Preliminary Findings on ABC Adoption in Canadian Hospitals: Reasons for Low Rates of Adoption

Abstract

Activity based costing (ABC) can be traced to the years before the Second World War, but its popularity in recent years has been widespread following the Johnson and Kaplan (1987) article. Both teaching and practice have been impacted by the extensive research and literature in this area. However, it is evident that there has not yet been widespread successful implementation of ABC. Adoption rates have been lower than expected given the potential advantages of using ABC suggested by leading academics and professional organisations around the world. We found through initial surveys that there are low rates of adoption of ABC in hospitals in Ontario. Since hospitals are under severe budgetary pressures, have a high variety and complexity of cases and a high level of shared resources, we would expect more adoption of ABC. We use the approach suggested by Scapens (1990) to ascertain the determinants of this low level of adoption. Our studies focus on four hospitals in Ontario, Canada, using surveys and interviews. Our preliminary findings are that the application of social theory, as suggested by Scapens (1990), provides useful explanations for the low ABC adoption rates in hospital care in Canada.