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Question 3c

Quark Healthcare (Quark) runs a number of large hospitals which provide general medical care for the people of Veeland. Veeland is an advanced economy and healthcare is considered to be a high skill, high technology and high status industry. It is compulsory for the people of Veeland to purchase health insurance and then the insurance companies reimburse the healthcare providers for services delivered. The insurance companies audit the healthcare providers and grade them for value for money. As there are a number of hospital chains (such as Quark), the insurers will encourage their insured customers to use those which are most efficient.The ultimate sanction for a healthcare provider is for an insurance company to remove them from the list of acceptable providers.

Quark has large amounts of capital tied up in expensive medical equipment and a drug inventory. The existing systems for accounting for these items are traditional ones aimed at avoiding theft and obsolescence. Quark has an inventory system which requires regular (weekly) physical checks of the drugs in inventory in order to update it. It is important that the right drugs must be in easily accessible stores (located throughout the hospital) in order to act quickly in case of a medical emergency. Also, the accounting staff at Quark maintain a non-current asset register (NCAR) which logs the location of all major assets including medical equipment. The problem with the non-current asset register is that it is often out-of-date as doctors will take equipment in time of emergency and not properly log its new location. This often leads to equipment lying unused in one area of the hospital while being searched for in another area, to the detriment of patient care.

Quark has recently instituted a tagging project where radio-frequency identification devices (RFID) will be attached to the most valuable pieces of equipment used in treatment and also to batches of high-value drugs. The hospitals are fitted with WiFi networks which can pick up the RFID signal so that the RFID tags will be detectable throughout a hospital. The tags will identify the object which they are attached to by a unique identification number and will give its location. The identifier number will link to the inventory system which will identify the product, the quantity initially delivered in that batch and the date of delivery. The RFID information will be accessible through the computer terminals throughout the hospitals.

The chief financial officer (CFO) of Quark has asked you to advise him on the impact of this new system on performance management at Quark. He has suggested that you look at the costs and benefits which will be associated with producing the information from the RFID system, the impact of the nature of the information supplied, the changes to performance management reporting and how the new information could be used for improved control at the hospital. He is keen to be seen to be at the forefront of accounting and management developments and has been reading about cost control techniques. Recently, he has heard about ‘lean’ systems, so wants to know how the RFID system and its impact on the hospital fit with this concept. Given the importance of the medical staff in running the hospital, he also wants to know how their behaviour will be affected by the control information from the RFID system. There is a very strict social order among these staff (in increasing order of skills: nurses, general doctors and specialist doctors) which regularly causes friction when one group feels it is not given its due status. For example, recently, the general doctors agreed to a new method for nurses to record drugs administered to patients but this new system has not been fully implemented due to complaints by the nurses and specialist doctors who were not consulted on the change.

Required:
(c) Evaluate how the medical staff’s attitudes will influence the design and implementation of the RFID system and how it might be used to promote responsibility and accountability at the hospital. (6 marks)