sound alerting hospital staff of the infrac-
tion. Knowing exactly where this equipment
is at all times will help hospital personnel
save time during crisis situations and react
faster to emergencies, ultimately saving
more lives.
Inventory Losses. Fraud examiners and
investigators say that employee theft is out of
control, citing recent U.S. Chamber of
Commerce figures that employees steal
approximately $400 billion from businesses
each year, and an Ernst & Young survey
showing that nearly 90 percent of organiza-
tions countrywide experienced some type of
fraud in the 12 months prior to the survey.
An additional undetermined amount is being
reported lost because of external fraud com-
mitted by customers, vendors, and others
having contact with a company or institu-
tion. Fraud experts note that all sectors are
targets—including retailers, hospitals and
health care, the hotel industry, schools, and
college campuses.^2
Pilferages of ordinary hospital supplies
such as bed linens have been quite common.
However, increasingly, hospitals report theft
of expensive medical equipment as well. Such
thefts create a financial loss to hospitals and
the danger that some life-saving equipment
will be missing when needed. More than 50
hospitals have been hit over the past 18
months.^3 The cost of replacing equipment
such as wheelchairs is estimated at several
hundred dollars, which makes hospitals eager
to find more difficult ways for would-be
thieves to steal essential equipment.^4
Recently, pilferage of controlled sub-
stances has also increased. In a recent survey,
64 percent of hospitals reported at least one
documented or suspected case of such pilfer-
age in the past year. Drug diversion occurred
in 76 percent of the hospitals with more than
100 beds, and in only 28 percent of the hos-
pitals with less than 100 beds. About 75 per-
cent of such theft was attributed to hospital
employees, which has led to the conclusion
that hospitals need more stringent methods
of control and surveillance.^5
When a hospital’s top executives engage in
fraud, theft, and embezzlement, these crimes
can be among the most unobtrusive and
damaging that a health-care institution can
face. While, in the past, even incidents
involving millions of dollars were covered up
and often went unprosecuted, today the U.
S. Attorney General is pursuing such crimes
more vigorously because of the federal funds
that may be involved.^6
The specific markets for MedTrack are the
hospitals with a capacity of at least 150 beds.
American Hospital Association statistics
show 5,764 registered hospitals in the
United States with a total bed capacity of
about 965,000. Of this number, community
hospitals totaled 4,895 with a bed capacity of
813,000. Total hospitalization expenses were
nearly half a trillion dollars, with community
hospitals accounting for nearly 95 percent of
this amount. Targeting the top 10 percent of
this market provides a potential $50 billion
market. A conservative estimate of 10 per-
cent toward the cost of supplies and services
(the Mayo clinic incurred 23 percent in
2004), implies a $5 billion industry for sup-
plies and equipment.426 ENTREPRENEURSHIP CASE
0
10
20
30
(^40)
50
EXHIBIT 2 Hospital Care Expenditure
CA NY TX FL PA IL OH MI NJ MA NC
$ Billion