Conflicts between controlling cost and providing social responsibility to patients This case examines potential ethical issues faced by the dialysis clinic described in ATC 5-2. It is, however, an independent case that students may study in conjunction with or separately from ATC 5-2. The dialysis clinic provides two types of treatment for its patients. Hemodialysis (HD), an in-house treatment, requires patients to visit the clinic three times each week. Peritoneal dialysis (PD) permits patients to self-administer their treatments at home on a daily basis. The clinic serves a number of HMO patients under a contract that limits collections from the HMO insurer to a fixed amount per patient. As a result, the clinic’s profitability is directly related to its ability to control costs. To illustrate, assume that the clinic is paid a fixed annual fee of $15,000 per HMO patient served. Also assume that the current cost to provide health care averages $14,000 a year per patient, resulting in an average profitability of $1,000 per patient ($15,000 − $14,000). Because the revenue base is fixed, the only way the clinic can increase profitability is to lower its average cost of providing services. If the clinic fails to control costs and the average cost of patient care increases, profitability will decline. A recent ABC study suggests that the cost to provide HD service exceeds the amount of revenue generated from providing that service. The clinic is profitable because PD services generate enough profit to more than make up for losses on HD services.
Required
Respond to each potential scenario described here. Each scenario is independent of the others.
a. Suppose that as a result of the ABC analysis, the chief accountant, a certified management accountant (CMA), recommends that the clinic discontinue treating HD patients referred by the HMO provider. Based on this assumption, answer the following questions.
(1) Assume that the clinic is located in a small town. If it discontinues treating the HD patients, they will be forced to drive 50 miles to the nearest alternative treatment center. Does the clinic have a moral obligation to society to continue to provide HD service although it is not profitable to do so?
(2) The accountant’s recommendation places profitability above the needs of HD patients. Does this recommendation violate any of the standards of ethical conduct described in Chapter 1, Exhibit 1.15?
b. Assume that the clinic continues to treat HD patients referred by HMOs. However, to compensate for the loss incurred on these patients, the clinic raises prices charged to non-HMO patients. Is it fair to require non-HMO patients to subsidize services provided to the HMO patients?
c. Suppose that the clinic administrators respond to the ABC data by cutting costs. The clinic overbooks HMO patients to ensure that downtime is avoided when cancellations occur. It reduces the RN nursing staff and assigns some of the technical work to less-qualified assistants. Ultimately, an overworked, under qualified nurse’s aide makes a mistake, and a patient dies. Who is at fault—the HMO, the accountant who conducted the ABC analysis, or the clinic administrators who responded to the ABC information?