JE- 3

Editorial Open Access

Bruning and Baghurst, Bus Eco J 2013, 4:2
DOI: 10.4172/2151-6219.1000e101

Volume 4 • Issue 2 • 1000e101
Bus Eco J
ISSN: 2151-6219 BEJ, an open access journal

A major concern for health care leadership is the increasingly
tenuous relationship between the primary stakeholders within the
system that include patients, providers, and payers. Decreased trust
between stakeholders changes the very culture of interactions and
communication which in turn leads to a relationship breakdown
between the stakeholders [1-3]. Movement toward patient-centered
care allows physicians to act as a “fact provider” in the physician-patient
relationship which permits patient autonomy and self-determinism [3].
Consumer-driven health care requires increased participation from
patients regarding care decisions; this requires access to understandable
information that directly compares options [4]. Unfortunately, patients
do not always have adequate and transparent information on costs or
quality of care to make ethical and appropriate decisions regarding
health care [5,6]. Thus, they must rely on others to ethically select the
best options with respect to care and cost.

Health care leaders perform an essential role in the success or
failure of relationships between the various stakeholders. Ethics
integrates features required to promote positive relationships. Voges [7]
described five principles involved with health care leadership decision-
making. Beneficence is the first principle, and can be considered as the
obligation of benefiting staff, patients, organization, and community.
Health care leaders’ decisions must advance stakeholders’ various
positions and promote population health. Decisions must meet the
second principle of non-maleficence, the responsibility to bring no
harm to patients, staff, organization, or community. Poor economic
decisions lead to potential loss for health care organizations including
service lines or even failure of the organization. These decisions require
obligation to stakeholders of the particular organization. Either patients
of the organization, providers, or other community members suffer
when poor economic decisions are made and organizations fail.

Respect for individuals and their autonomy is the third principle of
ethical decision-making for leaders. Ethical dilemmas occur between
providers, payers, and patients. As a result, tension occurs as conflicting
priorities transpire around individual decisions regarding patient
care and autonomy. This challenge occurs as patients expect certain

treatment options that payers do not want to provide payment for or
providers do not feel are warranted.

The fourth principle of justice requires that leaders provide fair and
unbiased concern when making decisions. One of the primary roles of
health care leaders is to promote the organization and improve function
and margin. Decisions that negatively influence the organization
decrease the organization’s ability to continue meeting its mission.
Development of sustainable relationships among the stakeholders
improves the probability of success.

The previous four principles are combined into providing for
a maximal competence in decision-making or the fifth principle of
utility. Health care leaders have a responsibility to the community in
which the organization functions. A poor relationship between the
various stakeholders threatens the organization’s ability to remain
functional. Organizations that fail negatively influence and harm the
community to which the organization means to serve. Leaders that
understand and work to improve the three primary relationships
improve the community.

This article reviews the three stakeholder relationships that occur
in health care, and discusses some of the ethical issues that strain those
relationships. Payers are the organizations which provide payment
for services rendered. These payers may include government, primary

*Corresponding author: Paul Bruning, Summit Orthopedics, United States,
E-mail: [email protected]

Received August 25, 2013; Accepted August 27, 2013; Published September
02, 2013

Citation: Bruning P, Baghurst T (2013) Improving Ethical Decision Making in
Health Care Leadership. Bus Eco J 4: e101. doi: 10.4172/2151-6219.1000e101

Copyright: © 2013 Bruning P, et al. This is an open-access article distributed under
the terms of the Creative Commons Attribution License, which permits unrestricted
use, distribution, and reproduction in any medium, provided the original author and
source are credited.

Abstract
Purpose: The purpose of this article discussion is to describe the application of ethical decision-making and the

three primary relationships within health care leadership. Healthcare change occurs rapidly and increases tension
and mistrust between payers, providers, and patients. Application of ethical standards to decision-making and change
decreases healthcare cost and improves trust in change processes.

Approach: Health care challenges occur among three primary relationships. These relationships include the patient
and provider, patient and payer, and provider and payer. A plethora of leadership models exist with regard to leading
change; however, these models do not consider that leaders are not always concerned with the ethical decision-making
process. Evaluation of the ethical principles, healthcare relationships, and recent healthcare changes found in the
Patient Protection and Affordable Care Act guide the article’s discussion.

Findings: Application of ethical principles to transformational leadership improves healthcare relationships
and alleviates stress and tension produced by change. Healthcare leaders have an expectation to provide ethical
considerations during change management and the decision-making process which influences the various relationships
found in healthcare.

Value: Healthcare leaders are in the unique position to improve healthcare using ethical principles. Because health
care reform requires ethical decision-making from leaders, the application of ethical principles to the various relationships
health care leader’s influence creates fundamental and successful change in health care.

Improving Ethical Decision Making in Health Care Leadership
Paul Bruning1* and Timothy Baghurst2
1Summit Orthopedics, United States
2Oklahoma State University

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Citation: Bruning P, Baghurst T (2013) Improving Ethical Decision Making in Health Care Leadership. Bus Eco J 4: e101. doi: 10.4172/2151-
6219.1000e101

Volume 4 • Issue 2 • 1000e101
Bus Eco J
ISSN: 2151-6219 BEJ, an open access journal

Page 2 of 5

insurance, and work compensation payer organizations. Providers are
the individuals or organizations that provide various components of
care or work to improve individual health. Patients are the individuals
seeking care for various illness, injuries, or detriments to wellbeing.
Leaders who identify and understand these ethical dilemmas are
empowered to positively influence the relationships among these
primary stakeholders and improve the healthcare system. Northouse
[8] explained that promotion of a collaborative climate requires
expected standards of excellence; these standards of excellence require
ethical decision-making.

Leadership Role in the Health Care Relationship Triad
Leaders must understand the three primary relationships in

health care to determine what changes can be made to improve the
effectiveness of these relationships. The following sections contain
a guide to the leadership role in the various relationships. The three
relationships considered within the model are patient–provider,
patient–payer, and provider–payer. Leadership influences these various
roles and participates in helping direct the challenge of introducing and
leading change.

Patient Physician Relationship
As patient and physician relationships become increasingly

strained, patients grow increasingly suspicious of providers [1-3].
Leadership in health care must work to engage ethical decision-
making in the patient and physician relationship. The application of
ethical decision-making improves working relationship and trust for
both the patient and physician. Physicians provide facts in patient-
centered care permitting shared decision-making between patient and
provider [3]. Patients must trust providers to offer the best options for
care without influence of economic benefit for the provider. However,
without trust patients are less-confident that decisions made are in
their best interest. Balint and Wayne [9] identified six principles that
influence patient and physician relationships that include the “Basic
Fault…Apostolic Function…Mutual Investment Company…Drug
Doctor and Therapeutic Agents…Deeper Diagnosis…and Conspiracy
of Anonymity”. These principles explain how patients react to life
experiences and how these experiences define individuals. Because
communication influences understanding and cooperation increases
trust between both parties, physicians must monitor their interaction
with patients to avoid a false sense of security. This false sense may
cause potential harm to patients because alternative treatments are not
offered. Thus, to alleviate this concern the provider must understand
and listen to the patient’s life circumstances. A failure to do so may
limit how much the patient’s concerns are considered in the decision
making process.

Leadership influences and improves relationships when a mutual
relationship of the provider and patient occurs. Portman [2] indicates
that patient physician interactions are consensual and not obligatory.
Both parties have a responsibility to the relationship and must be
willing to negotiate during conflict. The patient and physician may
both benefit from improving their interaction and relationship.
Managing this relationship requires ethical decision-making based on
core competencies and characteristics of the leader.

Payer Patient Relationship
Challenges to the prayer and patient relationship occur because

insurance companies profit from collecting premiums and not paying
health care costs. Patients who obtain insurance desire benefit from

premiums through access to effective health care. Although premiums
decrease the sense of health care cost, they also create a culture of
entitlement to health care [10]. Several processes and problems occur
that increase the challenges of health care leadership with respect to
payers and patients. Two of those challenges include moral hazard and
insurance companies creaming or skimming patient populations. First,
moral hazard results when insurance insulates a patient from health
care costs. This process of moral hazard increases the volume of services
sought. Refusing treatment or insurance coverage of patients with illness
potentially increases costs above premium or contracted payment and
introduces the concept of dumping. Removing the pre-existence or
denial of health care insurance coverage within the Affordable Care Act
of 2010 has proved popular within the United States. This provision
eliminates payer ability to deny coverage or for dumping to occur.

Another challenge for leadership in the patient and payer
relationship comes from the payers creaming or skimping on coverage.
Creaming occurs as payers seek healthy patients who demand fewer
services than premium cost paid. Providing less quality of care for a
condition during a specified length of time is skimping. These actions
increase tensions between payers and patients, but occur commonly,
and aid in increasing the profit-margin within the insurance industry.

Leadership within health care can improve this patient – payer
relationship by providing patients with adequate and transparent
information on costs or quality [2,3]. Challenges occur when costs
vary based on health care provider. Currently prices are negotiated
between providers and payers and are based on market leverage rather
than outcomes or true value of service provided [11]. However, ethical
decision-making applied to leadership characteristics can improve the
relationship of patient and payer when appropriately addressed.

Payer Provider Relationship
Health care leaders function on both sides of the provider and

payer process creating an opportunity to reduce health care costs and
more efficiently control resources. The decisions of a physician can
shape the quality, quantity, and costs associated with the health care
system [12]. Unfortunately a physician’s decisions in this regard are
often based on market trends while the decisions and practices of the
provider generally adopt a “follow the pack” mentality [12]. Thus, peers
play a vital role in influencing practice which contradicts the evidence-
based practice preferred by payers.

Many factors influence the health care industry’s reimbursement of
healthcare providers. For example, reimbursement rates for physicians
are calculated using complex formulas including elements such as
physician time, skill required, and intensity of work [2]. Various payer
calculations are used to determine payments to providers. Diagnosis-
related groups provide payment levels based on diagnosis, surgery,
patient age, discharge destination, and patient sex. Other payment
schemes include ambulatory payment categories, resource-based
relative value scale, and resource utilization groups. Fee-for-service
payments provide conflict to the provider and payer relationship.
Franzini et al. [13] suggested that the current system of reimbursement
creates a culture of money where some providers overuse more
profitable services. This system of various payments occurs through
numerous agreements including per diem rates, capitation, and fee-
for-service adding complexity and conflicting incentives to provider
[4,11].

The Massachusetts attorney general conducted a study on price
differences paid by insurers to providers and found that, compared

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Citation: Bruning P, Baghurst T (2013) Improving Ethical Decision Making in Health Care Leadership. Bus Eco J 4: e101. doi: 10.4172/2151-
6219.1000e101

Volume 4 • Issue 2 • 1000e101
Bus Eco J
ISSN: 2151-6219 BEJ, an open access journal

Page 3 of 5

to the lowest-paid physician group, the highest paid physician group
received 145% more for the same procedure [11]. This imperfect free
market increases the complexity of the health care system and provides
avenues for unethical behavior and practices. Multiple payers create
different requirements for reimbursement [14] and it is therefore
unsurprising that administrative costs in health care contribute
significantly to the United States health care spending [15]. Aggregate
costs for administration in health care that include documentation,
coding, billing, and dealing with multiple insurance payers exceeded
31% of total health care costs in the United States [15,16]. Blanchfield
et al. [15] estimated that a typical 10 physician practice accrues
administrative costs exceeding $250,000 per year.

Challenges to health care leadership come from reducing the
variation in payments and payers. Health care leadership is challenged
through contracting payment plans through multiple payers nullifying
any chance for clear and transparent cost of care comparisons.
Individual payers are able to pay different rates for the same services
depending on contracts arranged with providers. This pricing variance
interferes with the three relationships defined within this article.
Further challenges come from helping providers accept evidence-
based medicine that potentially decreases reimbursement but also
cost to the system. Health care market forces stray considerably from
ethical free market economics. Price transparency does not exist,
individuals often do not have the ability to choose when seeking care
or treatment, and individuals most often do not bear the full cost of
accessing the health care system. Vladeck and Rice [6] stated that health
care reimbursement and economics does not provide an ethical market
as providers, even those with virtuous intentions, may guide patients
in the wrong direction caused by incentives within a fee-for-service
payment structure. The creation of a model constructed to address this
issue by fostering ethical decision-making based on solid leadership
characteristics has the potential to improve the health care system.

Ethical Decisions
Health care leaders encounter ethical situations concerning

resource limitations, quality of care, cost-effectiveness, efficiencies, and
organizational need to produce profit margins [17,18]. Further ethical
dilemmas in health care occur when leadership must balance employee
and patient rights [18]. The present health care dilemma increases
ethical challenges for leadership [18,19], yet it is evident that leadership
within health care requires guidance on ethical decision-making.

Ethical Reasoning within the Patient Protection and
Affordable Care Act (PPACA)

According to Lachman [19], several issues are addressed through
ethical justifications in the Patient Protection and Affordable Care Act
of 2010.The lack of distributive justice is a primary validator of the need
for change in the relationship of the patient and payer [19]. The U.S.
Census Bureau identified over 46.3 million uninsured individuals in the
United States. Thus, the decision to require insurance coverage proves
challenging ethically, as the expense could cause significant harm to
financially struggling individuals. Individuals invariably require health
care services, and the Emergency Treatment and Labor Act of 1986
prohibit hospitals from denying care based on inability to pay or lack
of insurance. This uninsured care costs approximately $100 billion
annually [19], and hospitals face challenges from uncompensated care
and the need to generate revenue to provide care for other individuals.
Unfortunately, this dilemma causes cost shifting and increased
charges for those individuals with health insurance which results in

an approximate $1,000 annual premium increase for individuals with
insurance [19]. Requiring affordable health insurance, as described
in the PPACA, promotes the ethical concepts of beneficence and
non-maleficence whereby individuals are required to obtain health
insurance to reduce cost shifting [19]. This coverage proves affordable
when purchased through health care exchanges.

A growing ethical dilemma in health care results from a high
resource demand system with an increasingly aging population.
Hosseini [17] raised the ethical dilemma of age-based rationing of
health care services. Individuals over the age of 65 consume four times
the per capita cost of health care as those under the age of 65. Lachman
[19] described that 30 percent of Medicare dollars are spent during the
last year of life and half of those funds are spent in the last 60 days of life.
Younger individuals are cheaper to insure and require limited resources
from the health care system. The elderly use a disproportionately larger
apportion of health care resources. These resources tend to include
more complicated and expensive technologies and treatments [17].
This places an ethical burden on health care leaders to make decisions
that support, promote, and transform change.

National policy and reform within health care are driven by ethics.
Senator Kennedy, in his last letter to President Obama regarding
health care reform stated that “what we face is above all a moral issue:
at stake are not just the details of policy, but the fundamental principles
of social justice and the character of our country” [20]. The challenge
for leadership is because ethics overlaps with regulations, law, and
compliance but these are not the same or equal.

Ethical Decision Making in Health Care Economics
Health care market forces stray considerably from ethical free

market economics. Vladeck and Rice [6] suggest that health care
reimbursement and economics does not provide an ethical market as
providers, even those with virtuous intentions, may guide patients in
the wrong direction due to incentives within a fee-for-service payment
structure. This system of various payment schemes through numerous
agreements including per diem rates, capitation, and fee-for-service
adds complexity and conflicting incentives to providers [4,11]. For
example, Franzini et al. [13] reported that Medicare spending in
McAllen, Texas was 86% higher than in El Paso, Texas. At the same time
Blue Cross patients in McAllen, Texas cost 7% less to cover than patients
in El Paso, Texas. Franzini et al. [13] indicated that the current system
of reimbursement creates a culture of money where some providers
overuse more profitable services. According to Kaufman, the system
of incentives causes potential challenges to the behavior of providers.
The Massachusetts attorney general’s study noted that, “instead prices
reflect the relative market leverage of health insurers and healthcare
providers”.

Health care leaders must apply the concepts of ethical decision-
making when confronted with the questions of economic influences.
The complexity of reimbursement and the various revenue streams
create distrust in relationships. Further complicating the relationships
are the reality that the combinations of moral hazard and entitlement
insulate individuals from costs of health care. This causes individuals
to have difficulty appreciating the value and price of health care until
needed.

Practical Steps to Improve Ethical Decision Making in
Health Care

Health care change continues to move forward at an exponential

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Citation: Bruning P, Baghurst T (2013) Improving Ethical Decision Making in Health Care Leadership. Bus Eco J 4: e101. doi: 10.4172/2151-
6219.1000e101

Volume 4 • Issue 2 • 1000e101
Bus Eco J
ISSN: 2151-6219 BEJ, an open access journal

Page 4 of 5

rate with no indication of slowing. The new road to success in
an environment of instantaneous access to information requires
organizational ability to adapt [21]. Former models of organizational
administration, gathered from the manufacturing system, do not apply
neatly to the complex atmosphere of individual patients. Humans are
much more complex than automobiles or stereo systems. Individual
patients have comorbidities, experiences, and complex emotions
that influence the interactions. Providers and payers have different
visions, goals, and experiences that further complicate the very nature
of the relationships. One only needs to look at various health care
policies, which are put in place to improve the system, that result in
downstream problems and potential crisis. Leaders must understand
these complex relationships and provide ethical principles to decisions
made regarding the relationships within health care.

Trusting Relationships
Dye and Garman [22] argued that “developing trust is vital for

highly effective leadership; in many ways, it is the glue that holds work
groups and organizations together”. Earning trust requires remaining
accessible, continuing authenticity, and modeling of behaviors expected
[21,22]. These characteristics help develop trust from staff and other
stakeholders. Building trust in the relationships provides framework for
change. This trust advances the ability to provide visions and goals each
of the three relationships can believe.

Trust also builds with focus on similarities, shared principles,
common vision and goals, and clear benefits from collaboration
[20]. Physicians desire autonomy in decisions and take pride in their
offerings of patient care. Patients want to improve their health status
and have some level of decision-making within their own care process.
Payers desire to decrease the cost of care while providing the insured
with access to evidence-based medicine. While on the surface there
is a common goal of improving the individual’s health there is a great
deal of mistrust between the stakeholders. Health care leaders have the
ability to improve this trust with the use of evidence-based and ethical
decision-making.

Common Vision
While a common vision seems implied within health care the various

stakeholders’ goals create differences in perceptions of how to reach the
common vision. Physician’s desire for autonomy regarding treatment
decisions may be at odds with a payers desire to reduce the cost of care.
Payer’s rationale to deny coverage of a controversial medication may
be at odds with a patient’s desire to use the medication to fight their
ailment. Patient’s emotional state or asymmetric information creates
conflict within the relationship of patient and provider.

Health care leaders must provide the common vision of these
relationships and define these shared visions based on ethical standards
and principles. Without appropriate modeling of ethical behaviors
vision and values are lost. Providers, patients, and payers that do not
display behaviors consistent with the common vision threaten the
relationships. The challenge for stakeholders comes from forgetting the
past and failures of ethical behaviors and moving forward to build and
model the common vision.

Cooperation
Health care leaders must identify, describe, and reinforce the

benefits of collaboration between the various health care relationships.
This includes clarification of the ethical standards around decisions.
Decisions based on ethical principles increase collaboration and help
develop understanding of the consequences of failure to collaborate.
When providers collaborate with patients on care decisions the
similarities and differences of opinion are able to be discussed and
understood from each perspective. Focusing on the similarities helps
develop shared decisions and mutual respect. These processes improve
the outcomes of care.

Conclusion
Health care leaders must have the courage to act and act ethically.

Decisions are complex and influence the various relationships in
health care. Atchison and Bujak [21] wrote, “Healthcare leaders today
understand that the complexity of change issues demands courage to
stay on the right course. Any systematic change process will offend at
least one constituency. Courage in its simplest form is the capacity to
act. Talking, analyzing, and processing are all good only if they lead to
action”.

Basing decisions on ethical process helps progress the three most
common relationships in health care. Leaders using ethical decision-
making are able to defend and hold strong to how these decisions
influence the relationships of patient, physician, and payer. Ethical
decision-making encourages leader’s ability to act and improve health
care decisions and relationships.

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