8/7/2019 North Island Hospital

http://slidepdf.com/reader/full/north-island-hospital 1/1

The North Island Hospital Case Exerc

Robert Johnston, Warwick Business School, and Table 9.3 Charges to patients

ElainePalmer, University of Auckland, New Zealand

Rod Dowling is the chief executive of the North

Island Hospital (NIH) in New Zealand. His clinical

directors had just submitted a report for somenew laser technology that treats kidney stones.

This would require a capital outlay of NZ

$1,500,000, for equipment that would only be

needed two and a half hours per week. While this

seemed to make little financial sense, the med-

ical case was compelling.

Lithotripsy is the diagnosis and treatment of

kidney stones. The traditional treatment involves

radiography to locate precisely the stone or

stones in the patient's kidney and then surgical

removal under a full anaesthetic. Both these

treatments are not without risk and require four

to eight days' post-operative recovery. However,

these operations can be carried out routinely

using the existing theatres, urologists, nursing

staff and equipment.

The new laser treatment represents a significant

advance on previous treatment. It is non-invasive

and in essence 'explodes' the kidney stones

through precisely directed laser beams. The

resultant particles are then small enough for the

patient to pass with their urine. The procedure

does not require any anaesthetic. After treatment

patients need to be observed for an hour or so in

a post-operative area and then spend three

hours in a day unit, where they are encouraged

to drink quantities of water. Patients can go

home the same day. The specialist laser equip-

ment needs to be operated by a technician.

Current numbers of patients requiring treatment

for kidney stones at the NIH are running at just

less than 100 per year. The hospital charges its

patients for treatment as per Table 9.3, with the

average costs for removal of kidney stones being

Traditional treatment

Radiography services

Use of operating theatreAnaesthetist

Urologist

Theatre nursing

Post-op care

15 mins @ $5

60 mins @ $160 mins @ $9

60 mins @ $1

90 mins @ $1

6 days @ $90

Laser trreatment

Laser technician

Use of operating theatre

Theatre nursing

Post-op care

60 mins @ $5

60 mins @ $1

90 mins @ $1

4 hours @ $9

around NZ $8,500 (UK £2,600). (The t

charge is a standard charge, which cove

use of the facilities and equipment depre

over three years.)

Although the new laser equipment is com

theatre space is at a premium at the NIH an

Dowling is already under pressure to build

theatre (at an estimated cost of NZ $500

Rod is aware that the four other hospitals

Island are using the traditional treatme

kidney stones. (The five hospitals lie arou

perimeter of the Island at about 320-kilo

intervals.) Rod starts to wonder if ~e coul

vide laser treatment to all patients on the

Island - maybe he could zap patients by i

or use 'star wars' technology?

Questions

1 Assess the advantages and disadvantag

investing in the new technology for the

tal and its patients.

2 What advice would you give Rod?