Do Conflicts of Interest Exist in Other Professions?

Do you ever wonder if something similar to Standard 3 of the FASEA Code of Ethics on the ban of conflicts of interest and referral payments for financial advisers applies to other professions.

I went to a doctor yesterday and he referred me to a pathologist to get a standard test done. The referral was on a document in the name of the pathologist. I though little of it at the time, except for the fact that when I went to the pathologist, there was another pathologist next door. I started to wonder why my doctor referred me to one pathologist, rather than the other. That got me thinking.

Looking at the Annual Reports

The pathologist is a listed company, so I thought that I would have a look at what their Annual Report had to say about arrangements with doctors. I discovered a few interesting statements, including “In Australia, approximately 25% of specimens are collected by the referring doctor”. I wondered who pays for what in this case. I also saw the following statement:

“Payments to doctors in medical centre and occupational health businesses in exchange for contracting the Group’s services for a period of time are capitalised as a contract asset and amortised on a straight-line basis against revenue over the life of the contract.

So, doctors are being paid money to sign long term contracts in return for providing their pathology work to a specific pathologist. Interesting! So, I dug a bit further and found this in the 2019 report:

“The Group makes payments to doctors (customers) in its medical centre and occupational health businesses in exchange for contracting the Group’s services for an agreed period of time. These payments were previously capitalised as an intangible asset and amortised through the amortisation of intangibles line in the Income Statement. The amount that has been recognised against revenue for the year to 30 June 2019 is $9,284,000, with a balance of unamortised payments of $24,866,000 in the Receivables lines at the period end.

What does this Mean and how does it align with the FASEA Code of Ethics?

The pathologist sees the doctors as their customer, however the doctor’s clients are their patients, and they should be referring their patients to the best provider. To be frank, I have no big problem with this, in terms of either the doctor or the pathologist. Importantly, however, it is not disclosed to the patient, and you just have to assume that all pathologists are similarly capable. It does however make me reflect back on the FASEA Code of Ethics. Paragraph 37 of the FASEA Code of Ethics Explanatory Statement is pretty blunt in terms of Standard 3:

“37. The primary ethical duty in this Standard is that, if you have a conflict of interest or duty, you must disclose the conflict to the client and you must not act.”

Would pathology referrals need to come to a grinding halt if FASEA Standard 3 applied to doctors? It also takes me back to reflect upon the particularly idealistic statement in the introduction to the FASEA Code of Ethics. Contrasting this with the bill you get from a medical specialist, would make you laugh, or maybe cry:

“While the ethos of “the market” legitimises the pursuit of self-interest through the satisfaction of others’ wants, the ethos of “the professions” aims to secure the public good through the subordination of self-interest in favour of serving the interests of others.”

I wonder if FASEA took the time to contrast what happens in other professions before they quickly put in place the final wording of Standard 3 in February 2019. I suspect not. Hopefully with the benefit of time, they will change this Standard and we can all go back to working and living in the real world.