MGMT-6087 – Quality Management

Northlake Healthcare
Rachel Hunter, Manager of Bio-Medical and Clinical Engineering at Northlake
Healthcare, a hospital in Barrie, Ontario, was considering her options to improve quality
and costs of repairs for the hospital’s flexible endoscopes. It was Tuesday May 25 and
Rachel wanted to prepare a recommendation to be presented at the monthly team
meeting which was scheduled for June 24th.
Northlake Healthcare
Northlake Healthcare was one of the largest hospitals in the province, with over 500
beds and an annual budget of $600,000.00. The majority of the budget came from the
provincial Ministry of Health. Northlake was part of part of four large hospitals and a
cancer treatment centre in the Northern Health Services (NHS) organization, which
offered a complete range of health care services ranging from acute to specialized to
over 2 million residents in north central Ontario. Each member hospital of the Northern
Health Sciences organization offered specific areas of expertise, but together they
offered a comprehensive health care service to its patients.
The Bio-Medical and Clinical Engineering department was a team focused on the
management of the hospital’s medical technology. The service provided by this group
included the purchase, maintenance, repair and disposal of hospital equipment, as well
as assistance in the adoption of new technologies. Bio-medical and Clinical Engineering
had a budget approximately 3.5 million dollars and also had the responsibility of
managing Northlake Healthcare’s capital budget of approximately six million dollars.
Most equipment repairs were covered by individual departmental budgets, the hospital
had 50,000.00 of the capital budget allocated and available for repairs to equipment that
cost more than 1,500.00
The Bio-Medical and Clinical Engineering team was headed by Jacob Talwar and was
part of the medical operations division of Northlake Healthcare. Morgan Patel, Aaron
Schneider and Rachel Hunter comprised the remaining members of the team. Morgan,
the Equipment Management Co-ordinator, was responsible for financial management of
both repair and medical equipment acquisition budgets. Patel worked closely with the
Purchasing department which was part of the NHS Shared services organization. Aaron
managed the technical concerns of the department as the Technical Supervisor. Rachel,
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MGMT-6087 – Quality Management
who had a degree in Mechanical Engineering, also had an MBA from the Schulich
School of Business at York University.
Northlake Healthcare used flexible and rigid endoscopes in exploratory and corrective
surgery procedures. An endoscopy was a simple surgical procedure that involved the
examination of the inside of the patient’s body suing an endoscope, which is a medical
device that consists of a long, thin, flexible or rigid tube that contained a light and video
camera. Images of the endoscopy procedure could be seen a monitor (screen) and
recorded if necessary. Endoscopy was commonly used to view such areas of the
patient’s body such as lungs, stomach, digestive tract and major joints. Endoscopes
could also be fitted with surgical instruments capable of performing a number of
procedures, such as removing small tumors, gallstones, suction and fluid exchange.
Most endoscopes were flexible and could be manipulated using angulation knobs,
which controlled the vertical and horizontal movement of the device. There had been
2,500 endoscopy procedures at Northlake Healthcare in the previous twelve months.
An endoscopic procedure has an advantage in that the majority of them did not require
use of a general anesthetic and did not require a major incision as most patients
received a local anesthetic during the procedure. The common type of endoscopy
procedures included colonoscopy, laryngoscopy and thoracoscopy.
Endoscopes were maintenance and repair intensive devices that involved extremely
sensitive technology. Scopes wer tested before and after each procedure, which
included cleaning, leak testing, measuring of angulation ranges and video testing.
Despite careful maintenance, scopes occasionally broke down during surgery which
frequently meant aborting the operation and a rescheduling of the procedure, unless
there was another endoscope readily available.
Northlake purchased two or three new flexible endoscopes each year at a cost of
$20,000.00 per unit plus additional $30,000.00 per year on related equipment. The
hospital also purchase annually several rigid endoscopes each costing between
$5,000.00 and $10,000.00 each. Because of the cost of each endoscope and
supporting equipment the four facilities within the Northern Health Services shared the
equipment resources as necessary.
Original Equipment Manufacturers
Northern Health Services bought and serviced all the endoscopes from Richardson
Surgical Products and Modern Medical. In selecting Richardson and Modern, a crossfunctional team which included representatives from purchasing from the NHS shared
service, physicians, and the Bio-Medical and Clinical Engineering department was
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MGMT-6087 – Quality Management
created. The Bio-Medical and Clinical Engineering department had been responsible for
assessing the technical and financial issues in the supplier selection process.
Richardson and Modern provide endoscopes for use with specific procedures and most
of the endoscopes used at Northlake Hospital were supplied by Richardson based on
the type of endoscope that was used at that facility. Northlake Healthcare had
developed a good relationship with Richardson and spent approximately $190,000
annually on their products and services. The service provided by Richardson include
endoscopic repairs. Since the Original Equipment Manufacturers (OEM) controlled the
supply of specialized key endoscope components, they were frequently the logical
option to provide repair services.
There were third-party organizations that provided endoscopic repair services, however
they were not able to provide a full range of repairs due to the difficulty in obtaining
parts form the OEM’s on a timely basis. There was alos a consideration that warranties
could be voided if the endoscope was repaired by an unapproved service provider.
Some manufacturers had developed disposable scopes, but this technology was not
viewed as a cost effective option.
There were concerns in the healthcare industry that OEM’s were charging unreasonable
prices for endoscope repairs, and there was also some suspicion that occasionally
unnecessary repairs were being made. It was difficult to verify repair work since
removing the sealed casing on an endoscope required specialized equipment.
Furthermore, it often took three to four weeks for an endoscope to be returned after
being sent out for repair.
Mountain Medical Repair Services
In November of the previous year, Rachel had been contacted by Simon Bowler, a
representative of Mountain Medical Repair Service from Richmond, British Columbia,
Simon had met with Rachel in her office to introduce Mountain as a new player in the
endoscope repair industry. Simon claimed that they could provide repair service for
twenty-five to seventy five percent cheaper then the OEM’s as well as providing a
twenty-four hour free estimate and a three to five day turnaround. Simon stated
“Mountain Medical Repair only repairs what is broken and bills you accordingly”
In February, Rachel decided to test Mountain’s services and sent them an endoscope
for repair. True to their word, a repair estimate was received in 24 hours and the scope
was returned within five days. The repaired endoscope was used for three weeks after
its return, at which point one of the angulation wires snapped. Rachel intended to send
the endoscope back to Mountain for repair, but it was inadvertently sent to Richardson
instead. A few days later, Neil Knott, the technical representative from Richardson,
brought the endoscope to Rachel’s office. The sealed casing had been removed and
Rachel was shocked at what see saw. She found it difficult that anyone would
intentionally damage the scope, nor could she believe that anyone could be so
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MGMT-6087 – Quality Management
incompetent as to do such an unprofessional job (see Exhibit 1) Neil explained that this
what Rachel could expect when Richardson scopes were repaired by a third-party
repair company.
Exhibit 1:
List of Items Damaged on the Repair of the Endoscope
1 Threaded attachment nut, not used to seal the end of the body cover grip, was
galled by an attempted removal using improper tool
2 Opening in forward body frame was damaged with the improper removal of an
3 After the seal between the main housing and body cover grip was damaged, glue
was used in an unsuccessful attempt to repair the seal
4 Forward body trim nut to seal the forward body frame cover was also galled by
attempting removal using improper tool
5 The male threads on both the proximal and distal ends of the forward body frame
were stripped
6 An attempted remedy to correct the improper fit of the body cover grip due to
stripped threads was to attempt to add large quantities of silicone on the “O” ring
7 An edge on the UD guide plate was filed down approximately 2 mm for no
apparent reason
8 A brass angulation wire guide was removed, possibly because the threaded
mounting holes were stripped
9 In palce of the two missing screws, two ne holes were drilled and tapped to
secure the UD guide plate
10 Metal filings from the filed down section were still found in the housing
11 A spare screw was found floating in the housing when the housing was opened
12 Angulation wires appear to have neither replaced or repaired
13 The field service report and accompanying documentation from Mountain did not
indicate any difficulties in achieving a suitable repair
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MGMT-6087 – Quality Management
Jacob Talwar was travelling to the Richmond area the following week on business and
took the endoscope with him as he planned to visit Mountain Medical Repair Services.
Simon Bowler was defensive and claimed to have no knowledge of the damage to the
scope. After some persistence by Jacob, Simon allowed him to speak to the technician
that performed the repair on the endoscope. The technician was insulted that Simon
suggested that the technician might be responsible for the damage and threatened to
The damaged endoscope was left with Mountain and it took more then four week to be
repaired – apparently due to difficulty in getting the necessary parts. When it was finally
returned, it was put back into use and an angulation wire snapped during the first
Shortly thereafter, Rachel received a strange invoice from Richardson Surgical for
another endoscope that had been sent out for repairs. The invoice received included a
charge for repairs that had resulted, according to Richardson, from a third party
attempting to open the endoscope using improper tools.
In-House Repairs
In December of the previous year, Jacob Talwar attended a conference organized by
the consortium of seven hospitals in the Greater Toronto Area. One of the sessions was
explaining how the consortium had been successful in combining their endoscope repair
and moving it in-house, resulting in a savings of 35 percent.
Jacob felt that the Bio-Medical and Clinical Engineering department should consider a
similar initiative, asking Rachel to consider it and make a recommendation. The
hospitals in the Northern Health Service spent approximately three-hundred and fifty
thousand dollars annually on endoscope repairs. Rachel determined that there were
four levels of service for an in-house repair operation;
• Preventative Maintenance
• Screening and providing Repair Estimates
• Minor Repairs
• Large Repairs
Rachel estimated that 80 percent of repair costs were in the first three levels, and
currently the department performed in the first level, preventative maintenance. She
was concerned that it would extremely difficult to move level four repairs in-house due
to lack of technical abilities. Recently, however, Richardson had been more responsive
to assisting its customers with implementing levels two and three.
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MGMT-6087 – Quality Management
Neil Knott had indicated that Richardson would supply parts for minor repair work and
would provide a list of the necessary tools required, which would cost approximately
fifteen thousand dollars. As well, Richardson would provide training for two technicians
at a cost of 3,000.00 per technician. Rachel felt the technicians after training would be
capable of performing all the minor repairs for the entire Northern Health Service, which
would provide the advantage of reducing the turnaround time on endoscope repairs
from two to three weeks to one to three days.
Rachel knew that the endoscope repair situation at Northlake Healthcare needed to be
resolved soon. Jacob wanted to focus on endoscopes at the upcoming team meeting,
and Rachel wanted to sort through the issues and make recommendations regarding
the Richardson/Mountain matter, as well as the possibility of setting up an in-house
repair operation.

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