The writings of Immanuel Kant inform a decision-making process that can help finance leaders make the right call.

Imagine the following scenarios:

  • A manager in a healthcare finance function withholds information from another manager so that she can share that information first with her boss, who is a junior executive.
  • Healthcare finance leaders seek to extend their hospital’s ambulatory footprint for certain patients to enhance their bottom lines.
  • A senior executive pushes back on an executive compensation committee’s proposal to reduce the annual bonus and long-term deferred compensation program.

All of these incidents represent risks to a healthcare organization. Yet, each also represents a potential gain for somebody (e.g., more money, greater prestige, cost reduction, risk transfer). Common risks that arise in the health finance functions tend to fall into the following categories:

  • Governance
  • Strategy
  • Finance
  • Legal/regulatory
  • Reporting
  • Compliance
  • Reputation
  • Operations
  • Accreditation
  • Ethics

All of these risks combined are part of an enterprise risk management (ERM) system, which should be established and fully implemented in your organization and in the health finance function itself. Determining the strategic, operational, and tactical risks to a healthcare organization and then formulating approaches to prevent, mitigate, or manage the risks is the essence of a well-functioning ERM system.

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Risks are generally categorized into external (e.g., regulatory, technological advances) and internal (e.g., decision making, risk aversion). By applying principles of ethical decision making, healthcare finance leaders will be better equipped to not only make ethical decisions but manage risk.

Kant’s Two Imperatives

So how can a healthcare financial leader manage risks? One essential method is to consider the underlying conscious, rational motivations of the decision makers before a decision is made. This method, based on the writing of Immanuel Kant, helps healthcare organizations make more ethical and effective decisions.

Before describing this ethical decision-making framework, a brief introduction to Immanuel Kant is warranted. Kant, a German philosopher who lived from 1724 to 1804, believed that humans are rational and possess reason. Accordingly, humans exercise freedom in making choices. When healthcare finance leaders make day-to-day decisions, they use rationality. Reason differentiates humans from other animals.

Kant also believed that, when choosing a course of action, humans have a duty to demonstrate “respect for persons.” According to Kant, we cannot focus on the consequences of our decisions or actions because they cannot be controlled. However, our intentions are fully under our control, he says.

Regarding intentions, Kant described two major types of duties: the hypothetical imperative and the categorical imperative.

Consider the scenario at the beginning of this article in which the manager purposefully chooses to withhold information to enhance her political standing in the organization. This behavior illustrates the hypothetical imperative. The manager reasons that if I withhold information, then my political clout will increase.

In contrast, the categorical imperative is a universal principle that applies to nearly every situation. An example in society is the golden rule. For example, when senior leaders seemingly choose to place their own financial welfare above their organizations’ welfare, the universal principle of prioritizing the organization over any single individual within the organization is clearly violated.

An Ethical Decision Making Framework

Decision trees help people make important decisions with self-reflection, deliberation, and intentionality. In a 2005 paper, Sharon A. Bowen shared a model that sums up Kant’s recommended approach to ethical decision making (Bowen, S.A., “ A Practical Model for Ethicial Decision Making in Issues Management and Public Relations,” Journal of Public Relations Research, 2005, vol. 17, no. 3, pp. 191-216).

In this model, when facing a decision, you first ask yourself these three questions:

  • Can I rule out political influence?
  • Can I rule out financial influence?
  • Can I rule out pure self-interest?

If your response to all of these questions is “yes,” then ask yourself the following three questions:

  • Could I obligate everyone else in a similar situation to do the same thing I am about to do?
  • Would I accept this decision if I were on the receiving end?
  • Have I faced a similar ethical issue before?

If your response to any of the initial three questions is “no,” involve others in the decision. Ask the same three follow-up questions, but frame them as collective questions. Engaging others in the decision helps ensure that rationality drives the decision, rather than your personal self interests.

These three questions embrace what Kant described as the categorical imperative. In short, if the decision is good enough for others, it should be good enough for you.

In addition to these questions, individuals and groups should consider the three questions presented in Bowen’s Ethical Consideration Triangle as shown in the exhibit below.

Ethical Consideration Triangle
Ethical Consideration Triangle

  • Am I doing the right thing (duty)?
  • Am I proceeding with a morally good will (intention)?
  • Are dignity and respect maintained (dignity & respect)?

By asking these three questions, you will experience at least two benefits: First, you will slow yourself down by being more deliberate. Second, you will frame financial and business decisions from a broader perspective than just focusing on the bottom line alone.

Regardless of the answers to these questions, the results of your ethical decision-making process must be communicated. This task also should be done in an ethically sensitive fashion. Specifically, all stakeholders must be provided with the information behind a particular decision, how the decision was made, and the intended outcomes of the decision.

Beyond Outcomes and Compliance

Limiting your ethical decision making to the outcomes of your decision or actions alone is not enough. Similarly, restricting your ethical decision making to that which is legal is not enough. Bowen remarks: “…Kant required that people be treated always as an end in themselves and never as a means to an end.”

Returning to the example at the beginning of this article, consider the motivation to expand the ambulatory footprint. Are healthcare finance leaders seeking to extend the ambulatory footprint for certain patients for financial reasons alone, or also to enhance the health and well-being of those patients? Would they shift the setting for all patients regardless of insurance status and other characteristics?

A healthcare organization needs to show a profit, but are some patients a means to an economic end in this scenario? If so, Kant would regard this as unethical decision making.

However, utilitarians may argue that this decision is ethical. The utilitarian approach is best captured by the following phrase: the greatest good for the greatest number. Steps in this approach are to conduct a cost/benefit analysis of the decision to allocate resources and to evaluate the outcomes or results of a decision (the ends) more so than the means.

Before you choose one type of ethical decision-making model, take a look at your vision, mission, and values. Then ask the question: “How do our vision, mission, and values guide us in which type of ethical decision-making model to select?” By asking yourself and your leadership team this question, you are engaging in the practice of ethical sensitivity.

An Attentive Approach

Effective leaders engage in self-reflection and deliberation prior to making decisions that impact the organization, patients, community members, and other key stakeholders. If your organization is not making decisions well, perhaps this framework should be adopted. With practice, you will find that not only are you being more attentive to the ethicality of your decision-making process, but the quality of your decisions will improve.

William Marty Martin is an associate professor and director, Health Sector Management & Organizational Diversity MBA concentrations, DePaul University, Chicago, and is a member of HFMA’s First Illinois Chapter.

Publication Date: Tuesday, July 07, 2015