THE ROLE OF COMPUTERIZED ACCOUNTING INFORMATION SYSTEMS IN REDUCING THE COSTS OF MEDICAL SERVICES AT KING ABDULLAH UNIVERSITY HOSPITAL

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1 THE ROLE OF COMPUTERIZED ACCOUNTING INFORMATION SYSTEMS IN REDUCING THE COSTS OF MEDICAL SERVICES AT KING ABDULLAH UNIVERSITY HOSPITAL Abd el-rahman kh. el- Dalabeeh Assistant Professor Accounting Department Seif Obeid ALshbiel Assistant Professor Accounting Department Faculty of Finance and Business Administration AL Al-bayt University Al al-bayt University, P.O.BOX , Mafraq 25113, Jordan Abstract This study aimed to identify the role of computerized accounting information systems in reducing the costs of medical services provided at King Abdullah University Hospital. The study sample consisted of 36 employees including the administrative & financial director, the head of the accounting department, information systems personnel, and accountants. The study adopted the theoretical and field approaches of the descriptive analytical methodology. The study findings showed that there is a significant role for computerized accounting information systems in the reduction medical services costs at the hospital. It illustrated a positive correlation between each component of accounting information systems (human resources, hardware and equipment, software, databases, and procedures) and the reduction of medical services costs at the hospital. The study recommendations included retaining the highest levels of computerized accounting information systems through keeping up with the latest developments in the fields of software, hardware and databases, conducting regular maintenance which helps raise the level of services provided to patients at King Abdullah University Hospital, developing work procedures along with the progress of computerized accounting information systems, and conducting more research on the role of computerized accounting information systems in reducing the costs of medical services at other hospitals which were not included in previous studies such as the University of Jordan Hospital and private hospitals. Keywords: Accounting information systems, medical services costs, King Abdullah University Hospital. 1. Introduction In light of the technological developments across all economic sectors worldwide, Jordan has attained a very good reputation as a health and medical attraction in the Middle East region. The Kingdom spends more than 10%, or JD1.1 billion, of its gross domestic product annually on the health sector, and a third of this amount is allocated to medication. Despite the large amount of expenditure for a country of 6 million people, of whom 87% are covered by medical insurance, the Jordanian health sector is suffering from high costs of medical procedures and high levels of medical wastage of over 25% in both public and private sectors, amounting to JD88 million out of an annual medical bill of JD350 million, which places Jordan ahead of Germany in terms of medical expenditure, with the first spending 34% of gross domestic product on medication and the latter spending only 14% (National Center for Human Rights, 2008). This can be attributed to increasing demand from citizens on medical services which leads to increasing costs in order to provide the service at the desired quality and quality. All countries around the world, including Jordan, are suffering from this problem. On the other hand, accounting information systems are part of the overall information system. They play a significant, effective role in providing all levels of decision-makers with timely, accurate and precise information which helps them take the right decisions. Such information are provided through reports and statements aggregated from actual daily data. Accounting information systems are very important because they exist inside the COPY RIGHT 2012 Institute of Interdisciplinary Business Research 893

2 organization and control all its activities (Al-Dhufairy,, 2008). The value of an accurate and efficient accounting system is demonstrated by its ability to aid all organizations, by contributing to improving the quality of services, reducing costs and eliminating all resource-wasting activities; it also contributes to knowledge and experience which eventually leads to developing the organization and increasing its competitive advantage through the system's ability to provide the right information at the right time. This study aimed to identify computerized accounting information systems and illustrate their role in reducing the costs of medical services at King Abdullah University Hospital, which is a major medical institution in Jordan and one of the leading hospitals across the Arab world. It is well-known for offering a comprehensive system of topnotch medical services in line with the highest levels of quality. 2. Conceptual Framework and Previous Studies Accounting systems generate accounting information that help rationalize and support economic decisions which affect the resources of communities and consequently the well-being of community members (Kahaleh, Hanan, 1997). The accounting system is strongly connected with various administrative processes; it helps rationalize decisions, makes the administrative process more effective in satisfying the needs of the organization's management and raises the levels of performance in order to realize goals. The accounting system in any organization consists of a number of human parts represented by all personnel at the accounting department who utilize the material parts needed for accounting work such as equipment, hardware, books and records, in accordance with established accounting rules and procedures in order to record, calculate and deliver data into sets of financial reports and statements to all parties concerned with making decisions (Dahmash, Abu Zir, 2004). There are several definitions of accounting information systems, such as "a set of sub-systems and parts related to each other and to the surrounding environment, and works as one set in which relationships are interrelated with each other and within the system where each part depends on the other in achieving the goals of the overall accounting system (Chill, 2010). Hussein (2004) defined accounting information systems as an essential part of the management information system at the economic unit of business which collects financial data from sources inside and outside the economic unit, then operates such data and transforms it into useful financial data for users inside and outside the economic unit. Later definitions of accounting information systems include Makhadmeh (2007), who defined accounting information systems as a set of financial and human resources at the organization responsible for preparing financial information, in addition to information resulting from the processing of collected data, then providing such information to all managerial levels and for planning and monitoring purposes at the organization as well as other parties related with the organization. From the above, we conclude that accounting information systems in any given organization include a set of qualified individuals, computers, software, databases and procedures which control its work, where all the mentioned components interact with each other to provide useful information which help take the right decisions. Individuals are among the most important components of accounting systems. The importance of individuals within the accounting information system increases under work for electronic purposes, in terms of the availability of qualified individuals and their ability to perform accounting tasks using modern technology with multiple entities related to the economic unit where they operate, in addition to the increase in data and information required to be collected, processed and delivered to stakeholders. Computers are considered the apparatus of computerized accounting information systems as the use of computers is critical to function and process data at the required speed and accuracy, or the ability to contact stakeholders and deliver required data and information to them. Furthermore, accounting information systems comprise a set of computer-directed operational instructions, called software, which the computer follows in order to achieve the required targets (Mohammad, Hammad, 2000). It is also essential to have databases which include sets of logically interrelated files stored in an organized manner that enables access for application programs to process data. All of the aforementioned components are controlled by a series of procedures which represent methods and policies that should be followed when using, operating or dealing with the information system (Taha, 2000). Research in the field of accounting information systems is quite rare in the Arab region in general and Jordan in particular. Therefore, the researchers increased their focus on studying all aspects related to accounting information systems and their role in reducing the costs of medical services in the health sector. Accordingly, the researchers have found a fair number of studies in both Arab and foreign environments on accounting information systems' components and their role in reducing costs at service facilities. The significance of accounting information systems is illustrated by their role in reducing costs and increasing the speed of medical services provision; many researchers have highlighted the significance of reducing costs generally related to service provision across all service sectors, with a particular emphasis on the health sector. Several recent studies have addressed the role of accounting information systems in the services sector such as (Al-shbiel, 2011), which aimed to identify the impact of using COPY RIGHT 2012 Institute of Interdisciplinary Business Research 894

3 accounting information systems in achieving competitive advantage for Jordanian commercial banks, and concluded that that there is a statistically significant impact for accounting information systems on achieving the dimensions of competitive advantage (improving the pricing process for banking services, reducing costs of banking services, increasing the speed of provided services, and increasing market share. In the same context, however in the production sector, Al-Omari (2009) conducted a study in which he aimed to identify accounting information systems in Jordanian industrial firms and illustrate their role in monitoring production costs. He concluded that accounting information systems with their various dimensions play a major role in monitoring production costs. Also, al-sheikh (2000) conducted a study in which he aimed to identify the cost reduction concept and necessary steps or programs to be implemented in order to reduce costs. He concluded that uncertainty in defining the concept of cost reduction can lead to undesired results or generate a new financial burden. He also concluded that there are multiple methods for reducing costs, each of which depends on the cost reduction program, and the size and activities of the economic unit. Another study (Ali, 1999) was conducted on hospitals in Jordan where the researcher addressed the issue of rising costs of medical services from the prospect of the relationship between production efficiency in managing the hospitals operations and services requirements to promote such services. He found that the three main dimensions which control this relationship are: scheduling, cost and quality. Among the studies which addressed measuring the factors affecting medical costs represented by monitoring costs in order to reduce costs which have become a serious concern for Jordanian hospitals, Allam (1997) presented a general framework for placing medical services at hospitals under cost measurement procedures at a high level of accuracy and objectivity in a manner that allows hospitals to use this framework in rationalizing and monitoring the costs of medical services offered by hospitals. A study by Banks and others (2002) focused on the skills and competencies of the human element represented by doctors, nurses and technical and administrative personnel, as they are highly correlated with the quality of offered medical services. The study findings showed that there is a possibility to reduce the costs of interior departments at hospitals without affecting the level of medical services provided to patients, taking into consideration the importance of the hospital cadre in reducing the costs of health care. In a similar study, Al- Tarawneh,(2002) aimed to identify the role of doctors in reducing costs of medical procedures at public hospitals in Jordan. He concluded that doctors play a role during the time allocated for diagnosing medical conditions of patients, as well as realizing the costs incurred by the procedures they determine, in reducing costs of medical procedures at public hospitals in Jordan. According to the above, and based on the findings of previous studies, the study hypotheses can be drafted as follows: Main hypothesis no.1: There is no role for computerized accounting information systems in reducing the costs of medical services at King Abdullah University Hospital. Sub-hypothesis no.1: There is no role for human resources in reducing the costs of medical services at King Abdullah University Hospital. Sub-hypothesis no.2: There is no role for hardware and equipment in reducing the costs of medical services at King Abdullah University Hospital. Sub-hypothesis no.3: There is no role for software in reducing the costs of medical services at King Abdullah University Hospital. Sub-hypothesis no.4: There is no role for databases in reducing the costs of medical services at King Abdullah University Hospital. Sub-hypothesis no.5: There is no role for procedures in reducing the costs of medical services at King Abdullah University Hospital. 3. Method 3.1 Population and Sample The study community consisted of individuals working at the departments of King Abdullah University Hospital. Individuals were represented by four categories: the administrative & financial director, the head of the accounting department, information systems personnel, and accountants. The study sample consisted of 40 employees from the mentioned categories. Questionnaires were handed to respondents, and 39 questionnaires were recovered. After checking the recovered questionnaires it appeared that three of them were unfit/ did not meet the conditions, so they were excluded. Therefore the number of questionnaires used in the statistical analysis was 36, or 90%, which represents an acceptable percentage for conducting statistical analysis. 3.2 Instrumentation The study's data collection tool was questionnaire designed particularly for the purposes of this study in order to measure the role of computerized accounting information systems in reducing the costs of medical services at King Abdullah University Hospital. The questionnaire was developed in accordance with the study literature, with items divided on three sections: the first section included general information about study sample individuals, the second COPY RIGHT 2012 Institute of Interdisciplinary Business Research 895

4 section included twenty-one items to measure the computerized accounting information systems variable (independent variable) and its dimensions (human resources, hardware and equipment, software, databases, and procedures) which were categorized as follows: Human resources (individuals who use the computerized accounting information system): measured by questions 1-6 through the following items: The human resource at the hospital is capable of using the computerized accounting information system to performs its duties; the human resource at the hospital receives necessary training for using all hardware and equipment; the human resource at the hospital is able to adapt with the requirements of new tasks; the human resource at the hospital is capable of discovering any malfunction within the system; the skills of the human resource at the hospital are correlated with the requirements of the computerized accounting information system; the human resource at the hospital receives training on the latest work-related developments in terms of using hardware and equipment. Hardware and equipment: measured by questions 7-11 through the following items: The computerized accounting information system relies on modern, advanced computers and hardware; equipment used at the hospital have high storage capacity that fits with the size of work at the hospital; hardware and equipment used at the hospital are suitable with the nature of its work; hardware and equipment used at the hospital comply with all safety rules; hardware and equipment used at the hospital are quickly connected. Software: measured by questions through the following items: The computerized accounting information system relies on modern, advanced software; software used at the hospital are constantly updated by specialists in each respective field; software used at the hospital are suitable for the nature of its work; regular maintenance is conducted on software used at the hospital; the hospital uses certain systems and software to monitor the processing of data. Databases: measured by questions through the following items: The database used at the hospital is flexible and amendable; required data can be recovered when needed; data can be stored in central storage media; data at the database are constantly updated; only authorized persons have access to the database. Procedures: measured by questions through the following items: Procedures of the computerized accounting information system are suitable with the nature of work at the hospital; procedures of the computerized accounting information system are clear; procedures of the computerized accounting information system are simple and not complicated; procedures of the computerized accounting information system are flexible and amendable. The third section of the questionnaire consisted of six items designed to measure the dependent variable (reducing the costs of medical services provided at the hospital). It was measured by items as follows: The use of computerized accounting information systems leads to: the elimination of multiple duplicate examinations for the same patient; saving time and effort for providing medical procedures to patients; providing statistical information on medical procedures provided to patients at the hospital; providing internal monitoring on medicine and medical supplies storage facilities; providing medical information about patients at any time; reducing the number of employees at the hospital. The responses were rated on a five-point Likert scale as follows: strongly agree (1 point); agree (2 points); neutral (3 points); disagree (4 points); strongly disagree (5 points). 3.3 Validity The study questionnaire was reviewed by a number of academics specialized in the field of accounting in order to identify their opinion on the consistency between items of the study and their correlation with the domain. Proposed amendments and changes were taken into consideration before finalizing the questionnaire. To determine the reliability of the study tool, the value of Cronbach Alpha's coefficient of internal consistency was 76-88%, well above the statistically accepted value. This shows that the scale has statistically acceptable reliability. 3.4 Statistical Treatment In order to process the data collected for the purposes of the study, and according to the measurement of variables, the following statistical methods were used: Percentages for describing the properties of the study samples. Averages and standard deviations to identify the respondents' responses on items and to test the study hypotheses. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 896

5 3.4.1 Description of the Study Sample Table 1 shows the properties of the study sample Hypotheses Testing and Discussion In order to test the study hypotheses the averages, standard deviations and impact ratio for each variable of the study were calculated in order to identify the role of computerized accounting information systems in reducing the costs of medical services provided at King Abdullah University Hospital, as shown in Table 2. For the purpose of testing sub-hypothesis no. 1, which provides that " There is no role for computerized accounting information systems in reducing the costs of medical services at King Abdullah University Hospital", Table 2 shows that the average was 4.3, the standard deviation 0.18, and the impact ratio 86%. This shows that there is a role for computerized accounting information systems in reducing the costs of medical services at King Abdullah University Hospital. Therefore the null hypothesis is rejected and the alternative hypothesis is accepted. This means that qualified human resources can play a major and effective role in reducing the costs of services. The more skills and training the human resources have, the better they serve. For the purpose of testing sub-hypothesis no.2, which provides that " There is no role for hardware and equipment in reducing the costs of medical services at King Abdullah University Hospital", Table 2 shows that the average was 4.1, the standard deviation 0.68, and the impact ratio 84%. This shows that there is a significant role for hardware and equipment in reducing the costs of medical services at King Abdullah University Hospital. Therefore the null hypothesis is rejected and the alternative hypothesis is accepted. This means that King Abdullah Hospital up-to-date with the latest technologies and has a major interest in modernizing its hardware and equipment, particularly accounting ones, in order to reduce the costs of medical services. The study found that there is a significant role for software in reducing the costs of medical services at King Abdullah University Hospital, which means that independent variable "software" contributes to reducing the costs of medical services at King Abdullah University Hospital. Average was 4.7, standard deviation 0.24 and impact ratio 88%. Therefore the null hypothesis is rejected and the alternative hypothesis is accepted. Also, the study showed that procedures are among the most important components of the accounting information system and have a leading role in reducing the costs of medical services at King Abdullah University Hospital. Average was 4.00, standard deviation 0.18 and impact ratio 80%. Therefore the alternative hypothesis is accepted and the null hypothesis "There is no role for procedures in reducing the costs of medical services at King Abdullah University Hospital" is rejected. From this we conclude that increasing procedures related to the computerized accounting information system leads to reducing the costs of medical services at King Abdullah University Hospital. 5.Conclusions and recommendations The average for the accounting information system variable as a whole was 4.2, with a standard deviation of 0.68 and an impact ratio of 84%. This means that computerized accounting information systems play an in important role in reducing the costs of medical services at King Abdullah University Hospital compared with non-computerized systems, which usually require bigger costs and do not contribute to reducing the costs of medical services. Therefore the null hypothesis "there is no role for computerized accounting information systems in reducing the costs of medical services at King Abdullah University Hospital" is rejected and the alternative hypothesis is accepted. According to the above findings, the study recommends focusing on computerized accounting information systems in terms of keeping up with the latest developments in the fields of hardware, software and databases and conducting regular maintenance in order to reduce the costs of medical services offered to patients at King Abdullah University Hospital. The hospital is recommended to develop its work procedures in line with computerized accounting information systems. The study also recommends further research on the role of computerized accounting information systems in reducing the costs of medical services at other hospitals such as University of Jordan Hospital and private hospitals. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 897

6 References Ali, Muhammad Amin, service requirements to raise the productive efficiency of hospitals in Jordan, Institute of Public Administration Administrator's Journal, Oman, No. 77, Muscat 1999, pp Allam, Mohammad Nabeel, "A Proposed Framework to Measure and Rationalize Health Care Cost in Jordan", Institute of Public Administration Administrator's Journal, Oman, no. 71, Muscat, Al-Araji, Assem, et al, "Methods and Treatment of Administrative Slack and Cost Reduction A Comparative Study on the Public & Private Universities, Institute of Public Administration Administrator's Journal, Oman,vol. 70, Dec Al-Dhufairy, Nawaf Wabdan, The Role of AIS in Banking Services Pricing in the Kuwaiti Commercial Banks, Unpublished MA Thesis, Al al-bayt University, Mafraq, Al-Omari, Fuad Ibrahim, The effect of AIS in Monitoring Production Costs in the Jordanian Industrial Companies, Unpublished MA Thesis, Al al-bayt University, Al-Sheikh, Emad Yousef, Methods and Procedures of Jordanian Universities' Cost Reduction, Private University of Applied Sciences, vol. 3, no. 3, Amman, Jordan, Al-Shbiel, Mohannad Obeid, The Impact of Using AIS in Achieving Competitive Advantage in the Jordanian Commercial Banks, Unpublished MA Thesis, Al al-bayt University, Mafraq, Al-Tarawneh, Ahmad, The Role of the Physician in Rationalizing Medical Procedures' Cost in the Jordanian Governmental Hospitals, Unpublished MA Thesis, Al al-bayt University, Mafraq, Banks, D., A.As-Sayaideh., A. Shafei, and A. Muhtaseb Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Princess Raya Hospital. Technical Report 7. Bethesda, MD: Partners for Health Reformplus, Abt Associates Inc. January. Chill, Edmon Tareq Edmon, The effectiveness of accounting information system in Iraqi private commercial banks: from the management perspective, unpublished MA Thesis, Middle East University, Dahmash, Abu Zar, Na'eem and Afaf, Accounting Education Using IT Systems in the Jordanian Universities, First Scientific Conference of Accounting Dept., Accounting in Informatics Era, Facts & Challenges, Mu'ta University, Amman, Jordan, Hussein, Ahmad, Accounting information systems: Intellectual Framework & Applied Systems, al-dar al- Jam'iyyah, Alexandria, Kahaleh, Hanan, Jobra'eel Joseph and Radwan, Management Accounting: Introduction to Responsibility Accounting and Performance Assessment, First Edition, Dar al-thaqafah for Publishing & Distribution, Jordan, Makhadmeh, Abdulrahman, impact of accounting information systems on investment decisions of manufacturing organizations in Jordan, Applied Study on Jordanian Companies", al-manarah Journal, vol. 13, no. 2, Mohammad, Hammad, Abdelfattah Mohammad & Tareq Abdelaal, Accounting Applications Using Computer, al- Dar al-jame'iyyah, Alexanderia, National Human Rights Center Report, Amman, Jordan, Siyam, Waleed Zakariya, Assessment of AIS in the Jordanian Commercial Banks under the Technological Development, Unpublished Study, the Sixth Professional Scientific Conference of the Certified Accountants' Association, Amman, Taha, Tareq, Banking Management and Banking information systems, al-haramain for Computer, Alexanderia, P502 COPY RIGHT 2012 Institute of Interdisciplinary Business Research 898

7 Annexure Table (1) Variable Variable Category Percentage Gender Age Experience Qualifications Scientific Specialty Male 66.7 Female 33.3 Less than 30 years less than 39 years less than 49 years and older years years years and older 16.7 Less than Bachelors 33.4 Bachelors 30.6 Masters 33.2 Ph.D 2.8 Accounting 36.2 Business Administration 19.4 Economics 00.0 Finance & Banking 25.0 Others 19.4 COPY RIGHT 2012 Institute of Interdisciplinary Business Research 899

8 Table (2) Reliability coefficient Chronbach Alpha of dependent and independent variables Variable Items Chronbach Alpha Human resources 6.77 Hardware and equipment 5.80 Software 5.83 Databases 5.79 Procedures 4.76 costs of medical services provided at the hospital 6.88 Table (3) Means and Standard Deviations of Study Variables Variable Mean SD Beta Human resources Hardware and equipment Software Databases Procedures All COPY RIGHT 2012 Institute of Interdisciplinary Business Research 900