48. A joke making the rounds in Philadelphia-area doctors’ lounges goes like this:

Leonard Abramson, chief executive officer of U.S. Healthcare Inc., the big health-maintenance company, dies and goes to heaven, where he tells God what a great place it is. “Don’t get too comfortable,” God advised, “You’re only approved for a three-day stay.”

That’s the kind of cost control that the messianic Abramson understands.

In the past two years, U.S. Healthcare has slashed the fees it pays to specialists and hospitals by 12 percent to 20 percent and sometimes more, these providers say. In the past year, it has cut members’ days in hospitals by 11 percent. Increasingly, it asks specialists and hospitals to assume the financial risk for procedures that cost more than anticipated.

U.S. Healthcare is widely considered one of the country’s toughest HMO companies and one of the most innovative. It keeps 30 cents of every premium dollar to pay for salaries, marketing, administration and shareholder dividends, nearly 10 cents more than the industry average. It zealously tracks the performance of doctors and hospitals, paying more to those whose quality scores are high. It is earning robust profits—up 99 percent in the past 24 months—while rocking the tradition-bound, health-care markets along the East Coast.

“Unless you change the culture of the community you’re working in, you’re not changing health care,” Abramson declares.

In the health-care community, U.S. Healthcare has both staunch supporters and critics. Consider the following additional information:

• Last year, Abramson earned $9.8 million in salary, bonuses, and stock options.

Critics suggest this is excessive pay and takes resources that could otherwise have been applied to benefit patients. Abramson says, in a free market economy, large rewards flow to those who provide superior performance.

• Critics claim U.S. Healthcare selects service providers based on price rather than quality.

• The company pays doctors to take training courses, such as one in breast cancer screening techniques.

• The company has an information system that allows it to rank hospitals according to infection rates of urology patients, by the length of stay for coronary-bypass surgery, or by the number of babies delivered by Cesarean.

The company shows the comparative data to its service providers and uses it as leverage in negotiations.

• The company is increasingly using performance-based pay contracts for its service providers.

• All of U.S. Healthcare’s HMOs have earned three-year accreditation from the National Committee for Quality Assurance; this is the best performance of any U.S. managed-care company.

Examine the preceding information and discuss your opinion as to whether U.S. Healthcare is applying an ethical approach to the management of healthcare costs. Where possible, use concepts presented in the chapter to defend your position.