Int. J. Managerial and Financial Accounting, Vol. 3, No. 1, 2011
Design of an activity based costing system for a
public hospital: a case study
Scott D. Eriksen*
Hasan School of Business, Colorado State University-Pueblo,
2200 Bonforte Blvd., Pueblo, Colorado 81001 USA
Fax: +1 719 549-2909
Hostel s/n, E – 28040 Hoya de Manzanares, Madrid, Spain
Fax: +34 91 452-1111
Gary M. Cunningham
Jönköping International Business School,
P.O. Box 1026 SE-551-11 Jönköping, Sweden
Fax: +46 36 16-10-69
Abstract: Healthcare systems are under pressure to adopt contemporary management practices including activity-based costing (ABC). This paper reports an intensive case study of the design of an ABC system in a newly-organised public foundation hospital in Spain. The study covered several years and was based on interviews, observations and extensive review of documentation. The analysis draws on an institutional sociology framework. A primary finding is that there was no conflict between physicians and administration, unlike the previous wisdom that such conflict is inherent in ABC implementation in hospitals. Training and involving medical personnel in management, as well as educating implementers in medical issues represented major reasons for no conflict. Although not generalisable outside this specific context, this study provides the basis for broader empirical research. Keywords: activity-based costing; ABC; ABC system design; healthcare; institutional sociology; public sector; Spain.
Reference to this paper should be made as follows: Eriksen, S.D., Urrutia, I. and Cunningham, G.M. (2011) ‘Design of an activity based costing system for a public hospital: a case study’, Int. J. Managerial and Financial Accounting, Vol. 3, No. 1, pp.1–21.
Biographical notes: Scott Eriksen is an Associate Professor of Accounting at Colorado State University – Pueblo. He previously spent over 15 years on the faculty of major universities in Europe, including the Instituto de Empresa Business School in Madrid, Spain. He obtained his PhD in Accounting from the University of North Texas in the USA in 1987. His areas of research include cost management, management control and accounting information systems. He has publications in several countries.
Copyright © 2011 Inderscience Enterprises Ltd.
S.D. Eriksen et al.
Ignacio Urrutia is the Dean of Nebrija University in Madrid Spain. He has previously been on the faculties of several Spanish universities including the Instituto de Empresa Business School and the IESE Business School. He obtained his PhD in Accounting from the University of Complutense in Spain in 2000. His areas of research include cost management and management control. He has publications in several countries.
Gary Cunningham is a Professor of Accounting at Jönköping International Business School (JIBS) in Sweden. He has previously been on the faculties of major universities in the USA, Europe and the Middle East. He obtained his PhD in Accounting from the University of Texas at Austin in the USA in 1976. He primarily researches management control issues, especially governmental entities and multinationals and international aspects of accounting.
Significant changes in public sector management from the 1980s, often called new public management (NPM), reflect significant changes in consumers’ mindsets who expect private-sector service levels (Hood, 1995; Olsen et al., 1998; Olías de Lima, 2001). Public sectors managers believed public institutions could adopt and be held to, similar levels of private-sector accountability (Cunningham and Harris, 2001). Public health institutions, hospitals particularly, experienced pressure to improve management (Ham, 1997; Ruef and Scott, 1998) responding to governmental and public...
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