Health Care Finance Ethics mini-case

Summary of Assignment Requirements

• The seven ethics mini-cases are from the health care casebook. The issues are standard ethical issues in health care finance. Most refer to the pricing strategy and billing procedures of health care entities.

o The cases are at the end of the casebook.

• Each case ends with the statement, "What do you think? Does this case present an ethical issue? If so, to which party (or parties)? If you could act as the ultimate authority on this situation, what would you do?"

o There is no right or wrong answer.

o To prove this, you will write the answer for both sides.

o Part 1 - Present the side of the issue that it is an ethical issue: please explain it and present a solution.

o Part 2 - Present the side of the issue that it is not an ethical issue: please explain why there is no ethical issue and how the industry should present the situation to show patients or interested parties that no ethical dilemma exists.

• For the case, you pick the one case of seven that you prefer. Pick the cases that you like the best and that allows you to do an excellent job of presenting both sides of the issue.

Length & Style

• Length: 600 to 800 words per side.

o It is not a lot of words so be concise and choose your words carefully, called effective word choice.

o The number of words is because this is the length of what a reader will read before spacing off. A goal for master's programs is for students to be able to convey meaning effectively and concisely.

• Address the topics in the cases from the viewpoint of a financial manager.

o There is a natural tendency to do it from the point of view of the consumer. You can acknowledge their viewpoint but you need to present it from a financial manager's point of view for both sides of the case.

o Please do not let politics or other biases cloud your response.

o Please make sure that your answer is respectful of others. Please do not make bigoted comments.

• As the financial manager, you are not expressing your opinion. You are presenting the side using a financial thought process.

o Avoid morality as the reasoning. Instead, think about the concepts we have talked about in class - cash flow, profitability, project management, seasonality, uncertainty, etc.

o Consider the ideas of price transparency, price discrimination, price elasticity, and cost shifting.

o Another question to consider is ex-post versus ex-ante pricing. Do we know the true cost of health care events at the beginning of the event?

o Sometimes it is easier for students to think of writing it for a member of the board, a reporter, a judge, etc. It keeps the student focused on financial justification/reasoning instead of opinion.

o A mistake by some students is to focus on the economic discussion (price transparency, etc.) and forget that the assignment is FINANCE. Of course, the economic underpinnings are important to your answer but be sure that you are answering as a financial manager and discussing the financial concepts as the main ideas.

• Presentation style will affect your grade. If the two sides are not clearly delineated, your work will be hard to read and to grade.

o Some students will want to combine the two sides into one presentation. This is incorrect. Separate the two sides with appropriate headings.

• Please submit each case as a PDF with the file names as follows: Lastname_Firstname_EthicsCase#

o If I did ethics case #3 for my case, my file name would be: Macy_Anne_EthicsCase3

Quick Review of Economic Concepts

Be sure to write the case from the financial manager's point of view. Use the finance concepts that we have learned in the class such as cash flow, capital budgeting, breakeven, etc.

I think it can be helpful to also use some economic concepts as part of your answers. Because everyone has had a different background in economics, here is a quick review of some basic economic concepts to help you as you formulate your answers.

You need both finance and economics (along with whatever other material you want to add). Sometimes students will include just one or the other and the answer is not as complete as needed to earn a high score.

• Price transparency is knowing what the price is, what the price should be, what is the price charged to others

o The more transparent pricing is in a market, the more the prices will be similar and while there may still be profit, there will not be excess (also called abnormal or economic) profit

• Price discrimination has three degrees

o First degree - ability to charge each customer a different price; also called perfect price discrimination
o Second degree - prices based on quantity; the more you buy, the more you save; coupons and discounts are examples
o Third degree - prices are based on segments of market; price varies based on location, age, gender, military, etc.

• Price elasticity refers to how much buyers change their purchases when price changes.

o Inelastic demand means that buyers buy about the same quantity as various prices. We consider these buyers to be price inelastic. A firm will respond by raising price to increase total revenue (because quantity does not decrease).

o Elastic demand means that buyers are price sensitive and will reduce purchases if price increases. A firm will respond by lowering price to increase the quantity purchased, which increases total revenue.

• Cost shifting refers to one party shifting the costs to another party in the transaction. One can do this because the party to whom the costs are shifting either do not realize that the costs is shifted to them (transparency), cannot do anything about the shifting, or willingly accepts the shifting because they gain something in the process such as greater choices or control.

Additional Information

• I will grade your answers for correctness and completeness of your analysis and synthesis of the issue.

• Those students who provide an insightful analysis/synthesis will score higher.

• Do not waste time retelling the reader the situation. Use your 800 words to justify the side.

• I do not think that all the cases have the same level of difficulty. Thus, pick the cases that you can write on both sides effectively.

• Additionally, your answers will be graded versus the corresponding AACSB assessment rubric on ethics.

• As you create your posting, consider the following traits from the rubric to include in your answer.

o Detection: Demonstrates ability to recognize ethical issue in detail and ascertains exactly what must be decided.

o Considers Stakeholders: Demonstrates ability to compare and contrast multiple ethical frameworks in describing the legitimate rights and responsibilities of multiple stakeholders within business activities.

o Chooses an Action: Formulates an appropriate plan of action reflecting the benefits and risks of action and fully integrates multiple stakeholder considerations in the analysis.

Relate to Graduate Program of Study & Capstone Experience

• For those MBA students who are required to do a portfolio, you could use the ethics case to satisfy the requirement.

• For MSFE students, the comprehensive exam will have an ethics question. While it may or may not be on health care, you might be able to use the ethics cases as an example in your comp question. Typically, better comp answers are those that answer the question but then take the issue to the next level to demonstrate your ability to apply concepts to other issues.

• No matter your program, it is an important cognitive step to see an issue from both sides and to demonstrate this on your capstone experience.

Comments on Cases

• Some students may have access to prior semester's student answers (think fraternity file). Thus, in an effort to be fair, here are some pointers on the cases' themes to help even the playing field.

• Case #1: central issues include price transparency and price discrimination - what is the correct price for the surgery?

• Case #2: central issues include principle-agent problem and price transparency.

• Case #3: central issues include price transparency and price elasticity and the impact of the total amount paid (total revenue)

• Case #4: a central issue is the principle-agent problem impact on the goal of shareholder wealth maximization. Do I do what is best for the firm or for me?

• Case #5: central issues include price transparency and price discrimination. Who pays the stated price?

• Case #6: central issues include economies of scope and physician incentives.

• Case #7: central issues include physician incentives and price transparency.