Abstract
Background:Choosing an appropriate accounting system for hospital has always been a challenge for hospital managers. Traditional cost system (TCS) causes cost distortions in hospital. Activity-based costing (ABC) method is a new and more effective cost system.Objective:This study aimed to compare ABC with TCS method in calculating the unit cost of medical services and to assess its applicability in Kashani Hospital, Shahrekord City, Iran.Methods:This cross-sectional study was performed on accounting data of Kashani Hospital in 2013. Data on accounting reports of 2012 and other relevant sources at the end of 2012 were included. To apply ABC method, the hospital was divided into several cost centers and five cost categories were defined: wage, equipment, space, material, and overhead costs. Then activity centers were defined. ABC method was performed into two phases. First, the total costs of cost centers were assigned to activities by using related cost factors. Then the costs of activities were divided to cost objects by using cost drivers. After determining the cost of objects, the cost price of medical services was calculated and compared with those obtained from TCS.Results:The Kashani Hospital had 81 physicians, 306 nurses, and 328 beds with the mean occupancy rate of 67.4% during 2012. Unit cost of medical services, cost price of occupancy bed per day, and cost per outpatient service were calculated. The total unit costs by ABC and TCS were respectively 187.95 and 137.70 USD, showing 50.34 USD more unit cost by ABC method. ABC method represented more accurate information on the major cost components.Conclusion:By utilizing ABC, hospital managers have a valuable accounting system that provides a true insight into the organizational costs of their department.
Highlights
The health sector is one of the most important parts of the service sector due to its impact on the protection as well as promotion of human life (Banerjee, Deaton, & Duflo, 2004)
By utilizing Activity-based costing (ABC), hospital managers have a valuable accounting system that provides a true insight into the organizational costs of their department
The unit cost of medical services was calculated using the ABC method and all costs used in ABC program were expressed in the United States dollar (USD)
Summary
The health sector is one of the most important parts of the service sector due to its impact on the protection as well as promotion of human life (Banerjee, Deaton, & Duflo, 2004). One of the main challenges of hospital managers is development of cost information for decision-making and proper pricing of services. Hospital managers must provide healthcare services needed by the community at an acceptable level of quality and at the least possible cost; they need information on the actual cost of the services they provide. Many hospitals, even those with new cost accounting systems, have difficulty in calculating actual direct and indirect costs for medical services (Meyer & Feingold, 1995), which necessitates attention to the acceptable costing systems. Activity-based costing (ABC) method is a new and more effective cost system
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