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Institute of Medicine (US); Gray BH, editor. The New Health Care for Profit: Doctors and Hospitals in a Competitive Environment. Washington (DC): National Academies Press (US); 1983.
The New Health Care for Profit: Doctors and Hospitals in a Competitive Environment.
Show detailsFrances H. Miller
It is generally recognized that the parties to a physician-patient relationship are frequently on unequal footing. The potential for physician dominance stems not only from the fact that illness places patients in a vulnerable, dependent posture but also from the superior knowledge, training, and clinical experience of the physician. Although it may be difficult for the average patient to question the physician's judgment, patients must lay their innermost selves bare, both physically and emotionally, if their doctors are to understand the true nature and origin of their problems. Without trust, and therefore vulnerability, the candor necessary to the therapeutic relationship is impossible to achieve.
The law redresses this kind of imbalance in certain relationships by requiring people who occupy positions of trust, such as physicians, to subordinate self-interest to the well-being of their charges. Such a relationship is called a fiduciary relationship. A fiduciary—from the Latin fides, meaning trust, fidelity, or confidence—is a person who occupies a position of trust, fidelity, or confidence in relation to someone else. The physician's conduct is not measured by that of, for example, the used-car salesman, because the principle of caveat emptor appropriate to arm's-length bargaining has no place in the doctor-patient relationship.
As fiduciaries, doctors owe a duty of loyalty to their patient's interests that requires them to elevate their conduct above that of commercial actors. In the words of Mr. Justice Cardozo:
Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A ... [fiduciary] is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.1
The potential for conflict of interest, and therefore abuse of trust, is ordinarily what brings fiduciary principles into play, but conflict of interest in fact is not essential to fiduciary status.
This paper describes the law's current approach to fiduciary aspects of physician-patient interaction. In tracing the development of the concept, issues have been analyzed for their potential impact on physician involvement in profit-making medical enterprises. A broad perspective was deemed useful to understand the subtle way in which fiduciary notions surround the physician-patient relationship with constraints on behavior not found in ordinary commercial transactions. Those constraints in turn are relevant to physician participation in what Dr. Arnold Relman has termed the medical-industrial complex, 2 even though they may have arisen in an entirely different context. On the basis of an analysis of fiduciary theory, this paper concludes that a physician's receipt of secondary income from the treatment he or she advises for a patient raises the spectre of wrongful manipulation of the trust essential to the physician-patient relationship.
The Physician-Patient Conflict of Interest Problem
At a fundamental level a patient's best interests will not always coincide with what seems to be the physician's most advantageous financial or professional position. Physicians are uniquely situated to persuade patients to purchase medical services, for patients rarely possess the sophisticated diagnostic skills that would prompt them to second guess physician advice. Moreover, when physicians are paid on a fee-for-service basis, their income increases the more services they provide, regardless of whether the patient actually needs them. If the physician works for a profit-sharing independent practice association (IPA) or health maintenance organization (HMO), the fewer services he or she provides the more money the physician makes at the end of the year, because patients pay by capitation. Similarly, the less time physicians on salary spend with patients, the more time they have for other professional pursuits. In these last two situations patients may not suspect they are getting short shrift because of the trust inherent in the physician-patient relationship. The threat of malpractice litigation helps to keep these incentives to over-and underuse medical care within bounds, but the possibility of conflict of interest at this primary level is inevitable because of one or another of these economic incentives.3
A different kind of conflict of interest, which could in large part be avoided, is involved when physicians derive secondary income from the care they order for their patients. This happens whenever physicians own substantial equity interests in medical service organizations to which they refer patients.4 Physician owners or shareholders in a hospital or nursing home do not realize their full income potential when the facility's beds are not fully occupied. When they can fill empty beds with their own patients, the economic incentive to inappropriate use is obvious. Likewise, a physician with a substantial financial interest in a laboratory, a CAT scanner, or a home health care service usually profits in direct relation to the number of lab tests, CAT scans, or paraprofessional services performed. The temptation for a doctor-owner to prescribe excessive quantities of these items is undeniable. They are usually covered by insurance; thus, reimbursement is certain and the patient does not pay directly out-of-pocket for their cost.
More disturbing, physician-owners of dialysis centers have sometimes been suspected of placing their renal patients on dialysis sooner than necessary to keep their profit-making stations fully used. Some have been accused of dragging their heels on the question of kidney transplants, which might obviate the need for dialysis altogether. Their bias against home dialysis, which is cheaper to deliver but arguably more risky, also has been noted. Because the original projections of how much it would cost to cover dialysis under Medicare were so wide of the mark,5 there has been much speculation about how much, if any, of the increase in cost can be attributed to the fact that a high percentage of dialysis is delivered by for-profit providers. 6 The dual capacity in which physician-owners of dialysis facilities function lends a credibility to this concern that would be diminished in direct proportion to the degree of separation between their diagnostic and therapeutic roles.
In all of these eases of physician involvement in for-profit medicine the conflict of interest could be avoided without damaging the essence of the physician-patient relationship. Simply prohibiting physicians from functioning in a dual capacity with respect to their patients would suffice. Physicians need not be forbidden to own nursing homes or dialysis facilities. Rather, they would not be allowed to send their own patients there. There are obvious disadvantages to such a solution because, for example, physicians might pay more attention to maintaining the standards of a nursing home if their patients resided there. There are also ways to circumvent it, because physician's could simply agree to send their patients to each other's profit-making facilities. However, other methods of enforcing standards and discouraging collusive behavior exist, and a prohibition at least would do away with the direct incentive to prescribe inappropriate care.
The real question is whether such a remedy is necessary or whether mere disclosure of the conflict of interest would sufficiently eliminate the potential for abuse. Is any "remedy" at all even appropriate? Alternatively, does physician involvement in for-profit medical care pose such a threat that more drastic responses are in order? The answers to these questions are unavoidably complex. They are also beyond the scope of this paper, because the true magnitude of abuse is difficult to gauge on the basis of available information. A discussion of how the law treats the fiduciary aspects of the physician-patient relationship, however, might throw some light on the issues.
Background of Fiduciary Law
Determining when a fiduciary relationship exists and exactly what standard of conduct applies is no easy task. The term fiduciary has been called "one of the most ill-defined, if not altogether misleading terms in ... law."7 Courts have deliberately refrained from precisely defining the nature of fiduciary duty, on the theory that they need flexibility to deal with the innumerable permutations of relationships and behavior spawned by changing economic and social conditions.
Fiduciary remedies originally sprang from courts of equity rather than courts of law, because the law provided no redress for breaches of trust.8 The label "fiduciary" need not necessarily be reserved for situations in which equitable rather than legal relief is requested, but the standard of care governing recovery in certain kinds of common law actions, such as for medical malpractice, may be heavily influenced by professional ethics with an "equity" origin. Fiduciary terminology thus appears in cases that allege violation of ordinary legal duty as well as less well defined fiduciary obligation. Courts also tend to use fiduciary terminology loosely to bolster a "correct" policy result when the factual circumstances support recovery for the plaintiff without the added moral weight of separate fiduciary concepts. Generally speaking, the law seems to affix the fiduciary label to specific factual situations, rather than to be guided by a well-structured theory of fiduciary obligation against which particular behavior can be tested. Analysis of the fiduciary aspects of physician-patient relationships thus is hindered by the lack of a precise analytical framework within which to examine the issue.
Fiduciary Theory in Medical Litigation
There are certain basic principles that help place the physician-as-fiduciary problem in perspective. Fiduciary relationships usually fall into one of three general categories—with the fiduciary seen as (1) guardian of property, (2) advisor, or (3) agent.9 The law may impose fiduciary responsibilities on physicians stemming from more than one of these categories. The following sections discuss cases in the context of these categories and speculate on the way they might apply to physicians' receipt of secondary income as a result of their treatment recommendations.
Physician As Guardian of Patient Property
The first category of fiduciary relationships applies to persons entrusted with other people's property. They are required to deal with the property so as to enhance the interests of their beneficiaries, even if that comes at the expense of their own interests. A trustee, for example, may not self-deal with respect to trust assets. If a trustee does, no matter how objectively reasonable the transaction may appear, any benefit to the trustee will inure to the trust and any loss must be made up from the trustee's own pocket.
Although physicians ordinarily have no direct control over their patients' property, they do have enormous power over the medical costs their patients incur. To the extent that financial self-interest—particularly in the secondary income sense—has the tendency to skew their medical advice, physicians may be considered fiduciaries with respect to their patients' financial resources.
Kickback Cases
Courts have not hesitated to condemn practices whereby physicians accept kickbacks for breach of fiduciary obligation to their patients. Thus, when a physician agreed with a lawyer to refer personal injury claimants in return for a kickback equal to the difference between the medical bill and one half of the combined medical and legal fees, the Massachusetts Supreme Judicial Court was characteristically acerbic in finding that the state licensing board had jurisdiction to revoke his license. Noting the physician's "high moral duty" to serve patients before he served himself, the court commented that "very few ... patients would be pleased to know that ... [their doctor] had received in addition to his medical bill a further sum out of the patient's money for no service rendered to the patient." 10
Similarly, a federal Court of Appeals strongly condemned the practice whereby optical companies kicked back one-third of the retail price of eyeglasses to referring eye specialists. Labeling the arrangements as "unconscionable and reprehensible contracts for secret kickbacks to a doctor," the court specifically found that they corrupted the fiduciary relationship between physician and patient.11 Not only do kickbacks distort a physician's incentive for referral from its proper focus—the best interests of the patient—but they also inflate the cost of the referred product or service. To the extent that the second provider builds the cost of the kickback into the cost of the referred item, its price goes up unnecessarily. Recent allegations of corrupt sales practices in the cardiac pacemaker industry provide a dramatic illustration of the inflationary impact of kickbacks.12
These cases bear as strongly on patient financial well-being as they do on patient physical health.13 The courts' opinions focus on the way the doctors' breaches of fiduciary duty impaired their patients' property interests by forcing them to pay unnecessary costs. If one applies this logic to the situation of physician involvement in for-profit medicine, the parallels at first seem close. In fact, physician involvement in profit-making medical enterprises looks even worse because the "kickbacks," or secondary income, actually come from the physicians themselves in their corporate persona. On closer examination, however, the factor that artificially inflates costs in the kickback cases—the fee for merely "referring"—is absent. Costs may be just as artificially inflated if the care is unnecessary, but this will not be the case universally. (The same concerns arise when the kickback is more sophisticated and less visible in the nonprofit context, as when physicians with high volumes of hospital admissions are rewarded with nominal or nonexistent rental charges for office space in hospital-owned buildings.) The kickback opinions suggest that disclosure of the conflict of interest might obviate the breach of fiduciary duty, and disclosure of the receipt of secondary income from recommended treatment options might go a long way toward alleviating the potential for abuse associated with physician ownership of the business entities to which he or she makes referrals.
Reimbursement Cases
There is another sense, however, in which physicians may be considered fiduciaries with respect to their patients' property. It is sometimes argued that a physician has a fiduciary obligation to the patient's pocketbook when it comes to prescribing medical care.14 The practice of hospitalizing patients for treatments that could be provided less expensively on an outpatient basis but that are covered by insurance only if done on inpatients is consistent with that thesis. The Robin Hood method of pricing widely practiced by physicians prior to the advent of Medicare and Medicaid—subsidizing medical care for the poor by surcharging the rich—is a variation on the same theme. The physician's fiduciary role in both of these situations involves the patient's finances in addition to his or her health. Whether the law imposes such a fiduciary responsibility on physicians, however, is virtually untested in the courts.
Occasionally a patient will seek to recover from the physician the cost of hospitalization that was determined to be unnecessary, and therefore unreimbursable, by a third-party payor's retrospective utilization review procedure. Those few cases may mention fiduciary principles in passing, but the theory for allowing the patient to recover hospital costs from the physician is usually breach of an implied contract not to prescribe unnecessary care. The potential for expansion of fiduciary liability in this area exists, however. Physicians clearly know better than patients when care is medically unnecessary and therefore vulnerable to an insurer's claims rejection process. In addition, they usually have a fairly clear idea about what kinds of care are likely to be reimbursable. A medically unsophisticated patient, on the other hand, ordinarily is reluctant to question a physician's opinion that he or she be hospitalized or undergo certain forms of therapy. Notwithstanding the rhetoric about informed consent, patients are conditioned to defer to physicians on matters of medical judgment. The analogy to trust law, although not perfect, is thus apt. The physician could be viewed as a trustee of the patient's financial resources, including insurance, with a fiduciary obligation to consider both health and finances in using them in the patient's best interests.
If physicians are considered such de facto trustees, when they derive secondary income from the treatment prescribed for their patients, they are in effect self-dealing. As previously noted, however, the law protects trust beneficiaries by prohibiting a trustee from benefiting by self-dealing. The temptations for abuse are considered so overwhelming that courts have responded by effectively eliminating any opportunity for gain on the part of the trustee. If one were to accept the trust analogy as appropriately applied to physician ownership of health care organizations, one would have to insulate physicians from any secondary income generated by their medical advice.
Girl and Contract Cases
Gift and contract cases involving physicians and patients fit neatly into the lay understanding of fiduciary transactions, for they seek direct recovery of the patient's property or to nullify the patient's contractual obligations. The kickback and reimbursement opinions also concern the patient's property rights, but in a more subtle sense. In those situations health insurance may have blunted the patient's awareness of the financial impact of receiving artificially costly or unnecessary care.
The theory underlying the gift and contract cases involves the potential for undue influence generated by the physician's dominant position in the relationship.15 These cases concern the physician's fiduciary role with respect to patient property rather than patient health. The fact that the fiduciary happens to be a physician is incidental to the analysis. It could just as well be a lawyer, a stockbroker, or anyone else in a position of trust with the opportunity—and the incentive—to exercise undue influence over the dependent party.
In some jurisdictions a presumption that undue influence was exercised arises whenever fiduciaries receive substantial benefits by gift or contract from their charges. However, it may be too harsh to apply a presumption that mechanically invalidates gifts or voids contracts between physicians and patients. The grateful patient is a real—if vanishing—phenomenon. Tangible expressions of gratitude should not be regarded routinely as the fruit of unconscionable behavior on the recipient's part. Each situation should be examined on its own to determine whether in fact the physician exercised undue influence in the property sense with respect to a particular patient.
The physician's fiduciary role as an advisor on questions of patient health is not at issue in these cases. Only if the facts demonstrate a special reason that the physician should be considered a fiduciary in the property sense should the law presume that substantial gifts or advantageous contracts unrelated to health care were procured through the exercise of undue influence. Such a finding might be appropriate when the patient was aged and infirm, or very young and impressionable, and no one else was interested in or responsible for the patient's financial well-being. It would not, however, be in order when the patient was mature and actively managing his or her own affairs. This is not to say that a competent adult could never be the victim of undue influence exercised by a physician. It simply means that the law should not presume the existence of undue influence—casting on physicians the burden of exonerating themselves—unless the circumstances dictate a particular reason for doing so.
With respect to physician involvement in for-profit medicine, the gift cases seem to have no particular relevance. The contract cases, however, are another matter. If a patient contracts with a physician's profit-making entity, such as a nursing. home; for ancillary health care services, the law should scrutinize the contract very closely for evidence that the patient was not improperly persuaded to agree to its terms. Perhaps a presumption of undue influence might be appropriate under those circumstances, requiring the physician to prove that the patient entered freely into the contract. Certainly, when the terms of the contract appear unduly advantageous to the physician, courts ought to be particularly alert to possible breach of fiduciary duty.
Physician As Advisor
The second general category of fiduciaries concerns people who act as advisors and who are therefore in a position to exercise undue influence over what their charges do. The lawyer counseling a client is the strongest example, but the physician-patient relationship is strikingly similar. Both of these professionals often function in a dual capacity. They not only advise with respect to their patients' or clients' options but they themselves also often provide the very professional services they counsel their advisees to accept or reject. At the outset, therefore, they may be faced with a conflict between their advisees' best interests and their own financial well-being. That conflict is intensified when, for example, physicians stand to profit additionally from the ancillary services they advise their patients to consume because of their equity interest in the organization providing the services. This aspect of the physician's fiduciary obligation is seen in several types of cases.
Confidentiality Cases
The Hippocratic oath states ''[w]hatever, in connection with my professional practice ... I may see or hear ... which ought not to be spoken abroad I will not divulge. ..." For more than 2,000 years physicians have taken that oath, pledging themselves to secrecy with respect to confidential medical information. This self-assumed duty has fiduciary quality, for patients have no choice but to trust their medical advisors when they reveal the intimate details of their lives. Complete openness is often essential to effective treatment, but such one-sided honesty diminishes the patient's ability to deal with the physician on a basis of equality. The duty of confidentiality, springing originally from ethical principles, is designed to reinforce the relationship of trust between physician and patient in the interest of getting to the root of the patient's medical and emotional problems.16
In discussing breaches of medical confidentiality, some courts analyze the physician's duty as an implied provision of the physician-patient contract. That may well be true, but the force of the duty goes beyond mere contractual analysis. Physician-patient interaction does not necessarily involve contractual principles, yet no one would claim that lack of a contract gives a political candidate's physician license to broadcast that the patient is suffering from, for example, a terminal or even a social disease.
Recovery for breach of the duty of confidentiality is sometimes granted squarely on fiduciary grounds, the contract aside, because of the broader range of available remedies. Contract recovery generally is limited to economic loss occasioned by the breach, whereas equity encompasses a broader range of remedies. For example, equity can redress the mental distress and damage to a marital relationship that often accompany unauthorized disclosure of medical information, whereas damages for breach of contract would not.17 Moreover, when physicians seek to disclose confidential medical information, courts can enjoin their behavior by citing fiduciary principles. Thus, when a psychiatrist published a book based on a thinly disguised account of a particular patient's therapy, a New York Supreme Court had no trouble enjoining its further distribution, as well as awarding damages, on the basis of a breach of fiduciary obligation.18
The confidentiality cases reinforce the concept of physicians as the guardians of their patients' total welfare. Although they are not always directly relevant to the issue of physician involvement in for-profit medical care, they demonstrate that injury to the patient's financial status can sometimes be as much the physician's responsibility as is the patient's medical condition or emotional state. Furthermore, when there is any suggestion that physicians are improperly using confidential medical information for personal gain, courts are quick to grant whatever redress is necessary to mitigate the damage caused by breach of the fiduciary relationship.
Statute of Limitations Cases
Another situation that raises the issue of the physician as fiduciary pertains to the applicable statute of limitations in medical malpractice cases. The law requires that at some point in time a patient's right to sue a doctor for malpractice must expire. Because memories fade, evidence is lost, and circumstances change with the passage of years, legislatures have passed statutes of limitation to govern the time period within which lawsuits must be brought. In some jurisdictions the date of the allegedly negligent act starts the limitations period running, although in others the discovery rule prevails (i.e., the statutory period begins with discovery of the injury). However, under a theory known as the continuous treatment doctrine, the cause of action will not accrue until the physician-patient relationship ends.19
The continuous treatment doctrine is based squarely on fiduciary considerations. It contemplates that patients can justifiably rely on their physician's good faith and professional ability during the course of the relationship. They are under no obligation to question the physician's techniques or to second guess opinions because they have a right to depend on the physician's fiduciary obligation to act solely in accordance with their best interests. Because physicians can cover up their mistakes during the continuation of treatment, they are not permitted to take advantage of a shorter limitations period during which they might have lulled the patient into a false sense of security or compromised the patient's ability to gain information about the true nature of his or her condition.
Here again the advisory role of the physician is the key to fiduciary responsibilities. The physician's dominance in the relationship is counterbalanced by special advantages granted to the patient by the law. Although the cases may not seem directly related to physician involvement in for-profit medicine, they highlight the fact that when a physician's self-interest conflicts with the patient's welfare, the law uses fiduciary theory to balance the scales in favor of the weaker party to the relationship.
Informed Consent Cases
Fiduciary aspects of the physician-patient relationship can also be seen in informed consent cases. The early informed consent opinions granted recovery to plaintiffs for unauthorized medical treatment on a battery rationale. If the patients had not consented to whatever procedures were performed, their physicians quite literally had trespassed upon their bodies. Over time, courts realized that such a simplistic analysis was not helpful in situations where patients had technically agreed to treatment but had not understood what their consent really meant. Informed consent cases thus came to be brought on the grounds of negligence rather than battery, on the theory that a physician's duty of care includes providing a certain level of information to the patient before proceeding with or abandoning treatment. The physician's special position of trust requires him or her to serve the patient's best interests, including the right to personal autonomy, above all else. Thus, the patient's consent will protect the physician only to the extent that the physician has not taken advantage of the fiduciary position to procure it.
The theory of recovery for failure to secure informed consent is grounded on the idea that, in the words of Mr. Justice Cardozo: ''Every human being of adult years and sound mind has a right to determine what shall be done with his own body...."20 In other words, the decision maker is the patient not the physician. Unfortunately for this rationale, the physician usually understands the implications of medical information much better than the average patient.
This inequality of knowledge, however, is precisely what triggers the fiduciary aspect of the transaction. The physician has tremendous power over patients because the physician possesses the technical information and understands its implications. The physician also controls access to two things that may be critical to the patient's health: hospital admission and availability of prescription drugs. Moreover, the physician has great influence with respect to channeling sick people to appropriate specialists. The comparatively impotent patient approaches the physician for advice, with little choice but to trust that it will be given with the patient's best interests in mind. The additional conflict of interest raised when physicians derive secondary income from the care they advise their patients to accept can only impair that trust. It may not be necessary to eliminate such conflict altogether, but disclosure would at least counter the suspicion that secrecy is symptomatic of unethical behavior. If disclosure raises patients' doubts about recommended care because they know it would generate secondary income for their doctors, patients could seek second opinions on its necessity or seek care from a physician who does not have such conflict of interest.
Physician as Agent
The third category of fiduciaries deals with agents, i.e., persons who act for others in a representative capacity. As fiduciaries, agents are not permitted to take personal advantage of business opportunities that come their way in the course of service to their principals. For example, an agent cannot purchase property for him or herself that is offered for sale at an advantageous price to a principal whom the agent represents. By analogy, when physicians make certain decisions for their patients, perhaps they should only do so untainted by the conflict of interest that the receipt of secondary profits from their decisions would entail. Cases involving the physician's so-called therapeutic privilege to withhold information from patients in their own interest provide good examples of this aspect of physician as fiduciary.
So long as a patient is competent the major exception to the principle of patient self-determination with respect to medical treatment concerns the therapeutic privilege doctrine.21 If a physician feels that a patient cannot deal psychologically with the truth about his or her medical condition or the treatment alternatives, therapeutic privilege permits the physician to adopt a paternalistic stance with regard to fact disclosure and decision making. In those relatively rare circumstances the patient's family acts as surrogate decision maker or, if family members are unwilling or unable to occupy that role, the physician may take on the decision-making function.
A physician acts as a fiduciary more in the agency than the advisory sense when preempting the patient's right to self-determination and preventing the patient from making decisions. The parallel to agency theory is not exact, because a true agent remains subject to the principal's commands. To the extent that a physician purports to act for the patient, however, the physician should be held to an agent's fiduciary standard of behavior. The physician can only justify depriving the patient of personal sovereignty if in the physician's professional opinion the patient's own best interests would otherwise be severely compromised. If the physician defends such drastic interference with the patient's fundamental right to self-determination on the grounds that the patient's best interests demand it, it should be obvious that any competing interests of the physician must be held to an irreducible minimum. If the exercise of therapeutic privilege were to be tainted by the physician's receipt of secondary income from treatment decisions the physician has made for the patient, a court might well find that this irreducible minimum has been exceeded.
There are other common physician-patient situations where fiduciary principles come into play, such as the human experimentation, right to die, and children's rights cases, but most of these in fact involve issues of informed consent. In addition, the physician's "fiduciary" duty toward society at large has been invoked in cases involving hospital staff privileges and the duty to warn third parties about potential harm from psychiatric patients.
It may be difficult to characterize some of these latter situations as involving the potential for conflict of interest in anything but an attenuated sense, but the use of fiduciary terminology to support the results reinforces the notion that the special societal status accorded physicians is accompanied by special responsibilities imposed by the judiciary. Legislatures can also impose special responsibilities, and one of the purposes of this paper is to stimulate thinking about whether that might be an advisable method for dealing with the conflict of interest presented by physician involvement in for-profit medical enterprises.
Conclusion
The foregoing discussion has traced development of the fiduciary principles applicable to physician-patient interaction, focusing on the way physicians have been considered fiduciaries in the property law sense, the advisory sense, and the agency sense. Although research has disclosed no cases directly raising fiduciary issues about physician involvement in the medical-industrial complex, an intriguing potential for liability exists.
A physician's receipt of secondary income from the services he or she recommends for a patient presents a potential conflict of interest with the patient's best interests. The conflict is intensified if we consider the physician a fiduciary on more than one basis when the physician advises a patient about treatment. In the first place the physician has fiduciary obligations arising out of the trust inherent in the role of advisor. Additionally, the physician might be considered a fiduciary in the property law sense because of the responsibilities toward the financial resources available for a patient's care. It is this intertwining of the advisory role with derivative power over the purse that exacerbates the potential for and seriousness of any abuse.
The law applicable to conflicts of interest generated by physician involvement in the medical-industrial complex is ripe for development. As noted previously, both the opportunity and the incentive for wrongful manipulation of the trust inherent in the physician-patient relationship are present. The issues may be resolved differently, however, depending on such factors as the percentage of the physician's ownership interest in a profit-making enterprise, the directness or indirectness of the secondary income benefit the physician receives, and the patient's ability to secure alternate forms of recommended treatment from other providers.
The content of the law that develops in this area will be affected by fiduciary theory, and a rather ironic development in a closely related area of the law probably will be influential as well. The Supreme Court has recently delivered several opinions facilitating antitrust litigation against the medical profession. By implication, these opinions damage the public perception of physicians as fiduciaries. Two decisions in particular, both rendered in the 1982 term, are especially relevant to the issue of physician involvement in for-profit medical care.
In Arizona v. Maricopa County Medical Society 22 the Supreme Court held that agreement among physicians on a schedule of maximum fees for health insurance reimbursement amounted to price fixing, illegal per se under the antitrust laws. The Court explicitly rejected the argument that the agreements should escape per se illegality categorization because they were entered into by medical professionals governed by ethical norms. On the facts of the case the Court refused to "distinguish the medical profession from any other provider of goods and services." In the other case, Federal Trade Commission v. American Medical Association,23 the Court let stand a lower court finding that the AMA was organized to carry on business for the profit of its members.
These cases focus attention on the behavior of physicians as persons in commerce in apparent contradiction to their historic fiduciary image. The Supreme Court has expressly recognized that physicians can be influenced by the profit motive differentiated from pure professional concern for their patients' interests. In other words, the more physicians behave like ordinary businessmen, fixing prices and lobbying for financial interest through trade associations, the more the courts are going to treat them that way. On the other hand, the more they adhere to their disinterested fiduciary role, the less likely they are to run afoul of laws designed to govern arm's-length commercial transactions. Perhaps a more stringent application of fiduciary principles to physician behavior might be in the best interests of the medical profession. In the long run, physicians might prefer to forego secondary income from the ancillary services they order for their patients if it reduces their overall exposure to liability. Their patients and society might benefit as well.
References and Notes
- 1.
- Meinhard v. Salmon, 164 N.E. 545, 546, (N.Y. 1928).
- PubMedLinks to PubMed
- Secondary Income From Recommended Treatment: Should Fiduciary Principles Constra...Secondary Income From Recommended Treatment: Should Fiduciary Principles Constrain Physician Behavior? - The New Health Care for Profit
- PREDICTED: Homo sapiens nebulin (NEB), transcript variant X31, mRNAPREDICTED: Homo sapiens nebulin (NEB), transcript variant X31, mRNAgi|2217328290|ref|XM_017004184.2|Nucleotide
- PREDICTED: Homo sapiens nebulin (NEB), transcript variant X41, mRNAPREDICTED: Homo sapiens nebulin (NEB), transcript variant X41, mRNAgi|2217328305|ref|XM_011511226.3|Nucleotide
- nebulin isoform X1 [Homo sapiens]nebulin isoform X1 [Homo sapiens]gi|2462573578|ref|XP_054198186.1|Protein
- PREDICTED: Homo sapiens nebulin (NEB), transcript variant X13, mRNAPREDICTED: Homo sapiens nebulin (NEB), transcript variant X13, mRNAgi|2217328270|ref|XM_047444478.1|Nucleotide
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