical benefit that may not
be clear if the treatment has not been
administered.
Some of the most widely discussed ethi-
cal and legal cases in health care have
revolved around medical futility, partic-
ularly how to interpret its basic concept:
“These debates generally hinge on one
or both of the following: 1) parties in the
debate disagree about the goal or goals
that should serve as a standard for deter-
minations of futility; or 2) parties in the
debate disagree about what counts as ‘virtual certainty’ that an
action will fail to achieve a goal”
(Trotter, 1999, p. 528). Orienting the practice of health care
leadership to the goals of medicine

can help to clarify and resolve practical, ethical issues.
Determining the Legitimacy of Treatment Goals
Difficult questions regarding the futility of a clinical
intervention may be clarified with a consen-
sus regarding the legitimate goals of medicine. For example, a
treatment goal that is not aligned
with the objectives of health care may be illegitimate. Medical
futility cases can garner extensive
media coverage and give rise to heated political debate, as in
the case of Terri Schiavo. Whether
to continue or cease Schiavo’s artificial nutrition and hydration
following the determination that
she was in a persistent vegetative state raised issues regarding
principles such as reverence for
life, the credibility of medical diagnosis, and patients’ wishes
regarding life-prolonging treatment
(Veatch, 2005).
Creatas/Jupiterimages/Getty/Thinkstock
Setting limits in health care is important to prevent care
from extending past the point of effectiveness and to
prevent unnecessary testing and procedures.
172
Conflicts about medical futility may also arise in banal cases;
for example, those in which a patient
is seeking an excuse for a day away from work or a clinician

performs an unnecessary diagnostic
procedure to help defray the cost of the diagnostic equipment.
Apart from the question of futility,
some care that is inconsistent with the ethical goals of medical
practice can have grave conse-
quences. Several instances of repeated unnecessary heart
surgeries, for example, have come to
light in recent years, imposing not only illegitimate costs but
serious risk of health consequences
on the surgeons’ unfortunate patients (Abelson & Cresswell,
2012). Other famous cases of health
care interventions at odds with the legitimate goals of medicine
include the notorious Tuske-
gee syphilis study, the U.S. experiments on Guatemalans
(McNeil, 2010), and the universally con-
demned actions of Nazi doctors during World War II
(Beauchamp & Childress, 2009).
Measuring the Likelihood of Treatment Success
In other instances, disagreement over a proposed treatment’s
medical futility is not related to
the legitimacy of the goal; rather, the disagreement centers on
how to measure virtual certainty
that the treatment will fail to achieve its (medically appropriate)
goal. If a proposed treatment
has a 50% chance of working, should it be implemented? In
such a case many people would feel
uncertain about taking the action and would want to know more
about the proposed treatment.
What if the chances of a proposed treatment’s success were 1 in
100? Most would agree that a
99% probability of failure would more than adequately fulfill
the certainty that an action will fail at
achieving the intended goal criterion for medical futility. In
such a case would ethics require that

medical treatment be withheld? The sheer mathematical
probability, while helpful in determining
whether the medical intervention should be undertaken, will not
conclusively determine medical
futility. In fact, while a 99% risk of failure in attaining the goal
may be determinative in some cases,
in others it may be a risk a person is willing to take.
Other Factors Affecting Medical Futility
In addition to statistical probability, two other factors help
medical practitioners make ethically
prudent decisions about medical futility. One is the value of the
goal to be achieved. Some goals
are demonstrably weightier than others. For example, while
Coby Howard’s medical prospects
were bleak whether or not he received the bone marrow
transplant, this last chance for survival
was widely viewed as medically necessary despite the low
chances for its success. There may
be instances, however, when a treatment such as Coby’s is set
aside in favor of other important
competing interests, including the health and lives of other
patients who might benefit from treat-
ments that Medicaid would be able to cover if it refused a low-
chance transplant. Despite the
priceless nature of potentially lifesaving treatment, other factors
come into play when making
difficult health care–rationing decisions.
A second factor relevant to decisions of medical futility is the
cost, time, and resources necessary
to undertake the action. While economics related to a proposed
treatment should not determine
whether the treatment is medically futile, neither should they be
irrelevant. Resources dedicated

to one intervention are not available for another, so the effect is
the same whether the choice is
financial or categorical (Beauchamp & Childress, 2009).
173
CHAPTER 8
Ethics in Focus: Medical Futility
According to Griffin Trotter, a physician and ethicist, treatment
is medically futile whenever there is
certainty that it will fail to achieve its goal for the patient. The
conditions necessary for there to be
medical futility are listed below:
1. There is a goal;
2. There is an action or activity aimed at achieving this goal;
and
3. There is virtual certainty that the action will fail.
Although the definition of medical futility is straightforward,
many of the most vehement debates
in medical ethics revolve around the interpretations of this
concept. This is for at least two reasons
according to Trotter. First, there is a disagreement about what
the goal or goals should be for certain
controversial treatments. For example, some will argue that
prolonging the life of someone in a per-
manent coma is not one of the legitimate goals of medicine, and
perhaps even morally and profes-
sionally wrong. For others however, this is seen as perfectly
within the legitimate ends of medical
practice, and perhaps even the correct moral and professional

action to take.
The second disagreement is about what counts as “virtual
certainty” for purposes of determining
futility. For example, those who tend to have a “glass is half
full” outlook will always choose the 1%
chance for success, and therefore there is no “virtual certainty”
that treatment will fail. Meanwhile,
for people who have a “glass is half empty” outlook, a 99%
probability of failure is considered “virtu-
ally certain” and thus is determined to be a futile undertaking.
8.4 Chapter Highlights
This chapter dealt with the often difficult and sometimes tragic
decisions that must be made in
health care administration due to limited resources for which
demand exceeds supply. Policy
makers have been heavily criticized for making rationing
decisions behind closed doors without
accountability. Policies and decisions made without the input of
the population they are intended
to serve run the risk of being unresponsive to the needs of the
people and therefore illegitimate.
• How can health care administrators and policy makers enhance
the contribution of
democratic, deliberative processes for ethically defensible
health care rationing?
• How can health care leaders make ethically defensible
resource allocation decisions while
observing their moral obligations to patients, their
organizations, and their communities?
• How do procedural justice, distributive justice, and priority
setting help answer the fun-

damental question of moral stewardship in resource allocation?
• How can limits be set for the use of scarce resources in
medicine, particularly with
regard to the thorny issue of medical futility?
The concepts presented in this chapter provide the necessary
context for the extended discus-
sion of justice in Chapter 9, “Health Disparities and Social
Justice.”
Section 8.4 Chapter Highlights
174
CHAPTER 8Section 8.4 Chapter Highlights
Case Study: Resource Allocation in an Influenza Outbreak
Reports of influenza outbreaks in Asia have been increasing for
the past 6 weeks. It is now late Decem-
ber. Influenza outbreaks have been reported throughout the
United States, including states near
yours. Anytown, where you are a health system manager, is
seeing what may be the early effects of
an outbreak. For the purposes of this case study, we will assume
there are two types of drugs that
are effective in treating or preventing influenza: vaccines,
which provide immunity in most cases but
must be administered before the individual is exposed to the
disease, and antivirals, which reduce the
severity and duration of flu symptoms when given to sick
patients.

Your health system is reporting increases in emergency and
physician office visits for symptoms con-
sistent with influenza. School and business absences begin to
rise. Health care, law enforcement, and
other emergency personnel are calling in sick. Health system
staff members with duties in critical
areas such as information technology, direct patient care, and
the clinical laboratory are asking for
time off to care for ill family members.
The threat of an epidemic could not come at a worse time for
your health system. State appropriations
have been cut in response to a 2-year revenue shortfall, and a
growing immigrant population is plac-
ing new demands on your primary care clinic. Medicaid
managed care organizations have approached
you yet again with the threat of reducing your clinic
reimbursement rates.
In response to media accounts of illness, there is a sharp
increase in local demand for vaccine, but it
will not be available for at least another month. Even then, the
vaccine distribution protocol indicates
that it will be given first to priority groups until enough is
available for the entire population. Several of
your colleagues have expressed concern about being sued by
those who are denied immediate access
to vaccines. Local pharmacies have run out of antiviral
medications, and stories are circulating that
physicians have been prescribing antiviral medications more
broadly. Anytown has received a small
allocation of antivirals from a Centers for Disease Control and
Prevention stockpile distributed by the
state Department for Public Health, and public concern over the
way in which the antiviral medica-
tions will be used is increasing. (Based in part on California

Department of Health Services, Pandemic
Influenza and Public Health Law Training, version 1.2 [June 26,
2006].)
How would you use ethical principles to identify issues that you
as a health system manager must
address? For example:
1. How would you respond to someone who thought the only
fair way to allocate antiviral
medications was to give them out to the people who requested
them on a first-come, first-
served basis?
2. Of the four ways of allocating medical resources that are
discussed in this chapter (expert,
consensus, lottery, and judicial), which do you think is best
suited to the type of emergency
described in the case study, and why?
3. What ethical principles would support a decision to share all
available information with the
media as soon as possible? What principles would suggest
withholding some information,
at least in the short term?
4. Think of another kind of emergency where the supply of
resources is greater than the
demand, such as a natural disaster. What do you know about
how those resources are allo-
cated and who is making the relevant decisions?
175

CHAPTER 8Section 8.4 Chapter Highlights
Critical Thinking and Discussion Questions
1. The Affordable Care Act and the increase in Medicare
enrollment caused by the aging
baby boom generation are likely to increase demand for health
care resources substan-
tially in the near future. What procedures for policy making
would you recommend to
develop rules for access to health care? Does one of the four
examples in this chapter
(expert panels, community consensus, lottery, or court order)
appear to be a good fit, or
would you suggest something else? Defend your choice of
policy-making procedure.
2. Having selected a procedure for policy making, what factors
would you recommend
taking into consideration to make decisions that are consistent
with distributive justice?
Should these factors be articulated explicitly to the public so
people know what level
of access to expect? Should they be shared only with health care
providers so they can
apply and discuss them with individual patients? Is there
another option that balances
the interests of the public with those of individual patients?
3. How would you weigh the following factors when ethically
deciding how to fund a type
of treatment: (a) the cost benefit or cost effectiveness; (b) the
actual cost of treatment
(for example, a very effective treatment that is extremely
expensive); (c) the likelihood
that the treatment will succeed with most patients; (d) the

likelihood it will succeed with
a small group of patients; (e) the needs of patients who have
experienced significant
social or economic disadvantage; and (f) the political popularity
of the treatment?
4. Your health system serves a community in which there is a
high rate of diabetes among
the low-income population. If you increase services for diabetes
education, you will
generate a net financial loss because such services are not
reimbursed adequately.
What ethical factors would enter into your recommendation
about increasing diabetes
education?
5. Should Americans who have the resources to enroll in
multiple organ transplant wait-
ing lists (which means they can get to the site very quickly) be
allowed to do so? Does it
matter whether there is a shortage of suitable transplant
candidates in a region? What
ethical principles would you apply to this analysis?
6. The neurosurgery clinic that you manage has a long waiting
list for nonurgent appoint-
ments. The husband of your hospital’s CEO has been having
back pain, and the CEO’s
administrative assistant calls to ask whether you can schedule
him to be seen the next
morning. If you do so, the patients scheduled for the afternoon
will all have to wait at
least 30 minutes longer than they otherwise would. Recalling
the basic ethical principles
of health care, how would you handle this decision?

7. Back in the clinic that you manage, you discover there is a
shortage of a critical medical
item that is needed in nearly every neurosurgical procedure.
Your patients represent a
broad range of health conditions, races, ethnicities, educational
and professional accom-
plishments, lifestyles, immigration statuses, and criminal
records. Describe and defend
your preferred way of allocating the item that is in short supply,
assuming that no law or
institutional policy governs the matter.
176
CHAPTER 8
Key Terms
macroallocation The processes performed
and decisions made to determine how limited
resources are distributed in large groups or
populations.
medical futility The near certainty that an
action taken in pursuit of a goal will fail. Deter-
minations of medical futility are often difficult
because interpretations vary regarding the
goals to be achieved, their relative value, what
constitutes “virtual certainty,” and the trade-
offs necessary.
microallocation The processes performed
and decisions made to determine how limited
resources are distributed in individual cases or

small groups.
rationing Allocation of scarce resources;
rationing is necessary and unavoidable when-
ever the need or demand for any product or
service outstrips the supply.
triage A system that indicates which patients
have priority for treatment. Priority setting
varies depending on the type of health care
setting and the circumstances (such as routine
versus disaster).
Section 8.4 Chapter Highlights
© 2016 Laureate Education, Inc. Page 1 of 3
RWRCOEL Professional Dispositions
Professional Conduct
1. Ethical and Legal Conduct: The candidate demonstrates
professionalism
as outlined by legal and ethical guidelines within the
profession.
a. Demonstrates professional behavior as described in Walden’s
Code of

Conduct
b. Demonstrates ethical behavior as described by professional
codes of
ethics
2. Professional Obligations: The candidate meets professional
obligations in
a responsible manner.
a. Maintains a strong record of attendance and punctuality,
communicating in
advance the need for any absence or delay in meeting
performance
expectations
b. Prepares for professional obligations and meets expected
deadlines
3. Professional Appearance and Demeanor: The candidate
demonstrates
professional appearance and behaviors in the educational
setting.

a. Maintains appropriate appearance through professional dress
and
grooming
b. Approaches teaching and learning tasks with initiative,
confidence, and
energy
c. Exhibits composure and self-control
d. Demonstrates flexibility in adapting to changing
circumstances and
student needs
Professional Qualities
4. Professional Development/Growth: The candidate engages in
ongoing
professional development and growth to improve professional
practice.
a. Engages in continuous learning through participation in
professional
development opportunities
b. Applies new ideas to professional practice based on existing
data,
reflection, and intellectual curiosity

c. Engages in ongoing critical reflection of personal
performance to improve
professional practice
5. Advocacy: The candidate advocates for fairness, equity, and
social change
in the learning environment.
a. Displays empathy, fairness, persistence, problem-solving
skills, and
appropriate risk-taking actions on behalf of others
b. Advocates for the social, emotional, physical, educational,
behavioral, and
basic needs of others
c. Promotes positive social change to enhance educational
opportunities and
promote student learning
6. Equity: The candidate demonstrates culturally responsive
practices to
create an inclusive learning environment that is respectful of
diverse
cultures, values, and beliefs of others.
a. Displays equitable treatment of others

i. Sets high expectations for all learners
ii. Treats others with respect and dignity
iii. Recognizes individual differences in teaching and learning
b. Engages in culturally responsive practices in interactions
with students,
families, colleagues, and communities
c. Creates learning environments that are inclusive; free of bias
and
discrimination and respectful of diverse cultures, values, and
beliefs
d. Engages families and other stakeholders in planning for
individual success
Collaboration
7. Collaboration: The candidate works in collaboration with
others to improve
student learning and advance the profession.
a. Builds partnerships and fosters relationships with
stakeholders to improve

student learning and advance the profession
b. Collaborates with students, families, colleagues, and the
community to
promote positive social change
c. Uses technology to enhance collaboration, strengthen
partnerships, and
foster relationships with others to improve teaching and
learning
Communication
8. Communication: The candidate uses effective verbal,
nonverbal, and
technological communication techniques to foster active
inquiry, improve
collaboration, and create positive interactions in the learning
environment.
a. Actively and thoughtfully listens to others
b. Adjusts communication to meet the needs of individual
learners and
changing circumstances
c. Asks probing, thoughtful questions to elicit meaningful
responses

d. Conveys ideas in multiple ways using a professional tone
e. Acknowledges and respects ideas and/or feelings of others;
makes others
feel welcome, valued, and appreciated in their communications
f. Utilizes technological tools to facilitate communication to
improve student
learning and relationships with others
Assignment: Hidden Curriculum Essay
For this Assignment, you will write 3-pages essay and explore
hidden curriculum within your current learning environment.
Use APA style (6th Ed.)
To help you with your paper answer the following questions to
below.
· Defines hidden curriculum in your own words.
· Explains two examples from your classroom practice that
represent hidden curriculum. One example should represent
a negative implication of hidden curriculum, and the other
a positive implication of hidden curriculum.
· Explains one action you will take to repair the effects
of negativehidden curriculum. Provide a rationale for your
action using specific references to the Learning Resources.
· Explains one example to include in your classroom that
represents positivehidden curriculum. Provide a rationale for
your action using specific references to the Learning Resources.
· Explains how you will use hidden curriculum to meet the
diverse learning needs of the students in your classroom.
Include an explanation as to how your actions relate to at least

one of the RWRCOEL Professional Dispositions, Diversity
Proficiencies, and Technology Proficiencies
Reference
Use helpful resource to reference your paper
RWRCOEL Diversity Proficiencies
RWRCOEL Professional Dispositions
RWRCOEL Technology Proficiencies
Part III
Jose Luis Pelaez/Iconica/Getty Images
Resource Allocation and
Community Responsibilities
in Health Care
Chapter 7
Expenditures, Cost Containment, and
Quality of Care
Chapter 8
Ethical Resource Allocation
Chapter 9
Health Disparities and Social Justice
The ideal of the health care system is to maximize patient
access to high-quality care at a cost that is afford-
able to individuals as well as to society. Each of these elements
has ethical components and is driven and

constrained by the legal environment in which health care is
planned, provided, paid for, and evaluated. The
chapters in Part III explore different facets of the
access/quality/costs challenge on the level of both indi-
vidual patients and society. We also analyze failures in
attempting to equitably reconcile the tension among
these distinct but clearly interrelated facets in a real world of
limited resources but infinite need.
139
iStockphoto/Thinkstock
Expenditures, Cost
Containment, and Quality
of Care
7
Learning Objectives
1. Investigate the need for cost containment to ensure a
sustainable health care system.
2. Explore the depth and breadth of inefficiency, waste, and cost
overruns in American health care.
3. Outline the legal methods used to control, monitor, and
remedy cost and quality problems in American
health care today.
4. Identify the ways in which the Affordable Care Act of 2010
attempts to resolve the ethical and legal

problems associated with cost containment and quality
assurance.
5. Examine process improvement methods used by health care
facilities that are designed to eliminate
redundancy and waste.
140
CHAPTER 7
During the past century or so, medical care in the United States
has shifted from individual doctor-
patient interactions, typically within an office setting, to
interactions in health care facilities that
continue to grow ever larger and more complex. Modern
American health care has become more
highly specialized, technology centered, and fragmented—a
phenomenon that has been antici-
pated since the mid-19th century. The English sociologist
Herbert Spencer (2004) observed that
as society increases in complexity, so do its social institutions.
The bureaucratic explosion within
health care, therefore, seems less a symptom of inefficiency and
institutionalized excess and more
a part of the necessary, long-term development of specialized
sectors within advanced industrial-
ized society (Toulmin, 1990).
Today early 20th-century forecasts seem to aptly describe the
current state of affairs. Physicians
increasingly work in large, complex medical centers and
practice settings and tend to see their
scope of professional discretion minimized and finitely defined.

The fear of going beyond those
clear limits frequently causes physicians to practice medicine
defensively, sometimes forgoing the
ends of patient care to do so. Practicing under such constraints
has its advantages but can also
distract physicians from their professional duties. For many
patients, medical care has become
akin to conveyer-belt production. Continuity of care once meant
having the same health care pro-
fessionals in a lifelong relationship with the patient. In the new
era of medicine, care is more likely
to involve patients being scuttled between sometimes dozens of
different caregivers, very few of
whom will even remember the patient’s name or, in some cases,
even meet with the patient one
on one. As a result, patients may become suspicious of their
caretakers, sometimes even assum-
ing an adversarial stance where once there would have been
warm acceptance (Phillips & Benner,
1994).
Most health care administrators and managers enter the
profession with clear priorities on
patient care but soon feel incessant economic and regulatory
pressures to protect their institu-
tion’s finances and public image. This is certainly part of any
good health care administrator’s
job description, but too often the loyalty to this side of the job
wins out over the ultimate aim of
health care—caring for patients. “No margin, no mission” has
become a popular refrain among
modern health care leaders, and the statement is certainly true.
However, what often gets misun-
derstood in this pithy slogan is that margin should exist only to
further the mission. No mission,
no health care organization.

In this chapter we will look at how modern American health
care has succumbed to bureaucracy
and how the resulting unsustainable costs have not translated
into proportionately better quality
of care. The chapter will also show how the constraints of
institutionalization upon the moral prac-
tice of medicine should be a major concern for health care
professionals. Finally, we will examine
what American society has done to address this major issue of
ethical concern.
141
CHAPTER 7Section 7.1 The Current State of Affairs
7.1 The Current State of Affairs
American health care continues to be at the leading edge of
discovery and innovation. How-ever, in order to get a realistic
picture of the current state of affairs, its performance must be
examined in comparison to that of other health care systems.
That is when the paradoxi-
cal success-failure story of American health care comes to light.
In this section we will investigate
how American health care compares to that of other countries
and consider the impact of expen-
ditures on quality of care.
Do Expenditures Equate to Quality of Care?
The United States spends approximately 20% of its
annual gross domestic product on health care, four
times the average expenditure of other countries,
and twice as much as the next biggest spender (Davis,

Schoen, & Stremikis, 2010). Such expenditures could
be viewed as a good thing. For example, they could
be evidence of the importance that American society
places on a human right to the best health care avail-
able or on the value and necessity of good health for
everyone. Paradoxically, the United States also remains
the only leading industrial nation that chooses not to
guarantee health care for all its citizens (Davis et al.,
2010). This fact does not mean that such a large expen-
diture is not well spent or that individuals in the United
States do not receive a commensurately greater ben-
efit than anyone else. Combined with other indicators,
however, it becomes apparent that American health
care dollars are not well spent, nor do these dollars
afford individuals a greater benefit for this massive
investment. When compared to five other developed
nations (Canada, the United Kingdom, New Zealand,
Australia, and Germany), the United States comes in
first in health care dollars spent per person, but last on
nearly every other criterion, including access, patient
safety, efficiency, and equity (Furrow, Greaney, John-
son, Jost, & Schwartz, 2008). The United States also
lags behind the five other comparison countries in adopting
information technology and quality-
improvement systems and policies—despite the fact that many
of these innovations are American
(Furrow et al., 2008). (See Figure 7.1 for a comparison of health
care expenditures as a percentage
of the GDP of five countries.)
Cusp/SuperStock
The United States spends four times what
the average prosperous country spends on
health care. However, studies have shown
that this extra spending does not lead to

superior care.
142
Figure 7.1: Health care expenditures as a percentage of GDP,
selected countries,
1961–2009
Over the past 50 years, the amount of money countries spend on
health care for their citizens has
consistently risen. However, the increase is exceptionally high
in the United States. What do you think
has caused the country to spend so much of its GDP on health
care?
Source: Mauersberger, B. (2012). Tracking employment-based
health benefits in changing times. Chart. Retrieved from ht
tp://www.bls.gov/opub/cwc
/cm20120125ar01p1.htm
Additionally, many Americans lack access even to basic health
care, while much of the remainder
of the population has spotty or insufficient health care coverage
(Davis et al., 2010; Emanuel,
2008). (See Figure 7.2 for a breakdown of the number of
Americans without health insurance.)
Rampant expenditures continually threaten to wreak economic
havoc, and exorbitant administra-
tive costs further emphasize the unsustainability of the current
system. Consumer satisfaction
continues to dwindle as trust erodes amidst constant news
reports of health care professionals

and organizations committing malfeasance. Meanwhile, health
care professionals have resorted
to practicing medicine behind a defensive barricade against
malpractice lawsuits from one side
and economic pressures from the other.
143
Figure 7.2: Americans under age 65 without health insurance
coverage,
January–June 2011
A significant number of Americans are currently without health
insurance, with the largest group being
men between the ages of 25 and 34. This figure shows the
percentage of persons in the United States
under age 65 without health insurance coverage at the time of
the interview, broken down by age group
and sex.
Source: CDC, 2011. ht
tp://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201112.htm
Do Standards Ensure Quality?
One of the ways that health care has attempted to identify and
resolve areas of low performance
and compromised quality is to develop and promote practice
guidelines. Professional organiza-
tions review the medical literature, undertake empirical surveys
of current standards of care, and
debate among their members and the public what minimal
standards of acceptable care and pro-

fessional performance should be expected from their field.
These standards of acceptable care
can be influential as public assurances of minimal competencies
and thresholds of quality. They
also can be used to help determine when negligence has taken
place. Because standards of care
are important for everyday clinical practice, practitioners must
keep up-to-date about them. Why,
then, do some ethicists and health care practitioners question
the morality of using professional
standards?
When managed care organizations (MCOs), including health
maintenance organizations and
preferred provider organizations, first gained prominence in the
American health care system,
many felt that the guidelines proposed by various medical
entities for clinical care amounted to
little more than an institutionalized means to limit treatment
and maximize profit for providers
and insurers (La Puma, 1995). In some instances, compliance
with specific practice guidelines
144
influenced physician compensation, thereby creating financial
incentives and disincentives for
physicians’ clinical decisions. For example, physicians
participating in a specific MCO might receive
a bonus at the end of the year if reduced patient use of
expensive medical services contributed to
a positive financial bottom line for the MCO that year (Miles,

2005). (See Figure 7.3 for a break-
down of medical care participants by plan type.)
Figure 7.3: Percentage of medical care participants by plan
type, private
industry, 2010
Sixty-two percent of medical care participants receive insurance
through preferred provider
organizations (PPO). Health maintenance organizations were the
second most popular plan. What do
you think creates the interest in PPOs?
/cm20120125ar01p1.htm
Stop and Clarify: Managed Care Organizations
Managed care organizations take many different forms. The
common characteristic of all MCOs, how-
ever, is that they combine the insurer and provider functions
into the same corporate (for-profit or
nonprofit) structure. This combination of functions creates a
financial incentive for the MCO and its
participating physicians to deliver care as efficiently and cost-
effectively as possible. MCOs have been
developed in reaction to the traditional third-party payment
system, in which the health insurer, the
patient, and the provider all had their own, often inconsistent,
incentives—an inconsistency that inevi-
tably resulted in escalating health care costs.
(continued)

145
Another potential problem with practice guidelines is that they
may be applied inflexibly. There
is no guarantee that strict adherence will always result in better
care. For example, a physician
following earlier guidelines that recommended annual
mammography screening for older women
might subject patients to radiation and the risk of false positive
results, leading to unnecessary
and even harmful anxiety, follow-up testing, or even aggressive
surgical intervention—all without
a meaningful corresponding benefit for the patient in terms of
longer and enhanced quality of life.
Medical practice requires careful discernment and
discrimination; it takes many years for a prac-
titioner to develop genuine expertise. Professionals in any field
know the value of guidelines but
also realize that true experts know when to judiciously
disregard them. On the other hand, when
standards of practice were vague and totally individualistic,
physicians often tended to provide
costly and unnecessary care either under the guise of
“thoughtful, careful medical practice” (La
Puma, 1995) or in accordance with the ethical principle of
respect for autonomy since patients
requested it. This total discretion in treatment resulted in
spiraling health care costs, waste, and
often less than optimal health care outcomes. It was not long
before the public began asking for
a different kind of accountability to be sought through MCOs

and for a way to distinguish good
health care from bad.
Stop and Clarify: Managed Care Organizations (continued)
One type of MCO is the health maintenance organization
(HMO). In return for the prepayment of a
prospectively set monthly or annual premium, a closed-panel
HMO provides comprehensive health
services to an enrolled patient through physicians who are either
employees of the HMO (staff model)
or employees of a private physician group that contracts with
the HMO (group model). In a closed-
panel HMO, the patient must receive care from the HMO’s
employed or contracted physicians; other-
wise they must pay a non-HMO physician directly out of
pocket. In an open-panel HMO (independent
practice association), medical care is provided by privately
practicing physicians who, in addition to
treating their other patients and billing insurance companies for
that treatment, also participate in the
HMO’s network. When a network physician treats a patient who
is enrolled in the independent prac-
tice association, the association pays that physician for the
treatment according to a predetermined
methodology that varies considerably among independent
practice associations.
The other main type of MCO is the preferred provider
organization (PPO). Like the HMO, a PPO prom-
ises comprehensive coverage to enrolled patients in return for a
monthly or annual prepaid premium.
The PPO contracts with a network of physicians and other
providers (such as hospitals) to serve its
patients; to participate in the PPO, the provider must agree in
advance to accept an amount of pay-

ment for specific services that the PPO is willing to pay. In
return for receiving the provider’s best price,
the PPO makes the provider “preferred” by informing patients
that the full cost of their care will only
be covered if the patient uses one of the preferred providers.
Otherwise, the patient will have to pay
all or part of the provider’s fee directly out of pocket.
In a point of service plan, the patient gets to choose at the time
of service whether to use a pro-
vider inside or outside the patient’s MCO. The patient then
accepts the financial consequences of that
choice.
146
What Defines Quality?
Though many would agree that quality is not mere compliance
with practice guidelines, it is much
more difficult to come up with a positive definition of the term.
Furthermore, quality is inherently
difficult to measure.
To help answer the question of what constitutes quality, the
Rand Corporation conducted its Med-
ical Outcomes Study in the 1990s (La Puma, 1995). Health
outcomes are defined as “a change in
the health status of an individual, group, or population that is
attributable to a planned interven-
tion or series of interventions, regardless of whether such an
intervention was intended to change
health status” (Definition of Wellness, n.d.) In this study, Rand

researchers came up with seven dif-
ferent components: financial accessibility, organizational
accessibility, continuity, comprehensive-
ness, coordination, intrapersonal accountability, and technical
accountability (Rand Corporation,
1990). This enumeration of factors constituting health outcomes
is useful because it conforms
to the common belief that health care assessments should focus
on both the technical as well
as the interpersonal dimensions of care. The Rand project built
upon the seminal work of Avedis
Donabedian, a leader in the theory of health care assessment.
Donabedian proposed that tech-
nical care is “the application of the science and technology of
medicine, and of the other health
sciences, to the management of a personal health problem”
(1982, p. 4). He added that the “man-
agement of the social and psychological interaction between
client and practitioner” (1982) is also
a part of technical care, although it makes up the art of
medicine facet of the term. To define what
quality in technical care is, Donabedian (1980) acknowledged:
At the very least, the quality of technical care consists in the
application of medi-
cal science and technology in a manner that maximizes the
benefits to health
without correspondingly increasing its risks. The degree of
quality is, therefore,
the extent to which the care provided is expected to achieve the
more favorable
balance of risks and benefits.
For Donabedian, quality in health care’s interpersonal
dimensions was more difficult to define. Yet
together with excellence in the medical-technical aspects,

quality of care is “that kind of care which
is expected to maximize an inclusive measure of patient
welfare, after one has taken account of
the balance of expected gains and losses that attend the process
of care in all its parts” (Donabe-
dian, 1980). In other words, measuring quality of care must
ultimately focus on the impact of care
on patients’ quality of life.
Donabedian’s definition of quality remains one of the earliest
and most influential holistic attempts
to clarify what is now more commonly referred to as health
outcomes—that is, the actual impact
of care on patients’ quality of life. Later definitions—such as
the IOM’s “degree to which health
services for individuals and populations increase the likelihood
of desired health outcomes and
are consistent with current professional knowledge” (IOM,
1990)—offer a clearer focus on desired
results but also incorporate the idea that professional standards
should still play a role in deciding
what constitutes quality care. This is because achieving a
desired result may not be indicative of
the quality of the care received. It may be a coincidence that
things turned out the way the patient
or health care provider wanted; the result may have been good
despite a poor quality of care; or
the result, while desired or even good, may still pale in
comparison to the result that might have
occurred had better-quality care been rendered. The IOM
definition also judges care that does
not conform to current professional knowledge to be of poor
quality, despite the health outcomes

147
CHAPTER 7Section 7.2 Causes of Overspending
obtained. For instance, while unnecessary care that causes harm
is obviously of low quality, it is
not clear that unnecessary or even futile care will be considered
low quality if the patient or clini-
cian are pleased with the results. However, under the IOM
definition, these types of wasteful and
potentially harmful therapies are excluded from the definition
of quality care, regardless of their
outcome.
As the foregoing discussion indicates, the concepts of quality of
care and quality of life are related,
but not synonymous. The former is concerned primarily with
professionally determined measures
of the process or inputs of service provision. Quality of life, by
contrast, is concerned, from the
patient’s perspective, with the impact of the process or inputs of
care on the patient’s function-
ing and enjoyment. So, for instance, a surgery performed
according to state-of-the-art standards
and techniques might be judged by professionals to constitute
excellent quality of care, but the
quality of life evaluation would be poor if, despite the excellent
process, the surgery resulted in
pain, other side effects, and poor function on the part of the
patient. The quality of care/quality of
life distinction is illustrated by the old saying “The operation
was a success, but the patient died.”
7.2 Causes of Overspending
The value of health care is a function of comparing the quality

of life achieved for patients by providing them with good
quality of care with the costs of achieving desired quality of life
outcomes. Value can be enhanced by improving outcomes; that
is, the impact of care on
patients’ quality of life. Value may also be enhanced by
controlling the costs incurred in pursuing
desired outcomes. Hence, we must consider the question of
health care costs.
Overspending on health care threatens Americans’ and health
care organizations’ financial well-
being, as well as the sustainability of any health care delivery
and payment model. Apart from
these very important economic concerns, overspending is a
moral issue, due to the central impor-
tance of health care to human well-being. The fact that the
United States currently does not pos-
sess the resources to meet the demand for beneficial health care
means that some people do not
receive the care they need and want. This constitutes an ethical
tragedy that wasteful spending,
greed, inefficiencies, and fraud exacerbate by making it less
likely that the United States can maxi-
mize the health benefits and minimize the harms for its people.
In this section, we will analyze the
most prevalent and important causes of overspending in our
health care system and investigate
the different legal avenues developed to keep costs at
acceptable levels. (See Figure 7.4 for a
breakdown of U.S. health care expenditures.)
148

Figure 7.4: Percentage of United States health care expenditures
by source, 2008
The majority of the health care expenditures in the United
States came from private insurance
companies (34%). Medicare and Medicaid combined also
comprised 34% of the nation’s health care
expenditures. The remaining came from other public sources
and out-of-pocket payments.
/cm20120125ar01p1.htm
Differing Regional Practices and Medical Cultures
In his 2009 New Yorker essay, “What a Texas Town Can Teach
Us About Health Care,” Dr. Atul
Gawande told a story of two similar counties in Texas. Both
counties rest on the border with
Mexico and have very similar patient demographics and
socioeconomic characteristics. In Hidalgo
County, where the city of McAllen sits nestled between the
rugged deserts of Mexico and Texas
vacation destinations on the Gulf of Mexico, Medicare spends
more per capita than nearly any-
where else in the country—about $15,000 per enrollee in 2006
(Gawande, 2009; Dartmouth Insti-
tute for Health Policy & Clinical Practice & Commonwealth
Fund, 2010).
There is nothing particular about El Paso County, which lies
farther up the Rio Grande, that would
lead observers to expect Medicare spending there to be much
different than in McAllen. However,

while Medicare enrollee patient outcomes were virtually the
same in El Paso as they were in McAl-
len, Medicare spent only half as much in El Paso to achieve
them (Gawande, 2009).
Wondering what might account for such a poor return on
investment in McAllen versus other
parts of the country, Gawande went to Texas to investigate. He
did not find health care execu-
tives, professionals, and organizations willfully defrauding
Medicare. He did not find large-scale
unscrupulous behavior or collusion to run up costs or other
nefarious conduct. What he found
149
Fuse/Thinkstock
In studying two border cities in Texas, researchers found
that overspending on health care was due to a culture of
overtreatment and lack of effective caregiver assessments.
was a culture in health care organiza-
tions and among professionals to test,
treat, and spend at a demonstrably
higher rate than elsewhere. Without
comparative effectiveness assessments
to keep them in check, relatively insular
systems like McAllen tend to overtreat
patients and hence waste scarce health
care resources and tax dollars.

It is unclear whether communities such
as McAllen outspend other communities
in an effort to provide the best possible
patient care or if its clinicians have suc-
cumbed to the financial incentives that
overtreatment and waste provide in fee-
for-service health care. What is clear is
that the unnecessary care rendered in
places such as McAllen means there is
less to spend on necessary care every-
where. Besides overtreating some people at the expense of
providing the basic minimum of care
to others, unnecessary treatment can also present unnecessary
risks to patients.
Web Field Trip: Statistical Comparisons
The purpose of this exercise is to demonstrate and emphasize to
students the wide variations among
different parts of the United States in health care practices, and
therefore in health expenditures, and
to have students think about potential explanations for these
wide variations.
1. Locate a reputable online source for comparative statistical
data related to health care costs
or health outcomes (see Table 7.1 for sample sources to help get
you started).
2. Choose one index of health care cost or quality represented in
the data sets you choose.
This can be anything for which data are available (try to find
data collected no more than 6
years ago), and need not be from the United States. Some
possible indices include:

• Median Medicare costs per enrollee for specific regions in the
United States.
• What percentage of the total population accounts for 50% of
federal health care
reimbursements?
• Infant death rate by populations
• Rate of emergency department use as primary and preventive
care outlets
• Patient perceptions of quality care
3. Compare the measurement rates of total, average, and median
incidence outcomes with
the same figures from a different geographic location, patient
population, or time period. If
you cannot find a valid comparison group, then look at different
statistics for comparison.
4. Are the statistics noticeably different between the two
groups? Do they, for instance, differ
by more than you would have expected?
(continued)
150
Fraud and Abuse
In addition to regional differences in how health care
professionals manage particular patient
cases, another reason for the exorbitant cost of health care in
the United States is inappropriate
billing conduct by health care organizations and practitioners.

In any health care financing system,
competing financial incentives and disincentives will always
create a potential for fraud and abuse.
In some of the more public and egregious cases, major health
care organizations have engaged
in broad, systematic fraud. For example, some hospital
corporations have billed Medicare and
Medicaid for patient services that were never provided, and a
few notorious nursing homes have
billed those government programs for the care of patients long
after those patients had died.
Web Field Trip: Statistical Comparisons (continued)
5. If the statistics do not differ appreciably, look for a starker
contrast in health care costs or
quality measures elsewhere.
6. If the statistics differ by an amount that surprises you,
attempt to find plausible explanations
that would account for these differences by investigating the
statistical reports and articles
that accompany the results. If these do not account for the
difference, do an Internet search
(on PubMed, for example) for journal articles that attempt to
explain the statistical variation
you found (or an explanation of a variation that is close enough
to the phenomenon you
have witnessed that its findings might be generalizable to your
findings).
7. Write a short (less than one page) paper that explains the
variation you found. Write your
essay with an eye toward identifying possible ethical issues. For
example, does the variation
amount to a justice issue? If it is found that the statistical

variation cannot be explained by
observed differences between the two groups, can it be
explained by differential access,
disparate treatment, or illegitimate discrimination? Use the
ethics framework from Chapter
1 to help you organize your essay and spot the potential ethical
issues.
Table 7.1: Sample online sources for comparative statistical
data related to
health care cost and quality
Title Source
“Data, Statistics & Tools” Agency for Health Care Research and
Quality
ht tp://www.ahrq.gov
“Health-Care Costs: A State-by-State
Comparison”
Wall Street Journal
ht tp://www.wsj.com
“Snapshots: Health Care Spending in the
United States & Selected OECD Countries”
Kaiser Family Foundation
ht tp://www.kff.org
“Interactive Map: Health Care Costs Vary
Widely Across U.S.”
NBC News
ht tp://www.nbcnews.com

“Why American Health-Care Costs So Much” Washington Post
ht tp://www.washingtonpost.com
“The Dartmouth Atlas of Health Care” Dartmouth, the
Commonwealth Fund
ht tp://www.dartmouthatlas.org
151
Associated Press/LM Otero
W. Rick Copeland, director of the Medicaid Fraud Control
Unit of the Office of the Texas Attorney General, outlines
a medical fraud scheme. The FBI estimates that medical
fraud costs upward of $80 billion per year.
Such conduct removes finite financial
resources (more than $80 billion per
year, according to Federal Bureau of
Investigation estimates (FBI, n.d.) from
a system that could put those resources
to much better use purchasing care for
individuals otherwise lacking access to
health services. To counter this sort of
fraudulent and abusive provider con-
duct, the United States has compiled an
array of statutes, regulations, and case
decisions. The three main legal avenues
for combating health care fraud and
abuse are discussed in the sections that
follow.

Stark Law on Physician Self-Referral
The Ethics in Patient Referrals Act, or
Stark law, governs physician referrals
for Medicare- and Medicaid-reimbursed
services in which the physician (or close family member) has a
financial conflict of interest. Faced
with increasing evidence that health care practitioners were
referring patients to other businesses
owned or co-owned by the referring physician or a close family
member, Representative Fortney
Stark introduced a bill that would make these “self-referrals”
illegal. Self-dealing by physicians had
become common and was a major source of unnecessary testing
and treatment, as well as adding
risk for patients. The law covers 11 designated health services;
namely, laboratory tests, physical
or occupational therapy, imaging services, radiation treatment,
home health care, pharmaceuti-
cals, medical devices and supplies, and hospital services. The
Stark law provides a nearly complete
ban on any Medicare or Medicaid payments for services falling
under the statute in which the
referring physician has a close, personal financial stake.
While some of the other fraud and abuse laws require that the
offending conduct be knowing
and willful, the Stark law does not require knowledge,
unlawfulness, or intent to defraud. To help
providers distinguish prospectively between illegal and
permissible conduct, the Centers for Medi-
care and Medicaid Services has published a nonexhaustive list
of “safe harbors” illustrating per-
missible conduct.
For more information on the Stark law, including the text of the

act and detailed commentary, see
ht tp://www.starklaw.org.
152
False Claims
Estimates from 2009 by the Centers for Medicare and Medicaid
Services put the bill for improper
payments of false claims at more than $24 billion. False claims
are claims submitted to the govern-
ment for payment that is not really deserved by the provider
submitting the claim, usually because
the service for which the claim was made was not actually
provided to an eligible beneficiary.
Several federal and state false claim statutes make the knowing
and willful submission of a false
claim or statement to Medicare or a state Medicaid program a
felony (Medicare and Medicaid
Antifraud and Abuse Act, 1977). Submission of multiple false
claims by a business (a health care
organization or an independent contractor) engaged in interstate
commerce may additionally be
prosecuted under the Racketeer Influenced and Corrupt
Organizations statute commonly used
against organized crime families (RICO, 1970). Violation of the
Civil False Claims Act carries a pen-
alty from between $5,500 to $11,000 per claim plus damages
equaling three times the amount of
the false claim or claims (Civil False Claims Act, 1863).
Further, the Medicare and Medicaid Anti-

fraud and Abuse statute, in addition to prohibiting false claims
and representations, forbids know-
ing and willful solicitation or receipt of any illegal
remunerations, including kickbacks, bribes, or
unlawful rebates, as well as self-referrals (Medicare and
Medicaid Antifraud and Abuse Act, 1977).
States have adopted their own versions of the federal Civil
False Claims Act. The Civil False Claims
Act allows states to recover damages plus a bonus in a federal
fraud case involving Medicaid
claims if the state’s law facilitates the bringing of qui tam
actions by the public. Qui tam actions
allow private citizen whistleblowers, suing either individually
or through the state, to bring legal
actions against entities and individuals who break a federal law.
The qui tam initiators (“relators”)
are allowed to keep a portion of the damages, with the rest
going to the state. Qui tam legal
actions are meant to facilitate the policing of false claims by
providing financial incentives for
those citizens who witness the illegal conduct to blow the
whistle.
While overpayments by Medicare and Medicaid for false claims
result from federal and state
crimes that can be seen as outright theft, a few well-meaning
health care professionals character-
ize their intentional overbilling or falsified claims as motivated
by their devotion to the moral prac-
tice of medicine (Jost, Davies, & Gosfield, 2007). Given that
standardized rates of reimbursement
by Medicare and Medicaid often fail to cover the treatment
expenses of enrollees and claims
for rendered care are sometimes denied by Medicare fiscal
intermediaries and state Medicaid

Stop and Clarify: Reporting Fraud and Abuse
There are several ways to report fraud and abuse.
Medicare Fraud
Call Medicare at 1-800-633-4227 or search for “reporting fraud”
at ht tp://www.medicare.gov.
Another site with reporting information is Stop Medicare Fraud
(ht tp://www.stopmedicarefraud.gov).
Stark Law Violations
Report a Stark violation to the Office of the Inspector General
(OIG). Go to the OIG website (ht tps://
oig.hhs.gov) and select “Report Fraud” to report a Stark
violation online. Or call the OIG hotline at
1-800-447-8477. The OIG accepts any tips on Stark violations.
153
CHAPTER 7Section 7.3 Cost Containment
agencies, some health care professionals knowingly falsify
reimbursement claims in order to
receive the reimbursements to which these physicians feel they
are otherwise entitled. It is diffi-
cult to say what percentage of false claims are motivated by
greed and amount to theft, and what
percentage amounts to a health care practitioner trying to
maximize reimbursement to make ends
meet and provide continuing service to Medicare and Medicaid

patients who could not otherwise
afford their services.
Anti-kickback Provisions
A third approach to trying to prevent fraud and abuse is found
in the Medicare anti-kickback
statute, 42 United States Code section 1320a–1327b(b). This
statute makes it a criminal offense
to knowingly and willfully offer, pay, solicit, or receive any
remuneration to induce or reward refer-
rals of items or services reimbursable by a federal health care
program. Certain “safe harbors” of
permissible activity are defined in 42 Code of Federal
Regulations section 1001.952. Violation of
this law subjects the payer or recipient of the illicit kickback to
criminal penalties consisting of
fines and/or imprisonment.
7.3 Cost Containment
Escalating health care expenditures pose a variety of ethical and
legal challenges when they are the result of legitimate services,
but especially when they are the product of fraudulent or
abusive conduct by providers. Thus, it is a social imperative to
contain those escalating costs
so that finite resources can be used more efficiently and
equitably.
Modern American biomedicine, like every other major segment
of the economy, is very much
concerned with keeping costs at manageable levels and
providing reasonable returns on invest-
ment in addition to maintaining a financially sustainable
business model. However, the successes
of some of the other major sectors of the economy in keeping

costs within acceptable parameters
have thus far proved unattainable in health care. The enormous
amount of waste and inefficiency
in the American medical system; excessive spending on
services, drugs, and technologies that
provide little or no additional benefit over less-expensive
treatments; unnecessary care; and lav-
ish compensation in some health care professional sectors all
contribute to the runaway costs in
medicine.
Each of these factors provides tremendous financial rewards for
various parties who then have
enormous incentives to continue the status quo. For example,
physicians are often rewarded
financially for the quantity of medical services they render. The
typically high incomes earned
by physicians also make possible one of the most powerful and
well organized special-interest
lobbies in American history (Starr, 1982). While American
physicians and health care executives
are generally highly motivated to have a well-functioning and
sustainable health care system that
provides the best quality care, these groups can also find it
difficult to rally behind cost-control
reforms when doing so would likely mean cutting their incomes.
Medical practices also are often immune to the factors found in
most markets that keep prices
for services and salaries in check. Although private commercial
sectors are usually good at self-
controlling their costs, the American health care system is by no
means a typical market system.
American medicine is set up so that the costs of medical
services and products are often hidden
from consumers and the health care staff that render them.

Consumers are typically removed
from purchasing decisions, although it is reasonable to expect
the cost of a proposed treatment
154
to be discussed with the patient as part of the informed consent
process. That rarely happens,
however—due at least in part to the pervasive myth, when the
direct payment comes from an
insurer or other third-party payer, that the service is somehow
“free of charge” to patients. The
third-party payment system conspires to thwart whatever the
invisible hand of market econom-
ics otherwise might do to reduce waste and inefficiency, since
reducing costs likely would impact
provider incomes negatively (Hoffman, 2010).
American employers, who often end up paying for increasing
insurance costs or services directly,
have belatedly become a major force for cost containment, as
exemplified by the Washington
Business Group on Health. Until recently, though, employers
generally opted to pass rising costs
on to the American workforce in the form of lower wages,
smaller cost-of-living raises, and flat
hiring trends.
All of these factors contribute to a cost-containment problem
that has proved relatively immune
to large-scale reform. Yet relatively recent changes have given
some health policy experts hope.

The biggest change involves the Affordable Care Act.
The Affordable Care Act
The Patient Protection and Affordable Care Act (ACA) of 2010
contains several provisions aimed at
health care cost containment. First, the ACA is aimed at curbing
the incentives that encourage work-
ers and employers to use health insurance policies as a means to
grow tax-free investments. The
so-called Cadillac tax is a means to address the fact that, while
the federal government taxes employ-
ees’ earnings, it does not tax the money used by employers or
unions to pay for their insurance.
This policy has the unintended result of allowing employees to
use health insurance as a shelter
to avoid paying income taxes on a large
piece of their compensation package.
Not only does the federal government
lose tax revenue that it would otherwise
receive were it not for this provision, but
the advantage gets disproportionately
bigger the wealthier the wage earner is.
This means that bigger health insurance
tax breaks go to help the richest people
buy health insurance, which in turn
encourages more unnecessary health
care spending. Over time, the Cadillac
tax included in the ACA will attempt to
counteract the negative effects of this
subsidy. In theory, taking away the use of
health insurance as a means to compen-
sate workers tax-free should both con-
trol health insurance costs and increase
wages for American workers.

Another provision in the ACA concerns formation of insurance
exchanges at the state level. For
Americans who lack employer-provided insurance and do not
qualify for government insurance
programs, the opportunity to shop around for health insurance
in a new system with more con-
trols against abuse comes close to approximating a competitive
market environment. For possibly
Associated Press/Jacquelyn Martin
In 2010 President Barack Obama signed the Affordable
Care Act into law, which contains several provisions aimed
at health care cost containment.
155
the first time, Americans will be given the tools to become the
kind of rational consumers that
market theory envisions.
The ACA will also create the Independent Payment Advisory
Board (IPAB), which will bring some
needed oversight to Medicare spending. Partly in response to
Gawande’s 2009 story on the dis-
proportionately high Medicare and Medicaid spending in
McAllen, Texas, a nonpartisan group of
experts will be convened and tasked with improving health care
quality and efficiency while con-
trolling costs for Medicare beneficiaries. ACA advocates hope
that the IPAB, assuming it survives
significant legal challenges to Congress’s delegation of law-

making authority to a private body,
will be more successful in controlling costs that the Medicare
Payment Advisory Commission has
been.
Possibly the most important cost-control measure that the ACA
introduces will be a new agency
formed to fund research on the comparative effectiveness of
different clinical approaches to par-
ticular medical problems. The Patient-Centered Outcomes
Research Institute (PCORI) is funded
by a new fee imposed on health insurers and plan sponsors. The
PCORI will be an essential part of
a market approach because it will sponsor the production of
data needed to discriminate between
effective and ineffective treatments, along with their relative
costs. It has been difficult to use
the small amount of existing data to effectively reduce waste
and unnecessary care, even when
damning information about the relative costs, risks, and benefits
of popular modes of treatment,
drugs, and technologies surfaces. Powerful interest groups and
skillful public relations have often
proved more effective at perpetuating the underperforming
treatments than the research has
been at changing practice habits. However, the research
sponsored by the PCORI and the fact that
the ACA forbids health insurers from using PCORI research to
restrict health insurance benefits are
expected to aid health care consumers and physicians make
more informed decisions about what
treatments work. For treatments that fall within the gray area of
discretion, the cost-comparison
data is intended to help consumers and physicians make finer
distinctions and better health care
choices.

Utilization Review
Another important mechanism in cost containment is utilization
review. Utilization review strate-
gies include various methods used by health care organizations
to verify the necessity and appro-
priateness of services provided to patients and the expenditures
related to their care. Utilization
review has been an everyday part of health care administration
since it was mandated by the
Medicare law as a prerequisite for reimbursement.
Many health care organizations and larger physician practices
have internal utilization review pro-
cesses, sometimes known as case management. While unable to
unilaterally change a patient’s
treatment plan or order a patient’s discharge or transfer, these
internal processes play a vital role
in the ethical management and financial stewardship of the
organization. This strategy for ensur-
ing medically necessary and appropriate care and limiting the
risk of waste is included in the work
of quality-improvement organizations. These set benchmarks for
the reduction of inappropriate
care and investigate potential deviations. Quality-improvement
organizations have the authority
to deny Medicare payment for unnecessary or inappropriate
claims (Showalter, 2012).
An additional cost-containment strategy contained in the ACA
is the creation of Accountable Care
Organizations (ACOs). The ACA authorizes the Centers for
Medicare and Medicaid Services to con-
tract with ACOs in the Medicare Shared Savings Program.
ACOs will be coordinated groups of health
care providers who join together to provide comprehensive

health care to Medicare beneficiaries
156
CHAPTER 7Section 7.4 Current Quality-Improvement Methods
in return for bundled payments that financially incentivize the
various provider participants to
deliver cost-effective health care as efficiently as possible. It
remains to be seen whether ACOs are
any more successful in this endeavor than MCOs have been in
the past.
7.4 Current Quality-Improvement Methods
While the strategies we have investigated in this chapter have
dealt with the issue of cost containment, some strategies are
more specifically aimed at maintaining and improving the
quality of care. In this section, we will take a closer look at
some of these strategies.
Error Reporting and Surveillance
Since the publication of the 1999 IOM report To Err Is Human
(see Chapter 6), numerous initia-
tives for error tracking have been instituted through regulatory
and professional oversight. The
Joint Commission enforces a sentinel event policy that
encourages the reporting of errors to the
Joint Commission, as well as to patients. A sentinel event is any
“unexpected occurrence involv-
ing death or severe physical or psychological injury, or the risk
thereof” (Joint Commission, 2013).
The Joint Commission’s sentinel event policy requires that
patients—and when appropriate, their
families—be informed about sentinel events, as well as

whenever “outcomes differ significantly
from the anticipated outcomes” (Joint Commission, 2013).
Lean Methodologies
Apart from complying with requirements imposed by influential
accreditation agencies, lean
methodologies taught in popular management texts have also
proved influential in promoting
health care management cultures and policies that foster quality
improvement. Although there
is a general lack of empirical comparative effectiveness
research on many of these business
management–improvement methods, they have spawned some
welcomed attention to con-
tinuing quality improvement and waste and cost reduction. The
lean methodologies common in
today’s health care systems are based on reducing waste
originating from practices of overpro-
duction (that is, overproducing inventory that goes to waste);
motion and transportation inef-
ficiencies (when health care workers spend too much time and
energy moving themselves from
place to place as part of their job); static inventory (having too
much inventory on hand); and any
processes or costs that do not produce patient benefit or some
other recognized value to the
organization (Rubino, Esparza, & Chassiakos, 2014). Lean
methodologies, though primarily con-
cerned with trimming the fat from health care organizations to
help them more swiftly and nimbly
navigate the realities of modern health care, are supposed to
define value from the perspective
of health care consumers (Longest & Darr, 2008). This allows
the creation of lean processes that
are less likely to promote some secondary or instrumental end
(or the arguably illegitimate end of

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