Taking a Cue from Medicine
Indianapolis Star, July 25, 2002
Recent revelations of fraud at Enron, WorldCom and other companies have shaken public trust in the stock market. Increasingly, individuals are becoming reluctant to invest their savings in our economy. Future growth is threatened. If people cannot trust what businesses and their accountants report, our capitalist system cannot function properly.
It did not have to happen.
With more aggressive action by the business world and by government early on, we could have avoided the current crisis in confidence. Indeed, we can learn much about restoring public confidence and avoiding future crises from the medical profession’s response to its own threat to public trust a decade ago.
At that time, people were becoming very concerned about self-dealing by doctors. Many physicians were investing in CT scanners and other medical facilities and sending their patients to the facilities for tests. Every time the physician-investors ordered an x-ray, they made a tidy profit. That encouraged physicians to order unnecessary tests. It also encouraged referral of patients to the physicians’ own facility, even if a higher quality facility was available. This “self-referral” was wrong.
Just as it wasn’t right for corporate executives at Enron or our own power company (IPALCO/AES) to enrich themselves at the expense of their employees and shareholders, it wasn’t right for doctors to enrich themselves at the expense of their patients. Patient trust was becoming compromised.
When this was happening, I was directing the American Medical Association’s division of medical ethics. We quickly recognized the need to address the problem and restore patient confidence. We therefore drafted a new policy for the AMA’s code of ethics that broadly prohibited physician self-dealing in the form of self-referral. After the AMA changed its position, Congress changed the law. By acting firmly and decisively, doctors and legislators avoided a crisis in confidence in the medical profession, the kind of crisis that we’re going through now with the stock market.
We cannot turn back the clock on Enron and WorldCom, but we can act to minimize the damage and restore public trust. We need to enact tough measures that prohibit the kinds of self-dealing that have been abused by corporate executives and their accountants.
Accounting companies should not be able to provide consulting services to companies whose books they audit. Executive compensation should be linked to a company’s long-term performance. Officers should be held accountable for their company’s fraud, without being able to scapegoat mid-level managers.
Public trust is difficult to restore once lost. The stock market has continued to fall despite efforts by President Bush to provide reassurance. Half measures are not enough. Accordingly, it is especially important to move quickly and aggressively from this point on.
Orentlicher is a doctor and lawyer and professor at the Indiana University Schools of Law and Medicine in Indianapolis. He is the Democratic candidate for state representative, 86th District, Indianapolis.
Committee to Elect David Orentlicher