An activity-based costing approach for detecting inefficiencies of healthcare processes

Abstract

Purpose

The purpose of this paper is to set out a methodological framework to investigate how the integration of an activity-based costing (ABC) logic into the pre-existent accounting system supports healthcare organizations in identifying the inefficiencies related to their diagnostic therapeutic pathways (DTP) and related reengineering interventions.

Design/methodology/approach

The BPM-ABC methodological framework has been applied to the case of a specific surgery pathway, at the Orthopaedic Division of a University Hospital in Italy.

Findings

The case-study described in the paper points out: first, how the Business Process Management (BPM)-ABC methodology is able to produce significant information about consumed resources and the costs of the activities, useful to highlight opportunities for DTPs improvement; second, the barriers related to a pre-existing accounting system based on cost centres that can hinder the implementation of the BPM-ABC model.

Practical implications

The case study points out the role of the ABC as a management tool for supporting decision-making processes. The ABC allows inferring information for two purposes. First, ABC supports a cost containment process as it allows highlighting the most cost-consuming activities and resources. Second, the ABC allows identifying reengineering paths, distinguishing between incremental and radical ones.

Originality/value

This study represents a remarkable reference raising the awareness of the pivotal role accounting systems play in the management of the organizational processes.

Citation

Cannavacciuolo, L., Illario, M., Ippolito, A. and Ponsiglione, C. (2015), "An activity-based costing approach for detecting inefficiencies of healthcare processes", Business Process Management Journal, Vol. 21 No. 1, pp. 55-79. https://doi.org/10.1108/BPMJ-11-2013-0144