BY: ANN NEALE, PhD
Dr. Neale is senior research scholar, Center for Clinical Bioethics at Georgetown
University Medical Center, Washington, DC.
The market! The market is the elephant. For some, the marketplace is
the solution to what ails the health system. For others, the market is the source
of many, if not most, of health care's ills. Everyone should therefore
come to the table to discuss the elephant — to get a better sense of "the
virtues and limits of markets."1 Critical reflection on the
role of the market in the health care sector has important ramifications for
health care professionals, health care organizations, health policy, and patients
and communities. Thus, we should begin by identifying:
- The various levels of concern in situations where market mindsets and strategies
are perceived to clash with health care values and objectives
- The sources of moral distress about the health care environment with a view
to understanding the appropriate role of "the market" in health
care (to get to the deeper structure below market practice)
Various levels of concern exist where market mindsets and strategies are perceived
to clash with health care values and objectives. Some concerns appear to be
primarily directed at the aberrant behavior of "rogue" individuals;
others are directed at health care organizations' use of market strategies
that impede health care objectives. At the system level, considerable dissatisfaction
with various features of managed care exists. These concerns may or may not
reflect a fundamental fear that a market mindset is driving health care.
Individual Behavior Some complaints appear to be directed at individual
behavior — the physician selling health-related products out of the office;
the researcher who owns stock in the company funding the experimental protocol;
the materials management director who accepts a vendor's invitation to
travel abroad to "inspect" an MRI. Criticism of such individual behavior
might be simply a caution to avoid conflict of interest or excessive entrepreneurialism.
It may not signal deeper concerns about a growing market ethos in the health
Organizational Behavior Staff, employees, and the public take aim at
the behavior of health care organizations, suggesting that market values of
efficiency, productivity, and margin drive them more than values of patient
care and community well-being. Caregivers contend, for example, that efficiency
measures result in a lack of sufficient time or resources to provide adequate
care. They complain about overaggressive utilization review and discharge planning.
Employees question budget priorities that reduce staff development and benefits.
They resent downsizing strategies that leave them short-staffed and demoralized.
Communities and patients are troubled by health care organizations that adopt
certain market behaviors — expensive advertising campaigns, overly generous
incentive compensation, and large severance packages for executives. Physicians
chafe at economic profiling and measures that encroach on their professional
discretion, such as group purchasing, formulary decisions, and preauthorization
requirements. Categorizing these concerns is not easy because many of these
same critics do not favor legislative or regulatory solutions to cost and access
issues, recommending instead that they be "left to the market."
System Behavior No one seems to be pleased with the current health care
system, which is increasingly a form of managed care. In the early 1990s a groundswell
of support for health care reform (envisioned as "managed competition")
took shape. That effort's momentum subsided for a number of reasons, but
prominent among them was the fact that the Clinton plan was perceived as involving
too much government. Opponents portrayed the complex proposal as entailing too
much government interference and regulation and limitation of the public's
choice of providers. Congress, following what appeared to be the public mood,
decided to "leave it to the market." Yet market forces, which pursue
efficiency and productivity, have imposed a kind of "private regulation"
that Americans have found onerous. We've learned the harsh lesson that
market discipline can be every bit as intrusive as government regulation. The
Patients' Bill of Rights, which is basically an attempt to counteract the
market inclination of capitated health plans to underprovide services, is ironic
testimony to a public ambivalence (and perhaps ignorance) about the market.
Current experience with managed care can teach many lessons, among them that
greater marketization can compound difficulties and also that maintaining the
status quo in health care is not possible. Economic discipline and limits are
necessary — a very hard sell in light of the American belief that "We
can have it all."
Framework for Discussion
Discussion of the appropriate role of the market in health care should entail
an analysis of both market theory, particularly as it pertains to the health
care sector, and the values and beliefs underpinning the health care profession.
Even though neither the pure market nor the ideal health professional exist,
understanding the underlying ethos of these paradigms is important. Clarity
about the nature of the market and health care is necessary for the effective
blending of their values and strategies.
The United States is generally understood to have a market economy in that
we depend primarily on market forces to address the three dimensions of the
- What society will produce
- How it will be produced
- To whom society will distribute the benefits of production
Market theory stipulates that these economic decisions should be left to the
free play of self-regulating market forces, maintaining that, because everyone
follows his or her own self-interest, and because competition keeps individuals
from taking advantage of one another, society as a whole will benefit. Wages,
which the theory regards as reflecting workers' contributions, are mainly
determined by the interplay of the supply of, and demand for, labor.
Market theory divides society into two realms of authority: economic and political.
The processes of production and distribution are relegated to the economic realm.
In the political realm, government's role is restricted to providing for
the national defense, ensuring domestic law and order, and undertaking public
works such as education. Public works, because they are unprofitable, are unattractive
to private enterprise. The market's guiding principle is laissez faire
— noninterference by the state in economic matters.* The market's end
is wealth accumulation. Production, according to market theory, is held accountable
to a single outcome — profitability.
* Some market enthusiasts, for instance, support proposals to shift
Medicare from a government regulated program to a voucher program allowing
seniors to purchase a plan of their own choosing from among those offered
in the market. Overlooked is the fact that Medicare was passed because the
market, not finding it profitable, did not insure the elderly.
In accounting for exchange only among individuals, market theory lacks
the notions of community and social well-being. It claims that market exchange
results in the most efficient distribution of goods and services; equitable
distribution is not a concern. Indeed, equity is not even a category in market
theory. According to market theory, any extra-market intervention to achieve
equity by definition comes at the expense of efficiency.
What market theory does not acknowledge in its solution to the economic problem
of what to produce, how to produce it, and how to distribute the benefits of
production is that each of those dimensions of the problem is value laden. Each
has, for instance, a justice dimension. Do we produce goods that meet basic
human needs, or luxury goods? How we produce — what criteria the market uses,
what job assignments it makes — results in a more or less just division of
labor. The distribution question of who shares in the fruits of production is
patently a matter of justice. The market, prizing as it does efficiency, profitability,
and competition, takes no account of these moral issues, which are entirely
outside its purview. The market cannot address these issues because it does
not recognize them. This fact should help us realize that the market cannot
be genuinely reformed by market tactics.
2 In fact, as economist
Charles Clark has noted, the market is a non-solution to the "economic
problem," leaving pursuit of the solution to self-interested individuals
tempered by competition. Forgotten is the part of Adam Smith's thesis†
that insists the competitive market is only capable of converting private vices
(e.g., selfishness) into public virtues (e.g., maximum production) because the
competitive system works within an appropriate legal, institutional, and social
†Smith was a moral philosopher who considered "Moral Sentiments,"
which he revised many times, to be his major work.
Examination of some key assumptions of market theory — that markets
balance and clear, that price is the only signal that coordinates behavior,
and that people know their self-interest and can and do act only in their self-interest — should
drive home the fact that markets are more theory than reality. Indeed, the market
in its pure form does not exist.
The Mixed Economy
The United States has a mixed economy that relies on extra-market ways of "humanizing"
the market. We have a mixed system for coordinating production and distribution
of virtually all goods and services. In the United States, the market is embedded
in an infrastructure of laws, regulations, and extra-market norms, which provide
the necessary conditions for the market's effectiveness. Markets depend
on societal norms of honesty and trustworthiness, without which they would not
work. The U.S. health care market has numerous extra-market dimensions: private
organizations such as JCAHO, professional associations and th‚ir codes
of ethics, and government regulations that curb the opportunism that a pure
market ethos would unleash in health care.
To get at what is troubling those who resist the entrepreneurial and market
strains of health care, to uncover what is truly at stake in this controversy
about the market and market tactics, one needs to examine foundational issues
of human behavior and relations. One needs to uncover the dissonance between
the world views of the market and the health care profession.
Market theory describes human beings as acting only in a rational, calculating
mode. The market model rests on the conviction that persons act in their self-interest,
that their primary objective is their own material advancement, and that such
behavior in the aggregate is a boon to all. Market theory reduces life to a
series of markets in which virtually anything can be for sale. In the market
all goods and services, including health care, are fungible products that can
be bought and sold. Nothing has intrinsic value. All market relations are merely
individual transactions in which buyer and seller meet in a "spot market"
to exchange what one wants and the other has — for a price determined by
market forces. Market theory does not question the vastly different endowments
that people bring to the market. For the market, "equity" means fair
and free trade of existing resources and property rights. Equitable distribution
is not a market category; therefore 39.3 million uninsured are not a market
shortcoming. No moral sentiment (apologies to Adam Smith) in market exchange
and no notion of community and the common good exist in market theory. Its prized
value, economic freedom of the individual, is evident in its mantra: "If
everyone takes care of herself or himself, everyone will be taken care of."
Claims of the Health Care Profession
Medicine (and by extension health care) has historically been regarded as a
profession par excellence, along with ministry and the law. Professionals in
this classical sense have a noble calling. The most intimate details of their
fellow humans' lives ar´ entrusted to their care and competence. A
profound respect for this awesome responsibility is reflected in the fiduciary
ethic that is supposed to characterize these professions.3 The professional
ethos assumes a view of persons as relational and caring and a realm of human
life far more significant and intimate than the market can accommodate. What
is sought — diminution of illness, restoration of health — pertains to
one's very person. Health and health care are aspects of human well-being,
important to human flourishing and valued beyond price. The profession has traditionally
had the notion of a calling, a quasi-religious commitment. The professional
encounter is far more than a commercial exchange. Caregiver-patient relationships
are essentially healing encounters, covenantial relationships, demanding the
highest professional and ethical commitment. The ethos of health care is not
one of self-interest. Indeed, the interests of patients and community are supposed
to take priority over even the legitimate interests of their caregivers. The
healer should be a relational, altruistic person, characteristics that have
no category in market terms. The healer's service is essential to individual
and community well-being, a constitutive element of the common good. Health
care has both an individual and a community focus reflecting the social nature
and interdependence of persons — alien concepts from a market perspective.
The Crux of the Problem
The public may accept that the market is not equipped to equitably distribute
DVD players. They are more likely to regard the inability of the market to effect
just distribution as a significant shortcoming when it comes to health services
because social welfare is measured by fairness as well as efficiency. By definition,
a competitive market cannot optimize social welfare. This fact is not lost on
the more than 39.3 million uninsured Americans. Even among the insured, access
to quality, beneficial health care (e.g., prescription drugs) is highly uneven.
Free market forces cannot result in the just distribution of quality health
services. Competitive markets will not necessarily be superior to regulated
markets. The opinion that markets are efficient and therefore good, and that
government involvement or other extra-market intervention is inefficient and
not good is not realistic. This point is important now, when esteem for government
and all forms of regulation is on the decline and market solutions are proposed
in new arenas such as education, prisons, and social services.4
One can maintain, as does Robert Kuttner, that "a capitalist system is
a superior form of economic organization, but even in a market economy there
are realms of human life where markets are imperfect, inappropriate, or unattainable.
Many forms of human behavior cannot be reduced to the market model of man."5We
have to recognize that the market can do only some things well.
Concern about the market, or as it is sometimes expressed, fear that "business
decisions" are driving health care, is a concern that the health care profession
is being governed merely by the business criteria of productivity and efficiency,
and that managers and even some professionals are acting as if profit is the
primary goal. The uneasiness felt about the increasing role of the market in
health care is a critique of the view that "good business" adheres
only to market criteria and is blind to justice and the common good. This concern
is not a criticism of good managers or sound management, including financial
management.6 Rather, it takes issue with the Milton Friedman view
that the only social responsibility of business is to produce wealth for the
shareholders. Indeed, that view is not the majority view in the business world.
Daniel Yankelovich puts it this way: "Health care is facing a double bottom
line — one of conventional market values and the other of 'civil society
values.' Health care is seen as a semi-sacred right and not as a traditional
good. Reconciling the dissonance between free market practices and the public's
values in terms of health care will be difficult."7
Financial management in all sectors, but especially health care, is a careful
art of achieving economic discipline in a way that promotes human flourishing.
Thoughtful discernment around market strategies is necessary so as not to undermine
either the integrity of professionals or the ends of health care.
Value Drivers in the New Economy: Intangibles
Financial personnel, charged with achieving economic discipline, are now able
to bring some breakthrough concepts and fledgling tools to the management table.
The economic theory underlying these new approaches reinforces concern about
undue reliance on current management and accounting techniques and suggests
a way to accommodate those concerns.
Arthur Andersen is just one of the major accounting firms working to develop
more appropriate economic models. They contend that current management and accounting
rules are inadequate in the new knowledge-based economy because they overemphasize
finances and physical assets and do not take into account intangible assets.
Because those inadequate management and accounting rules shape an organization's
values, attitudes, beliefs, and performance, they distort organizations'
allocation of time and money.
Arthur Andersen's research and new economic model are explained in a recent
book.8 The fifth chapter, "Businesses are their Assets, All
their Assets," begins with this quote from Albert Einstein, "Sometimes
what counts can't be counted and what can be counted doesn't count."
The authors observe that managers usually know a great deal about their organizations'
investments in physical and financial assets but lack information and insight
about other sources of values that fall outside the existing financial reporting
system. They find the traditional financial reporting framework of balance sheet,
income statement, and cash flow statement lacking because it leaves out most
of the value created by intangible assets.
"This shortcoming affects the flow of information for decision-making
by management and a company's stakeholders. Even worse, the balance sheet
and income statement unwittingly pit human values against economic value. The
income statement categorizes as "expenses" many of the most significant
sources of value — people, for example — and overlooks much of the value
derived from customer relationships and information."9
Arthur Andersen's Value Dynamics framework, The
Dynamics of Value, is an attempt to identify and classify intangible as
well as tangible assets, making it possible for managers to better identify
and leverage all the assets essential to success in the new economy. The new
economic models that stress the importance of intangibles, among them people,
were developed in response to the realization that intangible assets are the
primary drivers of value (i.e., wealth) in the new economy. These models are
promoted as nec_ssary for business success, not because of any expressed conviction
about the intrinsic value of the person, but because they drive value (i.e.,
wealth). Nevertheless, they are welcome theories and tools in the hands of health
care managers who do believe in the importance of people as people and
who can use them to more adequately integrate the important stewardship function
in health care services.
The tension between the market and the professional paradigms in health care
is not a battle between health finance personnel who are concerned only about
money and caregivers who care only about the health and well-being of people.
It is not a statement about the irrelevance of health care costs in the face
of more important human realities. I believe that the tension is an unexpressed
realization that the philosophical underpinnings of the market and those of
health care are incompatible, and that the uncritical application of
market tactics in the health care sector jeopardizes the very essence and purpose
of that important realm of human activity.
The tension is, in one sense, inevitable because health care is carried out
within two frameworks: a moral framework set by the nature of the person
fully understood and an economic framework shaped by the market with
a different anthropology. The social teaching of the Catholic Church offers,
in broad strokes, insight into the resolution of this problem when it insists
that the economy and production are for the good of the person and the community — not
the other way around. Economist Robert Heilbroner has put it this way: "the
market is a good servant, but a terrible master."
- Robert Kuttner, Everything for Sale: The Virtues and Limits of Markets,The
University of Chicago Press, 1998.
- Kuttner, p. 129. Such is "a social goal beyond the comprehension of
- David J. Rothman, "Medical Professionalism: Focusing on the Real Issues,"
New England Journal of Medicine, April 27, 2000, pp. 1284-1286. Rothman
suggests that, in fact, the profession has not lived up to its professional
standards and that professionalism today has to be invented, not restored.
- Mike Brogioli and Lisa Smith, "Privatization of Social Services: Perspectives
from Catholic Charities USA," Charities USA, First Quarter 2000.
For-profit enterprises are now in the business of determining welfare eligibility.
- Kuttner, pp. 5-6.
- Max L. Stackhouse, Dennis P. McCann, Shirley T. Roles, and Preston N. Williams,
editors. "Introduction: Foundations and Purposes," On Moral Business:
Classical and Contemporary Resources for Ethics in Economic Life, William
B. Eerdmans, Grand Rapids, MI, 1995, p. 16.
- Shari Mycek, "Leadership for a Healthy 21st Century," Healthcare
Forum Journal, July/August 1998, p. 26.
- Richard E.S. Boulton, Barry D. Liebert, Steve M. Samek, "Cracking the
Value Code: How Successful Businesses are Creating Wealth in the New Economy,"
HarperBusiness, New York, 2000.
- Boulton, p. 29.
Copyright © 2001 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.