Hospital accounting and information systems: a critical assessment.
Public sector organisations seem to be caught up in the global wave of 'neo-Thatcherism'. As such, they are being held 'accountable' today by their respective government finance departments for the costs and benefits of the services they provide to the general public. As the public purse tightens, hospitals (and related health service units) more and more compete with other public sector organisations (old-age pensions and services, post-secondary education, day-care centres, port authorities, unemployment insurance, parks and recreation, elite sport programs, aboriginal peoples aid and development, and so on) for a diminishing piece of what seems a smaller and smaller pie. In this 'fight-for-funding', hospitals seem particularly vulnerable. Sky-rocketing costs, public resentment of doctors' high income and a deliberate restriction and limiting of medical school places, among other things, contribute to general public antagonism. The message for hospitals is that cost-effective accountability will loom large when hospitals come begging at the public trough. Even left-wing politicians today seem to be heeding the words of free-market economists like Freedman of Chicago. 'Privatisation' is the constant threat for those deemed inefficient. As a consequence, hospital administrators around the world, caught up in this trend, seem to be stampeding to 'boot-up' some kind of new accounting information system. For example, at my own university hospital (Queen's University, Kingston, Canada), the hospital administrators are in the process of introducing a version of the Johns Hopkins Hospital (Baltimore, Maryland) case-mix-loading cost-accumulation system. In other parts of the world they are known by other fancy names such as 'patient-costing', 'diagnosis-related-groups' (or DRGs). Trendy accounting systems seem to be the order of the day, a sort of panacea for the current plague of problems hospitals face. As the new systems become operational, however, traditional management accounting issues will likely surface. Particular departments, wards and surgeons will be fingered by the system for excessive costs, inefficiency, and under-utilisation of equipment. When this happens, the medical professionals will begin to pay attention to these systems. They will discover that the accounting decisions (which cast them in an unfavourable light) are subjective, arbitrary, and problematic. The old debates, such as incremental versus full-costing, transfer pricing and cost of capital, will be played out again; but now on the turf of hospitals. As the debates drag on, it seems likely that in the interim the new accounting systems could do more harm than help. The rest of the paper attempts to explain why.
Macintosh
N B
NB
University of New South Wales.
D000066:Accounting; D003365:Costs and Cost Analysis; D003625:Data Collection; D003660:Decision Support Systems, Management; D004526:Efficiency; D005377:Financial Management, Hospital; D006295:Health Resources / Q000191:economics*; D006751:Hospital Information Systems / Q000191:economics*; D012945:Social Values