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INF20012 Enterprise Systems

Case Study: A new ERP for the Southern Cross Health Foundation12

Submission: Please submit this assignment to provided links in Canvas
Type: Group (3-4 students)
Value:

Size:

40% of the total mark

3500 ± 10% words

Due Date: Week 12, Friday 30 October 2020, 11:59 pm AEST

Synopsis

Despite the potential benefits of electronic information management, including increased patient safety and more cost-effective health care delivery, few countries report the adoption of electronic systems for managing hospital information. On 1 January 2012, the Southern Cross Health Foundation (SCHF), a university hospital in regional Australia switched from paper to electronic documents to manage medical records (MR) and all related clinical and administrative procedures. The SCHF, which reported revenues of AU$450 million in 2014, is ranked the third best hospital in regional Australia. The hospital

1 This case study is adopted from Juanita Cajiao and Enrique Ramírez’s work published in the International Journal of Case Studies in Management:

Cajiao and Ramírez (2015), Surviving SAP Implementation in a Hospital, International Journal of Case Studies in Management, Vol. 14, No. 2

2 Some names, processes, and figures in this case study are modified and they may not be accurate or real.

made the ambitious decision to simultaneously implement electronic medical records (EMR), computerised physician order entry (CPOE), and enterprise resource planning (ERP).

1.    The LaTrobe Valley Foundation

The Southern Cross Health Foundation is a private non-profit organisation founded in 1982 to deliver tertiary medical care. The SCHF was the brainchild of two cardiologists from Melbourne who identified the need for a regional healthcare institution to deliver specialised care to medically complex cases and critically ill patients. They were later joined by Vicente Borr, a public health physician, who has been CEO since 1986. Bringing together regional civic and political leaders and donors, they collected the necessary funds to launch the project. Initially focused on cardiology cases, they gradually expanded their service offer. Today, the SCHF offers clinical care in more than sixty medical specialties and serves as a teaching hospital, where medical students receive training.

In December 2015, revenues totalled about AU$450 million. The previous year, the Australian Economic magazine had ranked the SCHF the 4th best hospital in the Australasia region and the best in Australia based on clinical, administrative, and financial indicators. In 2014, the SCHF was ranked the third best hospital in Australia and New Zealand region and the best in Australia. These awards confirmed the SCHF’s long-standing commitment to delivering excellent health care services in patient safety- centred environment.

In 2008, the SCHF embarked on an ambitious plan to expand its service offering by constructing new facilities to house additional beds, an emergency room (ER), and ambulatory care services. By December 2010, the number of beds had increased by almost 60%. This growth put tremendous pressure on all patient care delivery procedures.

1.1.  Medical Staff

The SCHF is a hierarchical, top-down hospital composed of medical units, each headed by a specialist physician. The CEO, the chief medical director, the chief nursing officer, the chief administrative officer, and the heads of the medical units form the physicians’ medical council are responsible for communicating all senior management decisions to their units.

Physicians have to comply with the policies of the medical directorate and the physicians’ executive council regarding quality and patient safety issues, the terms agreed to by the SCHF and insurers, and standard administrative procedures. Physicians are paid according to the number of patients they see, charging at the rates established by the insurance contracts. Approximately 20% of total SCHF billing is for medical fees. Additionally, all doctor-patient contact takes place within the SCHF facilities; full-time medical staff are not permitted to see patients or deliver clinical services outside the SCHF. Given the hospital’s high occupancy rates, doctors don’t need to go elsewhere to find patients.

1.2.  Patient Care Delivery before IT Implementation

A patient can enter the SCHF in one of four ways: ER, outpatient services, ambulatory procedures (diagnostic or other), or surgery. A patient may be admitted through the ER, be referred for surgery, be sent to recovery, be transferred to the ICU, be sent to a hospital floor unit, and finally be discharged.

While in the hospital, the patient may have been treated by a group of specialists in medicine or other disciplines such as nursing, respiratory therapy, nutrition, physiotherapy, and pharmacy. The patient

may have been given various diagnostic tests and received specialised medical treatment such as chemotherapy, radiation therapy, and cardiac rehabilitation. Patients generally pass through many hands during their stay at the SCHF, requiring close coordination between administrative and patient care personnel. This coordination is based on medical records (MR) containing the record of every medical and clinical procedure performed and all supplies and medicines used.

1.3.  Medical Records and Medical Orders

MR are clinical documents containing information about patients and their clinical course; they are created by healthcare staff while patients are under their care. MR thus contain information essential to both patient care and administrative procedures and must be managed and stored in such a way as to ensure the confidentiality of the information and the physical integrity of the records. In Australia, medical records are legal documents.

In the case of the SCHF, all professionals who dealt with a patient made a note of the procedures done. All these notes were made on paper or, in the case of the epicrisis (the final report of a physician summing up the medical case when a patient is discharged), dictated by the attending physician into a recording machine and then transcribed by one of a pool of secretaries. The transcription was then printed out and attached to the patient’s chart. This procedure had several implications for the quality and availability of the information contained in the MR. Doctors aren’t known for their legible handwriting, secretaries can make transcription errors, and documents can be lost, mislaid, or filed with the wrong MR. Sometimes a patient’s chart is required by different departments at the same time, affecting its availability. A critical care physician who has worked in the adult ICU since 2007 explained this situation: “In the ICU, there was this paper form on which different team members of the unit worked – doctors, anesthesiologists, nurses, physiotherapists; and sometimes we all needed that paper form at the same time. In addition, it was possible that the chart was in another unit, or that it was being audited by the insurance company.”

An ER physician who has worked at the SCHF for five years added: “Sometimes a patient arriving in the ER could not remember what their physician had said, or what medications he was taking. In the case of a the SCHF patient, all of that was written on the patient’s MR, but it took some time for us to get the patient’s chart and review the necessary information.”

Medical orders provide additional information to that found in medical records. These are the instructions from attending or consulting physicians on the course of action to be taken. Physicians use medical orders to request diagnostic tests, stipulate outpatient procedures, prescribe drugs, order surgery or hospitalisation, and terminate the treatment and discharge the patient. Various health professionals then carry out the physician’s orders. Doctors would handwrite orders either directly on the patient’s chart or on a separate form, and the professionals who carried them out needed to see the physical chart. An order could involve several people, as in the case of medicines, for example, which involved the pharmacy that dispensed the drugs, the nurses who administered them, and the billing clerk who invoiced customers.

Betty Smith, a nurse and the chief nursing officer, has worked for the SCHF since 1995. She explained: “When a nurse administered the medications ordered by an attending physician, she would make a note on the pink nursing form. In the case of inpatients, they would use blue ink in the morning, green ink in

the afternoon, and red ink on the night shift. These sheets were then attached to the charts. We wanted traceability of pharmacy-related procedures, but this was time-consuming and not always reliable.”

A 2000 study by the Institute of Medicine concluded that, in most Western countries, more people die from human error in hospitals than in car accidents. Among the problems that commonly occur during the course of providing healthcare are adverse drug events: preventable injuries resulting from improper order processing, dispensing, or administration of drugs.

Jaime Gable, a physician who has worked at the SCHF since 2001, explained: “In past, illegible handwriting on medical orders was one cause of adverse drug events, but it was not the only one. The person transmitting the order might confuse the names of similar medications, or trailing zeros might make the dosage unclear. But one of the biggest risks was drug-drug interactions. With the kind of patients, we handle, and the involvement of several specialists, unforeseen or unwanted reactions could take place between the drugs prescribed by different specialists.”

There was also the possibility of duplicate orders for diagnostic tests, which could impact patient safety

– in addition to the needless discomfort of undergoing them and the extra costs for insurers.

1.4.  Back-Office Procedures

Parallel to medical care is administrative procedures, which are governed by regulations, and they are mostly concerned with:

Insurance contract guidelines and billing: Under the health funding system, insurers have agreements with CDOs (such as the SCHF) for the healthcare of their members. The hospital’s Insurance contract department was in charge of negotiating and managing contracts with insurance companies. Because it handled some 70,000 billing items, tracking them manually was an enormous challenge. The department knew there could be problems with allocating the costs of services delivered and thus negotiating reimbursement terms with insurers. “We were not always certain whether the SCHF was profiting or losing with some procedures,” explained Danny Moreano, head of insurance contract management and chief operating room physician.

The terms of managed care contracts sometimes differ, making it difficult to standardise patient admission procedures and charges for clinical procedures and supplies and medicines used while providing services. Billing clerks thus had to memorise the contract terms or look them up in hard- copy manuals.

All fees charged to patients, whether they be for supplies, drugs, procedures, equipment use, room fees, or doctors’ fees, had to be typed into the billing system. But this did not always happen. Valencia, chief OR nurse, explains: “Although the required supplies and medications were pre-ordered, the surgeon or anesthesiologist would sometimes request additional supplies during the surgery. The nurse assistant would go to the operating room supply store, request what was needed, and say, ‘I’ll get you the written form in a minute.’ But with over 1,000 surgeries per month, emergencies, and the pressure for rapid room turnover, some charges may not have been entered into the system for billing purposes.” The billing manager explained the impact of this situation: “Billing clerks were never sure whether they could close the patient’s account or if there were still pending charges to be entered. They would try to contact people by telephone, but those people were not always available; after the account had been

closed, they sometimes got calls telling them there were still pending charges; all this delayed the process even further.”

Insurers had bills reviewed by medical auditors and required documentation of all fees charged to patients’ accounts. This meant that documents had to be manually collected, organised, and attached to invoices. In addition to requiring physical space to organise an average of 43,000 monthly hard-copy bills, this manual procedure affected the timing of invoicing, which had a major impact on the SCHF’s cash flow. The head of billing and accounts receivable explained: “It was time-consuming to track bills to know whether they had been finalised, were in the billing department for prior medical auditing, or had already been sent to insurers. Invoice processing was equally difficult – tracking every invoice to establish whether they had annotations, had been returned, had debit notes, or had already been paid.”

Supply chain management. Australia is no stranger to the pressures to cut healthcare costs experienced by many countries around the world. The efficient management of supply and drug inventories is critical, and the hospital strived to maintain just enough stock for day-to-day operations while avoiding out-of-stock situations. The complexity of the billing process created frequent inconsistencies in the information required for the efficient supply chain management.

Archives. Until 31 December 2009, the SCHF’s medical records were on paper. Back then, an average of 50,000 hard copy charts had to be moved back and forth between the archives and the medical units. This had significant logistical implications and created a growing demand for physical storage space. All units were affected by these logistical problems. Walk-in patients might arrive at a doctor’s office before their chart did, for example.

As they struggled to gain control of their physical space, the archives developed a spreadsheet system for keeping track of medical records; missing charts were becoming a problem. “Given the number of charts we were dealing with, plus the projected growth in service delivery, we knew we would continue to have major problems managing records efficiently,” explained the head of inpatient registration and archives.

1.5.  IT Architecture

By December 2008, there were at least thirty information systems working somewhat independently at the SCHF; they provided partial solutions to the needs of some users but did not allow for information integration. There were electronic systems for laboratory and diagnostic imaging, and some software developed in-house for support processes such as a scheduling module. In addition, some doctors had developed software tailored to their specific needs. Generally speaking, software developments were aimed at administrative and support processes rather than clinical procedures directly related to patient care. Until 2010, the hospital had software to handle back-office procedures, accounting, billing, accounts receivable, supply management, and medical fee management. Given the many disadvantages of its inventory module, it developed its own system. All this software was connected via interfaces. The opening of new beds and the resulting increase in related clinical services – e.g., surgery and outpatient care – placed additional pressure on procedures related to healthcare delivery.

The problems with medical fee management had become critical, as the head of information technology, recalled: “We had developed an application for managing medical fees, but it was causing problems. The interface could bog down for a day, even two days!” In addition, the information was sometimes inaccurate. An anesthesiologist and anesthesia group coordinator explained: “There were

times when your numbers didn’t match the payments you received; you could always recheck your bills, but it was a drain on everyone. It was time-consuming, and, as a doctor, you prefer to spend that time with your patients.”

A comprehensive IT project would enable the SCHF to improve patient safety, make healthcare services more efficient and cost-effective, and increase revenues in the medium term. The productivity of medical staff would also benefit from the streamlining of healthcare delivery since it was expected to improve patient flow/throughput.

 

Your Tasks:

Your group has to complete the following tasks:

  • Provide a brief background of the SHF and its operation. You need to identify the key areas of the SHF’s operation, its key strengths, and major The background should also identify the SHF’s key stakeholders and the factors that affect their relationships with the SHF. You also need to highlight what is the SHF’s vision about growth and how they aim to achieve it.(15 marks)
  • Create a table that lists key business problems of the SHF, as discussed in the case Against each business problem in the table, you also need to identify which one has a higher priority and whether you think an ERP solution can address that problem. You need to justify your answers. You can use this table to inform your answer to task 3. (15 marks)
  • Create a table that lists key business requirements of the SHF (8 to 10 requirements), as discussed in the case study. Against each requirement in the table, you also need to identify an ERP functionality(s) that can address that particular requirement. You can use this table to inform your answer to task (15 marks)
  • In addition to what is mentioned by Emily Wu in Section 3, you need to develop a set of selection criteria for choosing a vendor who can offer the SHF a suitable ERP solution. You need

to suggest at least five criteria for selecting a vendor. For each suggested criterion, a clear explanation must be provided to justify why it is a suitable gauge to select a vendor for the SHF. Note that your justification should consider the implementation and operation requirements of the SHF. (10 marks)

  • A common practice with such IT projects, particularly the implementation of an ERP system and its associated modules, is to introduce elements in a planned sequence, replacing the old system gradually, i.e., one module at a time, such as human resources and inventory management. Another option is called the big bang, or live start, with all modules and related processes, launched simultaneously. Both options have potential risks and benefits. A gradual release entails fewer risks and allows end-users to become familiar with the new system more gradually; but it also means making interfaces required to maintain parallel systems – the old and the new

– meaning that information processing has to be done twice. A big-bang implementation makes it possible to calibrate and stabilise the system much faster because it allows prompt online identification of possible inconsistencies. Additionally, since patients and doctors move between units, a phased or partial implementation – excluding some units, such as ER – would create problems. But a big- bang approach could also be risky. In the end, they decided to go with the big bang implementation method and at midnight on 31 December 2011, the balances were already loaded into SAP, and the old system was stopped. The green light was given to start.

What contingency plans should the SHF put in place throughout the hospital to avoid delaying critical patient care? List and describe two plans for the pre and two plans for the post-go-live phases (15 marks)

  • For many end-users, care delivery processes became more efficient and integrated as a result of the implementation of a new ERP system. For example, for nurses, the pharmacy management module made it possible to check compliance with the “five rights” – right patient, right drug, right time, right route, right dose. This had been much more difficult to trace in the paper-based

How do you think the implementation of the new ERP system can support the following areas of the SHF’s operation? (15 marks)

  1. Inpatient registration and archives
  2. Billing process department
  3. Patient safety
  • We are now in 2020, and the SHF is considering upgrading their current ERP system to SAP S4/HANA. Consider your answer to task 2 and Do you think that SAP S4/HANA is a suitable ERP solution for the SHF? Justify your answer by highlighting the capabilities and weaknesses of SAP S4/HANA. Based on your analysis you need to make recommendations to the SHF. (20 marks)

Expert's Answer

The Southern Cross Health Foundation (SCHF) is a private not for profit organization that was made to serve tertiary medical care. It was a project of two cardiologists from Melbourne who distinguished the requirement for a provincial medical services establishment to convey particular consideration to medicinally complex cases and fundamentally sick patients. Their operations were then joined by Vicente Borr who was a public health physician and was also the CEO. Uniting local city and political pioneers and benefactors, the foundation gathered the fundamental assets to dispatch the undertaking. At first centered on cardiology cases, they continuously extended their administration offer. Today, the SCHF offers clinical consideration in excess of sixty clinical claims to fame and serves as a showing clinic, where clinical understudies get preparing. The emergency clinic extended its administration offering by developing new offices to house extra beds, a trauma center (ER), and walking care administrations.

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