Ethics Analysis Problems

Ethics Analysis Problems

Case Studies (clearly and completely respond to the questions)

1.) Wal-Mart has the highest profit margins in the industry at 16%. A union has filed suit against Wal-Mart for its “off-the-clock” (without pay) practices with respect to manager trainees. These trainees worked 4-5 hours extra each week without pay to receive managerial training and evaluation. The trainees did not complain because of the supervisor’s promise of progression in the organization. When progression did not materialize, the trainees returned to check-out line positions and their union filed a class action suit on their behalf. The potential for back pay and penalties in the case is $2 billion according to the legal counsel for the Union. Wal-Mart notes that some managers may encourage trainees to work longer without pay but that such is not company policy. Wal-Mart also contends that none of their supervisors put a gun to the head of the manager trainees forcing them to work “off-the-clock”. Wal-Mart also contends that their managers are well-paid and that the number of candidates seeking these positions are high and most are willing to train for free just to have a shot at obtaining one of these positions. Finally, Wal-Mart has been a profitable business for decades and will fight any lawsuit to a final adjudication without settling out of

court, saying “get ready for a long legal battle”.

a.) Who is responsible for the “off-the-clock” policy? Why?

b.) Is the “off-the-clock” policy an ethical dilemma? Why or Why not?

c.) Does this policy violate the Christian ethical principles taught in this course? Why?

 

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2.) St. Augustine Clinics (SAC) is a multinational health care enterprise with 251 hospitals on four continents. SAC was started by Payne Nogane, a tax attorney, in the early 1990s. Nogane's development of SAC was possible because of the implementation of the Medicare and Medicaid programs. He saw the programs as opportunities for a virtual guarantee of profits. With the passage of Obamacare, Nogane believes he is sitting on a cash cow.

 

He began by acquiring six hospitals. He paid for these hospitals with promises to the physicians on staff with stock in his company. After the six hospitals were acquired in 1992, Nogane performed a $41 million national stock offering and gave the physicians shares of stock in SAC.

Nogane adopted a decentralized structure for the company. Hospital managers were simply given a financial goal and complete autonomy in their operations. Nogane traveled a great deal and used a company plane to get to SAC-owned condominiums in Manhattan and the Florida Keys. While

Nogane was not a hands-on manager, he set very clear goals for SAC managers. Achievement of established goals was rewarded. Under SAC's pay structure, it was possible for managers to double their pay by meeting goals. Nogane was harsh when goals were not met. In meetings he would refer to those executives who had failed to meet established goals as "morons." “Fire the morons before they make us go broke” he said.

 

Nogane's managerial style paid off in the form of earnings growth of 15% per year through 1998. But, in 2000, earnings growth was off, down to 10%.

 

When informed by his managers of the decline in earnings growth, Nogane announced that SAC would now focus on operating and acquiring psychiatric, substance-abuse and rehabilitation hospitals. SAC had 62 psychiatric hospitals in 1996, but by 2001, that number had grown to 86.

Further, SAC occupancy rates for its psychiatric hospitals were 25% higher than any of its competitors. SAC maintained an occupancy rate of 84%.

 

The director of SAC's Fair Oaks Hospital in New Jersey, testified at a Congressional hearing that SAC executives circulated information on how to maximize insurance payments. Strategies included longer stays and additional tests.

SAC's intake manual specified as a goal that one of every two people who came to the hospital for a psychological assessment would be hospitalized.

Some adolescent patients were billed for as many as 10 therapy sessions per day. A memo from one senior officer to the various SAC hospitals stated that the length of a patient's stay would be determined "not by the patient's individual medical needs, but on the insurance or payor mix." A controller for an SAC hospital in Texas testified that probation officers, clergymen and officers in corporation employee-assistance offices were offered up to $5,000 in referral or "bounty hunter fees" for referring patients to SAC. The controller also testified that he was required to make "cold calls" on facilities for purposes of soliciting referrals. He indicated that one of his cold calls was to a nursery school.

Former executives of SAC have provided information showing that physicians were given 50-year leases for $1 per year by SAC and then referred their patients exclusively to SAC hospitals. Many of these physician-occupied buildings operated at a loss. Both Medicare and Medicaid regulations prohibit payment of referrals fees to physicians.

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By 2012, occupancy rates at SAC psychiatric hospitals were down to 52%. Nogane began selling of the psychiatric hospitals and announced to shareholders than SAC would return its focus to its core 35 general hospitals. In announcing the refocus to shareholder, Nogane said the passage of Obamacare (Patient Protection and Affordable Care Act) as the reason for his need to restructure. "Our focus is on the patient. We know everything else will follow.”

a. Describe the ethical culture which existed at SAC?

b. What does SAC need to change about their approach?

c. Do you think SAC's strategies with respect to the psychiatric hospitals were ethical?

d. Evaluate the ethics of clergymen, counselors, and probation officers accepting referral fees.