Quality focus shining on corporate ethics

2003 questions from Baldrige reveal focus

With the recent spate of Wall Street scandals, perhaps it’s not all that surprising that the Baldrige National Quality Programs 2003 Criteria for Performance Excellence will include new questions to reinforce the focus on corporate ethics. The questions are:

• How do you address the following key factors in your governance system?

— management accountability for the organization’s actions;

— independence in internal and external audits;

— protection of stockholder and stakeholder interests, as appropriate.

• How do you evaluate the performance of your senior leaders, including the chief executive and members of the board of directors, as appropriate?

• What are your results for key measures or indicators of ethical behavior and of stakeholder trust in the governance of your organization?

In addition, health care applicants will be asked specifically if their performance results are made public. So, just what implications does this new focus have for health care professionals in general and, more specifically, for quality managers?

"Most health care professionals will see this as a compliance issue," says Patrice L. Spath, of Forest Grove, OR-based Brown-Spath & Associates.

"A lot of them have compliance plans, and part of those plans is business ethics. While there’s been an uproar over [corporate accounting issues], health care professionals for the most part would be inclined to say that we had to deal with this several years ago in terms of Medicare fraud and abuse," she says.

These people would be taking too narrow a view of the issue, insists Mary C. Bostwick, with the Baldrige National Quality Program National Institute of Standards and Technology in Gaithersburg, MD.

"We think of it as a broader issue than, say, financial fraud," she asserts. "There are patient care ethics, such as what kind of information you have, how accurate it is, and how you safeguard confidentiality; there are community ethics — what do you give back to the community in terms of community health?"

David J. Nygren, PhD, leader of the corporate governance group for Mercer Delta Consulting Company in New York City, agrees. "Ethics involves not only compliance, but the principles that guide that behavior," he explains. "For example, you can’t just be enforcing HIPAA [the Health Insurance Portability and Accountability Act]; that’s not really the framework of ethics we are looking for."

Why should health care professionals be concerned with ethics and governance issues?

"If you start with the assumption that all individuals at some point need health care, and given the vulnerability that people experience in treatment, you need to assure that beyond compliance you measure your performance against some standard of excellence that should be a fundamental governance concern," Nygren says.

"The role of any board is fidelity to the mission. If you are in health care, leadership must ensure there are procedures in place to guarantee integrity," he adds. "If you promise health and healing, and that patients will be well cared for, that has an ethical component — what you say should be what you do."

That’s true as well in terms of fiscal responsibility, Nygren adds. "If you do anything that exposes the hospital to further risk, you could be exposing the hospital to [financial] liability," he says. "There has to be congruence between what you say and do — how you define ethics, and whether you are faithful to that definition."

Nygren consults to CEOs and boards of Fortune 500 companies around enterprisewide change and has been involved with health care for 25 years. From that perspective, he says, it is the board’s responsibility to set policy, but it is the quality professional’s responsibility to see that processes are in place that really ensure there is fidelity to those policies.

"Take, for example, increased risk factors," Nygren says. "From a quality standpoint, one thing you would try to do in ethics is minimize risk — around disclosure, insurability, and so on. Ethics policies that frame the proper policy response are essential for the quality manager to attend to.

"At the quality manager level is where you try to write policies and procedures that will be approved by the board, whether they deal with patient safety or with confidentiality," he explains. "These all are ethics issues that address building patient confidence, so that they feel safe and not at risk."

"We really believe that ethics starts at the top," Bostwick adds. "The role of the middle manager is not so much a leadership role as an awareness role, as well as one of information transfer. The quality manager is in an ideal position to be more instructive and to share information with a wider audience."

Spath agrees. "The ethics of an organization are usually driven by the attitude of its leaders. A lot of dilemmas health care professionals get into involve not agreeing with the ethics of senior leaders. For example, the leader might say we don’t need additional nursing staff, but the nurses may think it affects quality of care. This becomes an ethical issue, as to whether the institution values quality," she notes.

If a quality manager believes there is an ethical problem, at the very least, he or she should know to whom to take that problem, Spath says.

Creating a policy

So, what are the practical steps involved in creating an ethics/governance policy? Experts say it usually begins with a task force or a committee.

"Most hospitals I’m familiar with have an ethics committee as part of their board," Nygren says.

"It’s important that you have some group that deals with ethics," Spath adds. "It should include the risk manager, the compliance officer if you have one, ideally a member of the governing board, and obviously senior leaders to make sure decisions match their vision for the organization."

The quality manager should sit on such a task force and have a role in policy-making, Bostwick says. "But it all comes back to leadership needing to take the initiative," she points out. "The quality manager should try to get literature in front of the leaders and increase their awareness of these issues. Also, they can share changes that have worked in other organizations."

Just what should the policy address? First of all, Nygren says, it should include a code of conduct and ethics. This breaks down into several key areas:

• Business integrity.

The board should be interested in transparency of information from management — full disclosure and accountability, he says. "This includes keeping stakeholders fully apprised of your operations, which is particularly important in health care."

• Conflict of interest.

Members of the board, in particular, should not have any financial benefit accrue to them by virtue of sitting on any other board of an organization that may have dealings with the hospital. Any breach of ethics should be disclosed immediately.

• Full disclosure of community benefit.

This consistently should be measured against the institution’s mission.

• An ombudsman function.

This is to ensure that "whistle-blowing," or internal violations reports, have a clear line of sight to an audit committee that oversees risk and ethics. "This is very important for health care," Nygren notes.

• Privacy of communications.

This privacy should revolve not only around the patient, but around physician practices as well.

Measuring your performance

Beyond establishing an ethics policy, it’s critical that you evaluate your performance. "You have to have measures to define if you are in compliance [with your policy]," Nygren says. "The board has responsibility for annual reviews, and this ought to be in a report that is given to the board."

An even bigger challenge, he adds, is to make sure your measures are accurate and quantifiable, and that they get tracked. "Many ethics violations are simply not tracked," he asserts.

What are some measures that might be adopted? "This can vary with the institution, but the principles that guide the ethical conduct of an institution should derive fundamentally from its mission," Nygren says, noting that nonprofits have slightly different missions than for-profit facilities, because they are dealing with stakeholders as opposed to shareholders.

Bostwick adds that measures might include such things as the percent of independent board members, relationships with your community constituencies, results of ethics reviews, and — for a less mature organization — the number of people who have been trained in the ethics policy.

What cannot be overlooked, as is made clear in the new Baldrige questions, is that the people at the top must be evaluated as well.

"In business and industry, it’s the board that does this," Bostwick notes. "They have an executive compensation committee that reviews performance — and this should include an ethics review. For a hospital, it’s the trustees."

"The board is supposed to represent the public interest," Nygren notes, "And it delegates that responsibility to the CEO. How leaders are evaluated and to what extent ethical considerations impact that evaluation is a quality issue."

In a nonprofit facility, he says, this includes looking for mission integrity; overall organizational performance (of which ethics is a key driver); qualitative indicators of how much the leader represents alignment with future strategy and the health needs of the community; and to what extent he or she stands out as a person who represents the board’s interests to the community. "You should also evaluate strategic leadership," he says. "To what extent does this individual look toward the future?"

Need More Information?

For more information, contact:

  • Mary C. Bostwick, Baldrige National Quality Program, National Institute of Standards and Technology, Building 101, Room 600, 100 Bureau Drive, Stop 1020, Gaithersburg, MD 20899-1020. Telephone: (301) 975-4280.
  • David J. Nygren, PhD, Mercer Delta Consulting, One California, Suite 1600, San Francisco, CA 94114. Telephone: (415) 273-1230. Fax: (415) 970-9630. E-mail: david.nygren@mercerdelt.com.
  • Patrice L. Spath, Brown-Spath & Associates, P.O. Box 721, Forest Grove, OR 97116. Tele-phone: (503) 357-9185. E-mail: Patrice@brownspath.com.