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Ethical Issues Regarding Organizational Change
This week we will focus on ethical issues regarding organization, staff, and whistle blowing.
This lesson covers a wide variety of administrative ethical issues arise as health services managers do their jobs.
Issues linked to employee performance appraisal, for example, are a function of formal relationships. Other issues,
such as working with independent practitioners of the medical staff, often result from less formal organizational
relationships. Managers have an ethical and legal fiduciary relationship with the organization as represented by the
governing body. In an ethical sense, managers are fiduciaries for all staff in the organization, and this relationship
raises special obligations and in depth self-dealing.
In carrying out their duties, health services managers are privy to copious confidential and insider information.
Much is sensitive; almost all is proprietary. Administrative information is distinguished from that collected, used,
and maintained for patient care. Using and safeguarding both types of confidential information is a major ethical
concern in health services organizations.
ORGANIZATIONAL CONTEXT OF RELATIONSHIPS
Managers are employed to carry out the organization’s mission in the context of its philosophy. As one of its most
important responsibilities, the governing body selects and evaluates the chief executive officer (CEO). In turn, the
CEO selects and evaluates subordinate managers, perhaps down to middle management. Regardless of
organizational level, managers are moral agents who are ethically accountable for the effects of nonfeasance,
misfeasance, and malfeasance affecting patients, staff, and organization. Managers’ decisions are not excused
because they are employees or because they were only “following orders.” The law may hold individuals who are
not prime actors or decision makers to a different standard, but managers remain morally accountable.
As an employee, the manager has a duty of loyalty to the organization and its staff. In terms of the organization,
this duty means that the manager supports the employer’s goals and activities and keeps confidential what is
learned. Disagreements about policy and its implementation are neither broadcast nor otherwise shared with
individuals who have no “need to know.” The duty of loyalty has special importance in light of a common malady,
backbiting the employer. Backbiting is not the grumbling or complaining usually considered normal, perhaps even
healthy behavior. Although employees may have a legitimate reason to complain about their treatment (even the
Describe the challenges of creating a strong corporate culture.
Identify the methods used to resolve conflicts of interest and avoid self-dealing.
3/2/2020 APUS CLE : PBHE215 D001 Win 20 : Lessons
y g p y y g p (
best employer does not get it right every time), rabid, negative comments are problematic. Employees who
persistently speak ill of their employer act in an unacceptable fashion and should find new employment, voluntarily
Managers must achieve the difficult balance between loyalty to the organization and fidelity to their personal ethic
and professional integrity. Where does the manager draw the line? How far should a manager go in following the
crowd or in standing alone? A clear and well-considered personal ethic is needed to answer questions such as
these. Professional codes of ethics play a role but provide only general guidance and are unlikely to be useful in
helping a manager decide what to do in specific cases. At the extreme, the limits of loyalty are part of whistleblowing.
In addition to some types of clinical information, the manager is privy to confidential information about the
organization. As with patient information, a basic criterion for other confidential information is “need to know.”
Examples of confidential organizational information include decisions about capital equipment, medical staff
recruitment and development, business and marketing strategies, and financial and human resources programs.
Equally important, but less commonly included, is general information concerning the staff and organization and
specific information such as the strengths, weaknesses, and peculiarities of individual managers or governing body
In a competitive environment, “loose lips” will result in significant adverse consequences. It is unethical to make
confidential information available, deliberately or negligently, to unauthorized organizations or individuals. This is
true regardless of whether the manager’s organization is put at risk or actually experiences a loss, or whether the
manager disclosing the proprietary information gains personally.
The 2007 American College of Healthcare Executives (ACHE) code directs healthcare executives to “respect
professional confidences.” This wording provides little guidance about use of confidential information in the
organization. Managers, governing body members, and staff must ensure that confidential information, which is
usually proprietary, is safeguarded. Physicians who are independent contractors—a typical arrangement in hospitals
—have limited loyalty to the organization; this makes sharing proprietary information with them problematic. In a
competitive environment, which likely includes competition from physicians on their own medical staff, health
services organizations increasingly provide confidential information to physicians only on a “need to know” basis.
Narrowly defined, self-dealing occurs only when a person with access to confidential information uses it for
advantages such as monetary gain, unfair personal advantage, or self-aggrandizement. Misuse of confidential
information that does not involve self-dealing is simply a breach of confidentiality. Examples of misusing insider
information include the following: a manager, knowing that the organization will establish a surgi-center in a
specific location, purchases the property through a straw man (an agent), who then resells it to the organization at
a profit that the two share; a manager discloses information about organizational decision making that gives
acquaintances an advantage in doing business with it (misuse of confidential information); and a manager seeking
revenge for perceived insult discloses market strategies to competitors, with no resulting personal gain. Strictly
speaking, only the first scenario illustrates self-dealing.
Misuse of Insider Information
Persons in an organization with access to information not available to the public are known as insiders. Ethical
problems arise when managers use such information in a manner that is inconsistent with their fiduciary duty, the
obligation to be trustworthy. Benefiting oneself or one’s associates are examples. Some misuse of confidential
information has a salutary effect and must be distinguished An example is whistle blowing that occurs when
3/2/2020 APUS CLE : PBHE215 D001 Win 20 : Lessons
information has a salutary effect and must be distinguished. An example is whistle-blowing that occurs when
internal efforts at reform fail and the manager’s moral agency demands external disclosure of information about
practices that may affect the safety of patients or the public. The protection of such groups takes precedence over
duty of loyalty (fidelity) to the organization, even if the manager becomes subject to civil or criminal sanctions.
A common misuse of confidential (nonpublic) information occurs when employees (insiders) use it to make
advantageous stock market transactions. Historically, health services organizations were largely unaffected because
few were publicly traded, for-profit stock corporations. This status has changed dramatically since the late 1960s.
Regulation by the Securities and Exchange Commission or state counterparts does not diminish the seriousness of
the unethical conduct inherent in misusing insider information. Again, the law is a minimum that does not
necessarily set an appropriate level of ethical behavior.
RELATIONSHIPS WITH THE GOVERNING BODY
The CEO is the governing body’s agent in achieving the organization’s mission. In turn, the CEO selects, hires,
evaluates, and retains subordinate managers. The CEO and other managers and staff are moral agents, not just th
organization’s morally neutral arms and legs.
As previously noted, some sectarian health services organizations require that mid- and senior-level managers are
adherents of the religion of the sponsoring organization. This requirement is too restrictive; coreligionists often hold
different views about various doctrines and the rigor of their application. An effective corporate culture is built on
managers (and other staff) who understand and accept the organization’s philosophy. Nonsectarian philosophies
and secular humanism commonly have values like those of organized religion. Culling for values occurs in recruiting
and selecting staff, and it is here that ethical compatibility should be determined. Applicants, too, should assess
their fit with the organization’s culture during the interview.1 Focusing on congruence of values widens the field
from which to recruit competent managers; such diversity inevitably benefits the organization.
The governing body and the CEO and senior management (shown in Figure 6 “Administration”) must define the
scope of their respective functions. This figure also suggests the need to distinguish senior and middle
management. Governance, administration, and management must understand their respective activities or they wi
interfere in one another’s spheres, with resulting inefficiency and frustration of organizational goals. The diagram is
not intended to depict relationships and spheres as isolated. It must include permeability of ideas and
communications, but separateness as well as unity must be clear.
>>> Insert FIGURE <<<
RELATIONSHIPS WITH THE MEDICAL STAFF
Relations among physicians and the organization and its managers raise several ethical issues that are present
whether it is a matrix organization or one organized as a traditional functional hierarchy. Schulz and Johnson7
suggested that the CEO’s role has evolved from business manager to coordinator to corporate chief to managemen
team leader, the predominant role at this writing. As a management team leader, the CEO is a partner with
physicians in their joint efforts to efficiently provide the best possible care. This evolution causes the greeneyeshade mentality of health services managers to become no more than a historical curiosity. In collegial
relationships, peers identify and solve problems of mutual concern. Regardless of the role and degree of collegiality
the CEO has duties and responsibilities that inevitably cause disagreements with physicians. Managers are ethically
(and legally) expected to be aware of the quality of clinical practice and to intervene, as necessary. This expectatio
reflects their ethical obligations to protect and further the interests of patients.
The manager must be attentive to the needs and activities of physicians because they are essential to patient care.
Their clinical service to and relationships with patients are the reason the organization exists. Conflicts with the
medical staff result from enforcing medical staff bylaws, resource allocation decisions, and relationships between
3/2/2020 APUS CLE : PBHE215 D001 Win 20 : Lessons
physicians and staff. Other important responsibilities of senior management are to help the medical staff keep its
bylaws and rules and regulations current and to assist in enforcing their administrative provisions. A typical
example of the latter responsibility occurs when a hospital CEO or medical director applies the medical staff bylaws
and its rules and regulations to suspend a physician’s admitting privileges. This action occurs most often because o
tardy completion of medical records. Absent dire circumstances in which summarily suspending a physician’s
privileges is warranted, disciplinary actions use established procedures and are not undertaken single-handedly.
Because of the independent duty owed to patients, even exclusively clinical problems cannot be ignored by
managers. Clinical and nonclinical managers must act as the need arises. Sometimes mistakes occur.
RELATIONS WITH NONPHYSICIAN STAFF
Like staff in other types of organizations, health services professionals seek various goals, objectives, and interests
Their work in the organization is a primary focus of their lives, but the congruence between personal goals and
objectives and those of the organization is likely to be less than total. Employees must understand that they and
the organization possess the same core principles of working in the patient’s best interests. This attitude must be
reflected in action, not just in written organizational philosophy and policies. If employees and physicians perceive
that the organization places greater value on performance other than that which reflects ethical interaction with
patients (e.g., increasing hospital revenues), the principles of respect for persons, beneficence, and nonmaleficence
cannot be satisfied. Because the organization can act only through its staff, this lapse is serious. If staff members
fear that intervening on the patient’s behalf jeopardizes their relationship with their colleagues and the
organization, they will be discouraged from acting as they should.
Ignoring problems will not solve them. This maxim is especially true if patients are at risk. As the Watergate
(1970s) and Clinton-Lewinsky (1990s) political scandals showed, problems can be ignored or covered up for a time
but will come to light eventually. The public reacts to such revelations by assuming that others in the organization
knew, yet did nothing. The public wonders how such situations could occur or be allowed to continue. In addition to
the moral guidelines of respect for persons and the virtue to be honest in all interactions, the likelihood of discovery
is a utilitarian reason for recognizing and solving such problems early.
Deadly communicable diseases and other high-risk situations raise special issues in the relationship between
organization and staff. Both parties are ethically bound to protect patients and further their interests. It is ethically
unjustifiable for an organization, through its managers, to put clinical staff at risk by failing to properly train or
equip them, for example. All potentially dangerous situations should cause managers to consider the need to
protect staff from unnecessary risk; failing that, the organization cannot meet its ethical obligations to them. In
turn, staff will be unable to meet their ethical obligations to patients. The paradigmatic examples of human
immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS) and other deadly infectious diseases are
HIV/AIDS and Other Severe Infectious Diseases
Since it was first identified in the early 1980s, HIV, which leads to AIDS, has proved an elusive foe. Its spread
continues, though more slowly since the late 1980s. Both the pessimistic prediction of a major outbreak in the
general population and the optimistic prediction that it would be eliminated have proved wrong. There have been
scientific breakthroughs in understanding HIV and treating AIDS. Unlike the vaccines for hepatitis A (HAV) and
hepatitis B (HBV), however, HIV has neither a vaccine to prevent infection nor a cure once infected. A second strain
of HIV was isolated in the late 1980s, and a new strain entered the United States from Africa in summer 1996; it is
probable there will be others. Work on a vaccine is tempered by knowledge that HIV’s rapid mutation makes
developing a vaccine with long-term effectiveness difficult, if not impossible. Even if a successful vaccine were
developed, several years of testing and clinical trials would be required before it could become generally available.
Meanwhile, the attention to prevention and education is unprecedented in modern public health.
3/2/2020 APUS CLE : PBHE215 D001 Win 20 : Lessons
In 2008, the World Health Organization estimated that 33.4 million people worldwide were living with HIV. The
number of individuals living with HIV in the United States in 2006 was 1.1 million. By comparison, there are
approximately 3.2 million persons infected with hepatitis C (HCV), the most common chronic blood-borne infection
in the United States. People with AIDS are living longer as a result of more effective medical management using
combinations of drugs and healthier lifestyles, including better nutrition and preventive measures that reduce risk
of reinfection. The result may be that AIDS will become a chronic rather than an acute disease, a development with
significant implications for health services organizations.
One major legal issue with HIV/AIDS is confidentiality. Dimensions include confidentiality of patient names and
records, reporting HIV infection, and a duty to warn third parties. Legal protections against breaching medical
confidentiality are well established. The AIDS epidemic caused states to pass laws safeguarding the confidentiality
and privacy of people infected or thought to be infected with HIV.13 Like other serious communicable diseases, all
states have made AIDS a reportable disease. Contact tracing, a historically important role for health departments,
is belatedly being applied to HIV infection as an effective measure to diminish its spread. The American Medical
Association (AMA) supports HIV testing of physicians and healthcare workers in appropriate situations. It opposes
mandatory testing for medical staff privileges but urges physicians to voluntarily determine their HIV status and/or
act as if their serostatus is positive.
A second legal dimension and area of litigation results from special risks present when staff members work with
AIDS patients. The Occupational Safety and Health Act of 1970 (OSHA) requires employers to provide a place of
employment free from recognized hazards that cause, or are likely to cause, death or serious physical harm. OSHA
requires universal blood and body substance precautions.
Third are the legal concerns of the risk to staff and other patients from patients infected with HIV and the
opportunistic diseases that develop as HIV progresses to frank AIDS. In protecting patients and staff, health
services organizations must avoid discriminating against people with HIV/ AIDS, whom the law defines as having a
NEW RELATIONSHIPS WITH MEDICAL STAFF
Beginning in the late 1980s, significant changes occurred in relationships between physicians and health services
organizations, a movement led by acute care hospitals. These arrangements are designed to add an economic
dimension to relationships that emphasizes clinical activities. The MeSH (medical staff–hospital) concept was
introduced in the 1980s but gained only limited acceptance; then, the joint venture, which included undertakings
such as medical office buildings and the lease or purchase and operation of high-technology equipment, became th
focus of economic relationships between organizations and practitioners. In the 1990s, both concepts were replaced
by the PHO (physician–hospital organization) and integrated health networks, both of which focus on primary care
but seek to deliver a continuum of services to a defined population. The economics of clinical practice must be tied
to the organization so that each may assist the other to survive.
Such arrangements are fraught with potential ethical problems. A mildly adversarial relationship between medical
staff and managers is useful because it provides checks and balances in maintaining high-quality patient care. This
relationship requires that each party remember that its reason for being is to serve and protect the patient. When
management and clinical practice are economically bound together, patient interests may suffer. The potential for
conflicts of interest increases if the physicians involved in these arrangements are also part of the governing body.
Evidence of actual conflicts of interest and fear of their potential have led to the passage of federal and state laws
regulating certain clinical referrals.
To avoid conflicts of interest when they are evaluated, CEOs must limit their role to explaining organizational
performance. The CEO’s performance should be reviewed without the CEO present but with feedback provided later
Like all staff, the CEO is owed fairness in the review process, especially if negative outcomes that might result in
3/2/2020 APUS CLE : PBHE215 D001 Win 20 : Lessons
termination are possible. Problems are minimized if the governing body employs a formal process to evaluate the
CEO’s performance, one based on predetermined objectives that are to be attained during the period under
CEOs evaluate the work of subordinate managers directly or in coordination with other senior managers. This
includes evaluating administrative dimensions of clinical managers’ work. Personal and professional relationships
may interfere with objective appraisal, or, in some cases, even day-to-day management.
The process of verifying credentials begins when a physician first applies for medical staff membership and clinical
privileges. All aspects of the candidate’s education and training, licensure, and clinical preparation are reviewed.
Regular periodic reviews ensure that physicians continue to be qualified. Renewal of privileges depends on
demonstrated current competence. All clinical staff with independent access to patients receive a similar review,
whether or not they are members of the medical staff. Preventing legal actions and bad publicity are important, but
the primary reasons to be concerned about competence are the principles of respect for persons, beneficence, and
nonmaleficence, as well as various of the virtues.
This topic identified and analyzed the ethical problems managers experience in their relationships with the
organization and staff. These relationships are analyzed within the context of the manager’s ethical obligations to
patients. Managers have access to patient and proprietary information, most of which is confidential. This
accessibility suggests the potential for inappropriate disclosure, self-dealing, and misuse of insider information.
The unique relationships that senior managers, especially CEOs, enjoy with governing bodies and staff were
examined within the context of various ethical duties. Managers must act to protect patients when questions of
clinical competence arise. Taking this action includes having the policies, procedures, and resources needed to
minimize the risk of inadequate practice and to eliminate it should it occur. Managers must establish a culture that
emphasizes patient care and safety, and they must support all staff in their efforts to maintain this focus.
New relationships among organizations and with physicians raise ethical issues, most of which result from the
potential for conflicts of interest. Emphasizing financial aspects makes it easy to forget that the patient is the
primary reason for the existence of health services organizations.
The topic concluded with an examination of falsified or overstated personal qualifications and the obligation of
managers to act when these problems come to their attention. Thorough background checks and the provision of
honest recommendations assist organizations in their work, protect patients, and maintain the integrity of the
AIDS epidemic update (report). (2008, December). UNAIDS, World Health Organization.
AIDS-related lawsuits will continue to rise, report shows. (1990, April 16). AHA News 26, p. 3.
American Medical Association. (2003, November 25). Report 4 of the Council on Scientific Affairs (p. 4).
Bayer, R. & Gostin, L. (1990). Legal and ethical issues relating to AIDS. Bulletin of the Pan American Health
Organization 24, p. 457.
Darr, K. (2011). Ethics in Health Services Management. (5th Edition). Baltimore, MD: Health Professions Press,
3/2/2020 APUS CLE : PBHE215 D001 Win 20 : Lessons
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