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Editorial AUGUST 2007

The Ethics of Monopoly and Monopsony Power in Academic Medical Centers

Frank A. Chervenak, MD; Laurence B. McCullough, PhD

A teaching hospital can gain monopsony power over a medical school, as when an OB/GYN department has highly regarded voluntary faculty who compete with full-time faculty, and with whom the hospital has preferential arrangements. Because the medical school needs the teaching hospital to support faculty, provide clinical training for students, and conduct research, it must respond to the teaching hospital’s monopsony.

A particular service within an OB/GYN department may gain monopoly power by creating financial and expertise barriers to entry, as with an assisted-reproduction medicine service. In settings where the medical school controls hospital privileges it is the sole provider of these services, gaining a monopoly over the hospital. Thus, the medical school’s monopoly power is considerable in closed-staff hospitals in contrast to the weaker power of a medical school affiliated with an open-staff hospital.

The ethical concept of cofidu-ciary responsibility provides a basis for responsible management of such power relationships in academic medical centers. This concept comes to us from the British physician-ethicists John Gregory (1724-1773) and Thomas Percival (1740-1804). They identified three components of this ethical concept3:

• Physicians and hospitals should be scientifically and clinically competent, basing clinical practice and its continuous improvement on evidence-based medicine
• Physicians and hospitals should act primarily for the benefit of patients, keeping
  self-interest—including economic interests—systematically secondary
• Medicine and hospitals are public trusts that should be managed for the long-term benefit of patients and society, not primarily for the self-interests of physicians and hospitals—including legitimate and even urgent economic interests.

In the clinical setting, Brody4 and Wear5 have argued that clinical transparency obligates the physician to provide clinically reliable information to the patient. The transparency of the informed consent process in which patients are provided information that they need protects the patient from the potential for exploitation that results from a disparity of power.

Transparency also legitimatizes monopoly and monopsony power in academic medical centers. The leadership of both the medical school and the teaching hospital should routinely provide each other with information about economic self-interests that are necessary for fulfilling cofiduciary responsibility. For example, improving the quality of patient care is a fundamental cofiduciary responsibility that also costs money. Business plans should clearly define the true costs of continuous quality enhancement and revenues available to cover them. To avoid exploitation of monopsony power of the teaching hospital the assumption of costs by each party should reflect the portion of the benefit claimed by each party. The calculation of costs should be rigorous, comprehensive, and honest. Otherwise, the teaching hospital can exploit the medical school by shifting costs to it thus impeding patient care, education, and research. The medical school can exploit the teaching hospital by demanding excessive reimbursements to cover the costs of its own (sometimes inefficient) bureaucracies.

Failure to achieve transparency results in both parties Àgaming” the system by various means, such as strategic procrastination and strategic ambiguity,6 misdirection, and outright deception, which corrupt the organizational culture.7

It is important to distinguish the reality of transparency from its appearance. From a desire or need to protect monopoly or monopsony one or both parties could simulate transparency by publicly committing themselves to it but then not funding the requisite infrastructure (eg, committing to quality enhancement without paying for data collection, analysis, and dissemination; or requiring management accountability). The appearance of transparency may advance monopoly or monopsony power but should never be mistaken for transparency itself.

An ethical perspective on monopoly and monopsony power is essential for understanding the complex power relationships between medical schools and their teaching hospitals. Both institutions must strive to implement cofiduciary responsibility for excellence in patient care, medical education, and research.1

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Frank A. Chervenak, MD, Editorial Advisory Board Member. Laurence B. McCullough, PhD, Professor of Medicine and Medical Ethics Center for Medical Ethics and Health Policy Baylor College of Medicine Houston, TX.

References

1. Chervenak FA, McCullough LB. Responsibly managing the medical school-teaching hospital relationship. Acad Med. 2005;80(7): 690-693.
2. Pauly MV. Managed care, market power, and monopsony. Health Serv Res 1998;33(5 pt 2):1439-1460.
3. McCullough LB. John Gregory (1724-1773) and the Invention of Professional Medical Ethics and the Profession of Medicine. Dordrecht, The Netherlands: Kluwer Academic; 1998.
4. Brody H. Transparency: informed consent in primary care. Hastings Cent Rep. 1989;19(5):5-9.
5. Wear S. Informed Consent: Patient Autonomy and Physician Beneficence within Health Care. 2nd ed. Washington, DC: Georgetown University Press; 2003.
6. Chervenak FA, McCullough LB. Physicians and hospital managers as cofiduciaries of patients: rhetoric or reality? J Healthc Manag. 2003;48(3):172-179.
7. Chervenak FA, McCullough LB. The Diagnosis and management of progressive dysfunction of health care organizations. Obstet Gynecol. 2005;105(4):882-887.

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