Reference no: EM133411838

Case Study: Objective: The students will complete a Case study assignments that give the opportunity to synthesize and apply the thoughts learned in this and previous coursework to examine a real-world scenario. This scenario will illustrate through examples the practical importance and implications of various roles and functions of a Health Care Administrator. The investigative training will advance students understanding and ability to contemplate critically the public relations process, and their problem-solving skills. As a result of this assignment, students will be better able to comprehend, scrutinize and assess respectable superiority and performance by all institutional employees.

ASSIGNMENT GUIDELINES (10%):. This assignment is planned to help your examination, evaluation, and apply the readings and strategies to your Health Care organization.You need to read the chapters assigned for week 6 and develop a 3-4 page paper reproducing your understanding and capability to apply the readings to your Health Care organization. Each paper must be typewritten with 12-point font and double-spaced with standard margins. Follow APA style 7th edition format when referring to the selected articles and include a reference page.EACH PAPER SHOULD INCLUDE THE FOLLOWING:1. Introduction (25%) Provide a brief synopsis of the meaning (not a description) of each chapter and articles you read, in your own words that will apply to the case study presented.2. Your Critique (50%)

Case Studies in Finance and AccountingMercy Hospital: A Case AnalysisAbstractThis is a case study which describes an account (names, other facts changed to preserve anonymity) in which an internal auditor in a hospital setting, due to personal biases and a lack of objectivity, performed a substandard audit of a capital asset acquisition and violated several standards of the International Standards for the Professional Practice of internal auditing as well as the Institute of Internal Auditors (IIA) Code of Ethics. Students use the standards and Code of Ethics to form conclusions regarding the shortcomings of this audit. The International IIA Standards and Code of Ethics are online and easily read, with the Standards being twenty-one pages in length and the Code of Ethics being two pages. The case is designed to be taught in one class period. Students are exposed to actual standards and required to employ the standards in their analysis of the case. Mercy Hospital - BackgroundMercy Hospital is a leading healthcare provider and one of the oldest hospitals in the region.The 300-bed, acute-care facility is known for its quality of care and respected for their expertise and innovation in the delivery of health care. As a leader in cardiac, trauma, surgical, orthopedic, neurologic, and vascular and cancer care, Mercy Hospital offers patients the latest treatments by providing its medical staff, comprising more than 600 physicians, with the most advanced technology available. Mercy Hospital is one of eight individual hospitals comprising a hospital network located across seven states ranging from Pennsylvania to Mississippi. The eight hospitals have a network headquarters which provides many of the financial functions including

internal audit services. Collectively, the hospitals are members of the Mercy Health Network. Management at each hospital is decentralized except all of the hospitals participate in a consortium to purchase medical supplies for a more competitive price than otherwise would beavailable.64-Slice CT ScannerThe 64-Slice CT Scanner is a new imaging medical device that helps physicians diagnose and treat a variety of medical conditions by providing a more anatomically detailed image of the patient's organs. Older CT scanners have been used for years to study internal organs, bones, soft tissue and blood vessels. They are particularly useful in trauma situations to identify injuries to the heart and vessels, liver, kidneys or other internal organs. The scanner is also used to plan for surgery and monitor the treatment of tumors for cancer patients heart related maladies are all too common. The United States Center for Health and Human Services reported that in the USA for the years 2007-2008, over 5 million people arrived in emergency rooms complaining of chest pain (United States National Center for Health Statistics, 2010, p. 2). The new 64-Slice CT Scanner is judged to be faster and more reliable for diagnosing chest pain. It can evaluate a heart patient by capturing thousands of images of the heart in less than 5 seconds or capture images of the whole body in less than 30 seconds. The cost of these machines is generally expected to range from $1.5 to $2 million. Bidding on the 64-Slice CT Scanner can be a very competitive and costly commitment by vendors. They insist that Board approval be granted for the machine before final bids are submitted.The Audit Process

Mercy Hospital's capital-asset procurement process for any single acquisition over $100,000 isto have a formal proposal submitted to the board of directors (BOD) who vote on its approval. Ifthe proposal is approved, the funds are transferred to the respective hospital for eventualdisbursement. The internal auditors are charged with following up within one year of acquisitionto check the propriety of the purchase and disbursal of funds. Recently, a proposal for a new CTscanner was submitted by Mercy Hospital's controller. The other hospitals were told to "wait andsee" until the internal auditors could inspect the documentation of the acquisition and theoperating effectiveness and efficiency of the new process before being allowed to submit theirown proposals. Mercy's proposal was the one of the larger proposals submitted over the pastseveral years at a total of $1.625 million dollars plus approximately $25,000 for the labor andother necessary expenditures to remove the old equipment to permit the installation of the newscanner. The cost of the new scanner by itself was listed in the proposal at $1.3 million.The internal auditor assigned to the acquisition was Jack Jones. Jack had been with the networkfor over three years performing mostly operational audits (on existing processes), reviewinginternal controls, and payroll and travel expenses. Jack believed that the procedures associatedwith this capital-asset audit would be simple and routine.This was not Jack's first visit to Mercy Hospital. In fact, Jack had performed an audit on thehospital's payroll and travel expenditures only a year ago. Jack's recollection of the experiencewas not a pleasant one. He had several "confrontations" with the controller, mostly as a result ofclashing personalities. While all the expense issues were easily resolved, Jack felt there was stillan adversarial relationship between them and he was "on guard" for any "preemptive strikes"this time around.

It was a long drive to Mercy Hospital so when Jack arrived a little late the day of his audit hewas greeted by the controller with a perceived air of indifference and promptly led to a secludedand windowless office room. The controller calmly explained that he was extremely busy andwould answer any questions at the end of the day. Jack merely nodded his head and sat down infront of several tall piles of invoices that the controller had furnished and represented thedocumentation supporting the purchase, set up, and testing of this new technology. Jack wassomewhat surprised, fully expecting to see only a handful of invoices, but did not ask for anyexplanations. As Jack began looking through the myriad of statements and canceled checks hesoon found one particular invoice near the top of the first pile which indicated that the actualprice paid for just the machine itself was only $902,000!Jack's first reaction was to call the director of auditing. When he found that the director was outfor the day and could not be reached, he decided to call the VP of Operations at corporateheadquarters. Jack was critical of the controller in describing the seriousness of his suspicionsbased on this preliminary information. Jack didn't realize that there was a scheduled BOD'smeeting that day and that the news would be passed on to the Board. The Board members wereoutraged over the alleged misuse of the funds and possible fraud.Jack was unaware that the controller was soon being lambasted by the chair of the BODs in aprivate conference call. Seconds after the call, the controller walked up to Jack and had only twowords to say-"Get out." Jack was flabbergasted; he called back to Network's HomeOffice only to receive a rather icy response from the Chair of the BOD's secretary suggesting thathe return immediately. As Jack got into his car and drove back to the home office he wonderedwhat he had done so wrong.Postscript

Three days later Jack was called in to the director of internal audit's office. The director told thestory of how he personally visited Mercy Hospital the next day after Jack's visit and performedthe capital-asset audit himself. The director found that there were a number of reasonableexplanations for the differences in the original proposal and the actual expenditure. To beginwith, the companies who sold the machine would not talk about discounting the price until theyknew that the funds were available. Once the proposal was approved and the funds wereauthorized for disbursement, only then did the competing vendors begin slashing their pricesbecause of competition for the sale. This is what drove the cost of the machine down from$1,300,000 to $902,000. Other accessories and services provided by the vendor reduced theinitial list price even further by some $57,000. Training and warranty costs were not subject todiscounting. However, there were several factors that mitigated some of these savings.It would take close to a month before the new machine became operational because no one reallyknew how difficult it was going to be to remove the old machine which had been embedded inthe concrete floor (to minimize vibration). It was decided that to save time and costs, the newmachine would be set up in a new room adjacent to the room for the older scanner. The newspace would have to be renovated and new electrical connections installed.Since the hospital could not afford to shut down for any extended length of time, the new spacehad to be renovated before the older machine could be dismantled. Then, while the newequipment was being tested, the old scanner had to be kept running in its temporary location.During the time that both machines were running, machine operators and supporting personnelwere asked to work double shifts in order to test and become familiar with the new scannerbefore closing down the old machine. This took longer than expected because Mercy's

technicians were not familiar with the new machine and had some difficulty with even minorstart-up problems. Therefore, for the first two weeks, special outside consultants were hired tooperate the scanner at the proper specifications. These additional and unexpected outlays werecostly and brought the total to just under $1.4 million ($1.17 million and $230,000 for therenovations and other expenditures) which was still lower than the original estimate of $1.65million. Even though the list price came in at a reasonable $902,000 (saving $398,000 and otherdiscounts provided additional savings of $57,000), the renovations amounted to $230,000 andexceeded the original estimated renovation costs of $25,000. The director went on to explain toJack that the reason for the abnormally large number of invoices was due to the renovation cost,additional labor cost associated with the new machine, and the cost of running both machinesduring the transition. As it turns out, Mercy's controller actually did a commendable job inoverseeing the project and keeping accurate records of the disbursements. In fact, the controllercreated a specialized installation guide that will probably save hundreds of thousands of dollarswhen the remaining hospitals install more of these machines. When the director was finished, hetold Jack that unless he changed his attitude and re-considered what it means to be a professionalinternal auditor, he was likely to remain a payroll auditor for the rest of his career. The directortold Jack to go back and read a basic internal audit text on interviewing techniques, the Code ofEthics and the Standards for Professional Practice. Jack still didn't understand. What was thedirector trying to say?

Question: CASE STUDY CHALLENGE1.

Students should be asked to read the case and discuss all procedures done during thisauditory.

2. Comment on Jack's interviewing techniques.

3. What could Jack have done differently?

4. What did Jack forget to do?

3. Conclusion (15%)Briefly summarize your thoughts & conclusion to your critique of the case study and provide apossible outcome for the Finance department. How did these Chapters influence your opinionsabout Managing finance and budgets?Evaluation will be based on how clearly you respond to the above, in particular:a) The clarity with which you critique the case study;b) The depth, scope, and organization of your paper; and,c) Your conclusions, including a description of the impact of these Case study on any HealthCare Setting Organization and managi