IT1926
A System and a Disaster
Oxford Health Plans is a successful health maintenance organization (HMO) in New York. The firm went public
in 1991, and its stock price enjoyed steady growth. In 1997, however, problems with a new computer system led
to significant losses: $120 million in the fourth quarter on top of $78 million in the third quarter. When the
company announced its second-quarter loss, its stock price was 75% lower than its previous high. It could not
send out monthly bills for many of its customers and could not track payments to hundreds of doctors and
hospitals. During the year, uncollected payments from customers rose to $400 million, while Oxford’s unpaid
bills to caregivers rose to over $650 million.
The problem began when Oxford started planning a system based on the Oracle database management system
when it had a little over 200,000 members. By the time the system went live three (3) years later, the HMO had
1.5 million members. The company tried to convert to the new system all at once. While the computer system
labored under the load, Oxford management continued its aggressive drive to sign up new members. The new
system was intolerant of errors that were accepted in the old one. As a result, an account with thousands of
participants might have been rejected for an error in any member’s record.
Some customers refused to pay the HMO after not being billed for months, so Oxford had to write off over $100
million in uncollectible bills. The HMO’s failure to pay its bill also angered care providers. At one point it owed
Columbia University $16 million and Cornell $17 million for medical services. Oxford lost track of its actual
medical costs—information a health care provider needs to set reserves and project liabilities.
While the organization had been implementing information technology since the 1950s, it still seemed to repeat
many of the same problems. Is this a case of management failure or technology failure? What opportunity had
been lost by the company? Explain your answer.
Because of such technological failures, the company's stock price has fallen significantly below its
prior level; they did not track payment information to physicians and hospitals; and they did not send
invoices to many clients. The new system could not accept mistakes, many participants were excluded
from any member's record. There was no such record, many consumers did not pay HMO. Over a
hundred million dollars in uncollectible debts had to be written off by the company. They were unable
to pay their care providers, and as a result, their business suffered greatly.
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IT1926
MANAGEMENT PROBLEM
Dennise Francias is a recent MBA graduate with a degree in marketing. She has accepted a position with Unilab
Philippines, a large firm selling consumer products under the marketing department. This organization is also
responsible for sales of over-the-counter drugs such as headache remedies, indigestion cures, and similar
products. Her first assignment is to research the sales of one of their company’s products versus the sales of
competing products.
She was happy to see that Unilab Philippines had a local area network (LAN) for the marketing department.
When Dennise looked for data on a competing brand. She found that the marketing department is subscribed to
several different services that provided sales results for over-the-counter drugs. However, not all workers have
access to these services. Some of them are doing the searching manually from the printed report from different
subscriptions.
Dennise feels that there must be a better way to conduct market research, particularly that the department has a
LAN with a lot of capacity. What solution to this problem can you recommend?
The organization uses LAN, especially in the marketing department they have access to different
services to which other employees do not have access, resulting in manual searching on printed
reports. One method they may utilize is to create a public drive to which all employees have access,
allowing them to post a specific sales report that others can use. They can use this public drive to
upload and download files.
GRADING RUBRIC (25 points):
Criterion Description Max Points
Clear understanding of subjects and connections between
Content 15
subject and task
Clear and appropriate focus; logical and controlled
Organization 7
organization throughout
Word Choice, Sentence Sentence variety enhances style and effect; varied and
3
Variety and Structure precise word choice
TOTAL 25
REFERENCES:
Lucas, H. (2013). Information technology for management. Switzerland: Creative Commons Attributions.
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