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AAOS Now

Published 10/1/2008
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Marty Krawczyk

Cornerstones of effective governance: Values and ethics

Basing decisions on ethical values is good business

The word “governance” became a common business buzz word following the headline-making corporate scandals of companies such as Enron and WorldCom. The Sarbanes-Oxley Act of 2002 aimed to prevent the recurrence of such white-collar crimes through strict corporate governance guidelines that hold management, boards, and accounting firms accountable for the reporting of financial information.

The current interpretation of governance requires that the governing members of an organization—whether a corporate board of directors or the partners in an orthopaedic practice—establish policies, continuously monitor their implementation, and develop systems and processes of accountability to ensure the organization’s stability and prosperity. This is by no means an easy task, but orthopaedic surgeons can use certain cornerstones to build effective governance structures for their practices.

Core values set the standard
The cornerstones of governance are values and ethics. In medicine, values and ethics are the foundation for developing the principles that guide the delivery of health care. These cornerstones are also essential in building the business side of a medical practice.

For example, a practice might adopt the following core value: “To treat each employee, patient, business partner, and the community-at-large with dignity, honesty, and respect.” The business plan and administrative processes should then be aligned to ensure that physicians and staff can demonstrate their commitment to this core value as they perform their daily duties. The partners, as business leaders, must set the standard and example; staff and other business partners will follow if they believe the value is consistently applied.

The second cornerstone of governance is to incorporate ethics in business practice decisions. Physicians adhere to ethical standards in the practice of medicine and as business leaders; they have a moral obligation to evaluate the impact of their business decisions on various stakeholders, such as patients, employees, and the community—anyone who is affected by the practice.

How does ethics apply to practice decisions? An example might be a practice that has adopted the goal of increasing profits by 15 percent each year. To accomplish this goal next year, the practice will need to delay moving to larger offices until at least the following budget year. Before making that decision, proper governance demands that the decision-makers consider the impact of this decision on various stakeholders, perhaps by asking the following questions:

  • Is the current practice location causing overcrowding of the waiting room, patient care rooms, and business office?
  • Is safety, quality of care, or the professionalism of physicians and staff compromised?
  • Does the current volume of patients visiting the office have an impact on traffic congestion that negatively affects patients, staff, and the community?
  • Will the decision to delay the move and meet the profit goal compromise the core value of the practice, “To treat each employee, patient, business partner, and the community-at-large with dignity, honesty, and respect”?

Orthopaedic practices often face tough and challenging business decisions. When the most difficult business decisions in a practice are consistently based on the values and ethics inherent in governance, however, the practice will almost certainly profit and grow in the long term. Consistent demonstration of commitment to values and to good governance practices fosters trust—and trust between patients and physicians is key to growth.

Aligning actions toward mutual goals
An effective governance structure recognizes the needs of individuals (stakeholders) and aligns the actions of all individuals connected to the practice—physicians, staff, patients, and business partners—toward mutual goals. These goals may include higher standards for patient care and increased productivity, among others.

Effective governance practice also encourages stakeholders to identify, communicate, and recommend solutions related to the changing needs of the practice. Immediate and short-term needs are addressed in a timely manner; long-term needs are integrated into the business plan.

A practice that consistently demonstrates that values and ethics guide decision-making engenders trust among the stakeholders. Within an office setting, trust builds morale, leading to increased productivity, which eventually increases profits. In their book Gung Ho!, Ken Blanchard and Sheldon Bowles show how productivity and profits can be increased using values as part of the business plan. As they write, “Values guide all plans, decisions and actions. Values are now.....Values are lived....Values sustain the effort.”

Marty Krawczyk is a practice management program coordinator in the AAOS practice management group. She can be reached at krawczyk@aaos.org or (847) 384-4337.