What's in an exchange? - the ethics of business transactions

Healthcare Financial Management, Feb, 1998 by Richard L. Clarke

Accounting theory states that a transaction occurs as the

result of an exchange of value. Cash is tendered in exchange for goods and

services; work is done in exchange for wages paid; loans are granted in

exchange for a promise to repay. Even intangible assets are calculated as

the result of an exchange based on current or future value. Everything that

has economic value is based on the concept of exchange.

I know this is nothing new to healthcare financial managers. The idea of an

exchange of value is fundamental to any financial transaction. But the

concept of an exchange of value is also important to remember when

considering any decision, especially those that may create an ethical

dilemma, such as failure to comply with laws and regulations.

In September 1997, I wrote in this column about developing a personal

compliance plan. I noted that standards for honesty and integrity are

measured in terms of what is right and just. They require us to observe both

the form and the spirit of legal, technical, managerial, and ethical

standards.

Noble words. In the real world, however, our organizations expect us to

optimize return on investment; to position our organizations to succeed in

the marketplace; to make the most out of every exchange. How do we reconcile

the need to optimize each exchange with the need to observe both the form

and the spirit of legal, technical, managerial, and ethical standards?

I believe our personal standards of conduct should require us to clearly

define each transaction we engage in based on the concept of exchange of

value - that is, what of value do we expect to receive from the exchange. In

dealing with physicians, for instance, what of value do we expect to receive

in return for a fee paid to the physician? Is the value of what is received

directly related to the fee, or is something additional of value expected?

If something additional of value is expected (eg, increased referrals from

that physician), are we in compliance with antikickback laws and

regulations? The analysis of the value of what is received and what is

expected to be received is the key to an honest assessment of the ethics of

the transaction.

For any transaction, the following questions should be answered:

* What is the expected value to be received from this exchange? Is the

value direct and measurable using market principles?

* If the expected value is not direct and measurable, what is the

rationale for the exchange? Is that rationale consistent with all laws, good

business practices, and ethical conduct?

* If others knew of the exchange, would they be able to see the value?

Could it easily be explained to others why the exchange was consummated?

Would they think the exchange was fair, honest, and legal?

* Do you feel good about the value received? Does it make sense to you?

Answers to these questions form the basis for understanding clearly the

nature of an exchange of value. If, after honest assessment, you believe the

value is real, fair, and legal, then you have fulfilled your obligation to

the organization, the public, and yourself. If the answers to these

questions cause you to doubt the true value, or whether that value causes a

violation of laws or other standards, then it is your duty to attempt to

restructure the exchange, or identify the issues for the appropriate

authority within the organization.

Understanding fully an exchange of value is critical to assessing the

legality and ethics of that exchange.