Union Medical Center Case
4AA3
Union Medical Center
April 2, 2015
Richard Veller, the new CFO for Union Medical Center, began to change the operations of their management. Richard Veller looked to change UMC to an industrial system, which meant that the hospital would view cases as products. Just like any ordinary business, these products would have cost objects and would require an accounting system. In order to allocate costs appropriately, UMC was required to organize their cases into Diagnosis Related Groups to create a functional management control system. These changes brought certain internal issues into the spotlight. If solutions are not found, the hospital will not be able to implement their plans.
Issue 1: Lack of control over use of resources
Management currently has an extremely lack luster regulation over the expenditure of resources. The main reason that has caused the leakage of resources is because the hospital also serves as a teaching institution. The issue here is that the hospital must accommodate for these residency students. However, residency students have been recklessly using the hospital’s resources such as equipment and electrolytes for their lab tests. Students have adopted the tendency to over order on these goods which take up funds that could be used elsewhere. This issue also links to the fact that doctors have too much control over the hospital. They have no ceiling cap for their expenditure of resources on their daily operations as well. It can be argued that placing a threshold on their resources could potentially be dangerous for the patients. However, if their costs are not regulated the hospital would be giving doctors too much control and may run into further funding problems in the future. Although it is only for one patient for one certain type of illness, the DRG number 198 summary shows that the hospital exceeded its Medicare reimbursement rate of $4300 by $813. Without putting regulation on the expenditure of residents and
Union Medical Center
April 2, 2015
Richard Veller, the new CFO for Union Medical Center, began to change the operations of their management. Richard Veller looked to change UMC to an industrial system, which meant that the hospital would view cases as products. Just like any ordinary business, these products would have cost objects and would require an accounting system. In order to allocate costs appropriately, UMC was required to organize their cases into Diagnosis Related Groups to create a functional management control system. These changes brought certain internal issues into the spotlight. If solutions are not found, the hospital will not be able to implement their plans.
Issue 1: Lack of control over use of resources
Management currently has an extremely lack luster regulation over the expenditure of resources. The main reason that has caused the leakage of resources is because the hospital also serves as a teaching institution. The issue here is that the hospital must accommodate for these residency students. However, residency students have been recklessly using the hospital’s resources such as equipment and electrolytes for their lab tests. Students have adopted the tendency to over order on these goods which take up funds that could be used elsewhere. This issue also links to the fact that doctors have too much control over the hospital. They have no ceiling cap for their expenditure of resources on their daily operations as well. It can be argued that placing a threshold on their resources could potentially be dangerous for the patients. However, if their costs are not regulated the hospital would be giving doctors too much control and may run into further funding problems in the future. Although it is only for one patient for one certain type of illness, the DRG number 198 summary shows that the hospital exceeded its Medicare reimbursement rate of $4300 by $813. Without putting regulation on the expenditure of residents and