Problem: Conflicting Moral Demands: Qual Plus HMO

For ten years, Jim Goodrich has been the chief operating officer (COO) of Qual Case Plus, a successful not-for-profit, staff-model managed care organization (MCO) with Study 275,000 members in a major metropolitan area on the West Coast. The organization has been so financially successful, in some measure because of Jim's efforts, that it is about to embark on the construction of a $12 million corporate office complex to house its business activities. As COO, Jim has been responsible for the planning and development of the project, the purchase of the land, and the presentation of the construction proposal to the 12-member board of directors. Following the board's approval, the building and grounds committee of the board will select a general contractor and submit the construction contract to the entire board for its approval.

The committee-established selection criteria for the general contractor included demonstrated quality of work, ability to meet construction deadlines and work within budget, financial solvency of the firm, and competitive costs. Only local firms known to adhere to ethical business practices were asked to bid on the project.

The request for bids indicated that all bids must be sealed and delivered by noon on December 9 to the COO's office. Bids received after this designated time or not in this designated manner would not be considered. The committee was scheduled to meet at 1:00pm that day to open the bids, review them, and select a general contractor to submit for board approval.

Joe Smith had served on the building and grounds committee for a number of years. Well-liked by the other members of the board, he had been appointed to this committee because, as the owner of Smith Masonry, he had expert knowledge of construction and related fields.

At the appointed time, the committee met, opened the bids, and began its review. Of the bids received, three met all criteria. The costs associated with two of the bids were close. The cost of the third bid, offered by Acme Construction, was considerably higher. Joe was visibly shaken. Knowing that Acme subcontracted with Joe's firm for masonry work, Jim assumed Joe would declare a conflict of interest and abstain when it came time for a vote. Jim did not anticipate what happened next.

As the discussion was about to begin, Joe moved that the committee take a ten-minute recess before continuing its deliberations. When the committee reconvened, Joe made a motion that the three contractors who had made the final cut be offered the opportunity to submit a "final" bid in 24 hours. The committee would then reconvene the next day to review these final bids. Jim was astonished at the motion and at its immediate support from the rest of the committee and questioned the rationale, legality, and ethical implications of this action. He was told quite simply that because all three finalists were being given the same opportunity, it should not be considered illegal or improper. As for rationale, the committee believed that Acme Construction, which met all of the other criteria, may have inadvertently made a calculation error that placed its bid so much higher than the other two finalists. Joe indicated that it would, in fact, be unfair and unethical not to allow a final bid from a contractor known to be competitive in pricing and highly regarded in the building community when the difference in the bid was obviously great enough to be a miscalculation. The motion was quickly called, and the vote was unanimous that "final" bids would be sought from the three contractors.

Jim was shocked and angry that the board committee would take action that he believed to be blatantly unethical, if not illegal. Furthermore, as the executive responsible for this project, he was expected to concur with their decision, an expectation that he was uncomfortable with and believed to be in conflict with his responsibility as an administrator. As soon as he was in his office, Jim called the organization's attorney and reviewed the committee action with him. When asked about the legality of this action, the attorney said he believed it to be a bit unusual but not illegal. Jim suspected that the attorney was reluctant to explore the matter more fully because it was individual board members' actions that were being questioned, rather than the action of the board as a whole.

At this point, Jim knew he had to report the events of the afternoon to Brent Williams, his boss. Brent had been CEO of Qual Plus since its inception 15 years ago and had the unfailing support of the board of directors. Jim liked Brent, and his reporting relationship with him had been mutually satisfying. Brent trusted Jim and gave him the latitude to run the operations of the organization. At times Jim felt that Brent might play a little fast and loose with propriety, but the issues were always personal ones that did not really affect Jim or the operations of the organization. Rumors had circulated that Brent's home had been remodeled at no cost to him through largesse and that his automobiles were provided at no cost to him by another board member. He was also known to vacation often in a luxury condo in the Caribbean owned by yet another board member. More disturbing to Jim, however, was the fact that Brent's administrative assistant took care of all of his personal errands and business and was often gone from the office for extended periods of time.

When Jim told Brent about the committee action, Brent dismissed it with a shrug.

"It's a board committee-it's their call," he said. Jim persisted and told Brent that he was not comfortable with the committee's actions, especially because he was the one expected to execute their decision, and that he was going to request an opinion from the Qual Plus ethics committee. Brent appeared agitated at this suggestion and said abruptly, "I would not recommend that, but if you feel you must, go ahead. Just remember, it's your job that's on the line here." He then stood up, indicating that the discussion was over.

Jim was disappointed with Brent's reaction. With a mortgage, twin girls in college, a son in high school, and a wife with professional ties to the community, Jim was not prepared to relocate. He doubted he could match his current salary in another position. Brent and the board had been extremely generous with his compensation package. Jim did not want to jeopardize his position at Qual Plus. On the other hand, he was seriously troubled by his dilemma.

He called the chair of the organization's ethics committee, who said she did not believe this situation fell within the purview of her committee because it was a board action but agreed to poll her committee and get back to Jim with a response by late afternoon. Jim was not surprised when she called back to say that her committee agreed with her earlier assessment. Jim had come to the conclusion that no one at Qual Plus was ready to take on the board members over this issue. Frustrated, Jim knew that he was expected to keep his mouth shut and carry out the board commit­ tee's wishes. He also knew that if he did this, he would be violating his personal principles and would make himself vulnerable to future expectations of unethical behavior.

Question: In the above case study, a health care executive is faced with an ethical problem.

a). Explain the executive's issue.

b) Proposed a solution to the issue.