3807 ELMWOOD AVENUE LOUISVILLE, KENTUCKY 40207 TELEPHONE: 502-895-9761 FAX: 502-897-2461
MAY 30, 1996

Mr. Chairman and Members of the Committee:

My name is Linda Peeno. I am a physician with training in Internal Medicine and Infectious Diseases. Currently, I work in the field of medical and health care ethics. As part of this effort, I chair a hospital ethics committee (University of Louisville Hospital), for which I do consultation, education and policy development. I am the executive director of an international academic society (International Society for the Systems Sciences), and as chair of its Medicine and Healthcare group, I work on ethical issues in international health care systems. I serve on the national board of Citizen Action, a non-partisan consumer organization, through which I work toward equitable health reform. I am the founder of the CARE Foundation, a nonprofit group organized to promote consumer education, public accountability, and ethical responsibility in managed care. I am here to represent the largest interest group in our health care system: those affected by its design and operations, those who validate its consequences within their lives.


As a former medical director, I have done the dirty work of managed care. This prompted me to leave and work aggressively for health care ethics. Because I know how the "system" works, I am best able to identify its ethical transgressions and suggest corrections.

Health care is a special category of business in that every decision, whether clinical or economic, has an ethical component. The ethical issues for "managed care" fall into four major categories of concern: professional, medical, business, and social. Some of the more important areas for attention include: the lack of professional code of ethics for physician executives; interference with the principles of informed consent and patient autonomy; violation of consumer rights; and social maleficence in obstruction to access and delivery.

I contend that "managed care," as we currently know it, is inherently unethical in its organization and operation. Furthermore, I maintain that we have an industry which can exist only through flagrant ethical violations against individuals and the public. Based on my experience, a health plan's resistance to ethical correctives will be proportionate to its reliance on ethical transgressions for its "success." We must not sanction their unethical practices at the expense of individual rights and public good will.

Although the "managed care" industry is quick to defend its actions with high-sounding justifications, their claims break down under examination. For example, can they really support the argument that the effects of "managed care" are necessary for the "good of society." What does this mean? Who should decide this? Can this be appropriately determined by the entity who stands to benefit the most from an economic definition of this "good"?

The systemic ethical problems in managed care require urgent correction in several areas: the monitoring of denials of care; the elimination of certain contracting arrangements with physicians; the requirement for full disclosures of financial arrangements, cost-cutting strategies, and consumer information; the development of open and reported grievance procedures; and the mandate of ethical guides and processes. How could the industry object? After all, this is just a way for "managed care" to apply its own processes of "quality management" and "outcome analysis" to itself?

Nothing less than the life and well-being of our society depends upon this. We have gone too far under our current system called "managed care." How much more harm and death must occur before we have the courage to do something about it?


I wish to begin by making a public confession: In the spring of 1987, as a physician, I caused the death of a man.

Although this was known to many people, I have not been taken before any court of law or called to account for this in any professional or public forum. In fact, just the opposite occurred: I was "rewarded" for this. It bought me an improved reputation in my job, and contributed to my advancement afterwards. Not only did I demonstrate I could indeed do what was expected of me, I exemplified the "good" company doctor: I saved a half million dollars!

Since that day, I have lived with this act, and many others, eating into my heart and soul. For me, a physician is a professional charged with the care, or healing, of his or her fellow human beings. The primary ethical norm is: do no harm. I did worse: I caused a death. Instead of using a clumsy, bloody weapon, I used the simplest, cleanest of tools: my words. The man died because I denied him a necessary operation to save his heart. I felt little pain or remorse at the time. The man's faceless distance soothed my conscience. Like a skilled soldier, I was trained for this moment. When any moral qualms arose, I was to remember: I am not denying care; I am only denying payment.

At the time, this helped avoid any sense of responsibility for my decision. Now I am no longer willing to accept this escapist reasoning that allowed me to rationalize this action. I accept my responsibility now for this man's death, as well as for the immeasurable pain and suffering many other decisions of mine caused.

For me, "ethics" must be done close range. Distance blurs the complexities of human experiences. Those who argue that "the further removed, the clearer the thinking" are those who too often use "ethics" as legalism, public relations, or high-sounding rationalization. I would argue that, at least in medicine, one's ethical "authority" diminishes the further one is from the frontlines of patient experiences.

This is why I do not call myself an "ethicist." I am less interested in the theoretical claims and more interested in the experience of persons who suffer the effects of these claims. For me "ethics" is the process of determining how to function day in and day out, in the tiny, painful, exhausting step by step decisions of everyday life. I maintain that we can never escape accountability for the consequences of our decisions and actions, however remote they seem. Furthermore, I believe we are responsible not only for what we do, but what we set in motion.

Since leaving my last corporate position, I have devoted my personal and professional life to concerns for medical and health care ethics at the level of the consumer/patient experience. If I am an expert, it is in the ways in which harm occurs in our system, and the ways it affects the lives of people who have trusted doctors and insurance companies with their care. I have forged this knowledge not from the safe, painless study of ethics from a distance, but from the close participation in a system's ethical transgressions. s.

Nothing in my education as a physician prepared me for what I experienced as an "executive doctor." I thought I could easily translate my professional code of ethics as a physician to my work in the business of health care. I left my job as a medical reviewer for Humana's national market, to become the medical director of a 35,000 member HMO. Later, my work as a medical director in a hospital and as a physician executive at Blue Cross/Blue Shield of Kentucky convinced me that the place made no difference. Whether it was non-profit or for-profit, whether it was a health plan or hospital, I had a common task: using my medical expertise for the financial benefit of the organization, often at great harm and potentially death, to some patients.

When I realized this, I could no longer do these jobs. I left a six figure job in order to work for the persons with the least voice in health care: patients. This required more than medical education. I have spent the past four years studying in areas of ethics and philosophy; medical and health care law; health care organization and financing; utilization and quality management; information resources management; and international health care systems analysis. I have used my "expertise" to assist in health reform, public and professional education, and international health system design. My work has taken me from community rooms in rural USA to townships in South Africa. I struggle with the tensions between individual and society, between care and cost, between ethics and economics -- close range. I do not take the luxury of doing this remotely, safe from the "battlefield." As difficult as it is, I put myself continuously at the level of pain and suffering so I cannot ever forget the connection between the "system" and its consequences.

Also, I have taken seriously my own ethical responsibilities: I have educated myself not only with the books, but with the stories of people who suffer. I have painfully dissected every experience of my own from the inside out, until I understand the ways they represent industry practice, their ethical implications, and how it is possible to go awry. I have taken every penny "earned" from my work in this and folded it back into work to benefit those affected by an increasingly heartless health care system.

I do this because I know the system inside and out. I know where the dangers are. Although many persons are quick to extol the ease and affordability of their plan, the real tests come when someone needs something expensive. Like a bucolic pasture turn battlefield, the landmines start exploding everywhere. (I know because I have helped set more than a few.) These landmines were part of my ordinary armamentarium -- including some of the below:

I am the evidence that managed care is inherently unethical, in the areas of both medicine and business. Had my experiences been the result of merely local aberrations, I would not have had anything to do for the past six years. On the contrary, I discovered that my experiences are standard practice and quite ordinary for the managed care business. This fuels my work in ethics. The greatest irony to me is how the words "quality" and "outcome" have come to be industry buzz words, yet neither are ever applied to the managed care practice itself. We have enough stories of maleficence by managed care to fill tomes, and yet we continue to allow the industry to claim that these occurrences are simple anecdotes. As long as we accept that rationale, we sanction a system that is functioning with virtually no checks and balances -- ethical or legal. At a time when nearly every other human endeavor faces ethical scrutiny, how can we allow a particular industry to escape -- especially one with so much potential harm?

At the level of medical practice, we have rightfully abandoned the paternalistic model of medicine -- i.e. we not longer believe that a professional can do certain things in certain ways regardless of effects so long ng as it is justified by benevolent reasons. Furthermore, we do not subscribe in this country to authoritative use of power to override individual protection and rights for some purported "greater good," especially if that "good" has not been worked out through the democratic process. We have two major reasons to scrutinize the unethical practice of managed care.

Our claims to the "best health care system" in the world is beginning to have a cynical truth. We certainly do the business of health care better than anyone else. As a result, we have entered a dire phase others should avoid. We have created a monster system, one in which among other transgressions, a physician can receive a high income for doing the reverse of the profession. Instead of delivering care, a physician can be significantly rewarded for denying it. What matters if individual patients are harmed or killed, if the professional is true to a higher mission for society?

Ethical action produces trust, dependability, harmony. It depends upon equity and disclosure. We have no ethical foundation if we are producing discord and destruction of human bodies and spirits. The ethical process of managed care must be worked out within the context of its effects, close to its consequences, attentive to the stories of those who are most adversely affected.

The real societal good -- our well-being and lives -- depend upon it.



The current activity called "managed care" presents us with a conundrum: is it possible to have ethical managed care? Have we created a system which is so dependent upon misrepresentation, deception, manipulation, and coercion (and fraud in some cases) to achieve its results, that it is impossible to do this business ethically? If the "success" of managed care really depends upon responsible practices, then the health care industry should have no problems implementing ethical correctives. However, if it is not, can we justify a "system" so blatantly unethical? I maintain that the health care business should be held to the same professional, organizational and social standards as other businesses. Even these standards alone are not enough, however, for health care must also meet the standards set by medical ethics as well.

Some areas in which we should consider ethical correctives for managed care include:

Typical roles and functions of health care organization ethics committees include:

There are many lessons from other organizational committees in health care to validate the value of the committee process for guidance and resolution of ethical issues. Some general observations include:


I contend that managed care, as it has become, can exist only through serious ethical transgressions against individuals and society. Furthermore, I contend that a health plan's resistance to ethical correctives is proportionate to its reliance on ethical transgressions for its "success." Disclosure and exposure would present serious disadvantages in competition for cost-cutting and profit making. In summary, it is a fair assessment to claim that managed care's "success" depends upon the following:

The list could go on, however, there is enough here to suggest drastic needs for change. Of course, each of these would be vehemently contested by the managed care industry. If they are inaccurate, then it seems that the industry should have no reservations about supporting transparent and publicly accountable activities. We know, though, they do object to this. Why? Because control of patients and doctors depends upon unethical practices. To this, at least, we should object. Manipulation and exploitation for any reason, even beneficence, is unethical and destructive of social good.

We have enough experiences from history to demonstrate the consequences of secretive, unregulated systems which go awry. The list above is not new. In fact, it comes from a book detailing the characteristics of a dire period of recent history.3 The last time this combination of forces worked in concert, over 200,000 individuals lost their lives in Nazi Germany (even before the Final Solution). Most of these persons were German citizens sacrificed for medical reasons set by economic and social agendas. I find the parallels chilling. One can only wonder: how much pain, suffering and death will we have before we have the courage to change our course?

Personally, I have decided even one death is too much for me.