The adoption of Activity-Based Costing in private health care facilities in South Africa

Gideon Botha,Elda Du Toit

doi:10.4102/jef.v10i2.20

Abstract

The implementation of a South African National Health Insurance, combined with the potential of price reforms, has the potential to adversely affect the profitability of the health care industry. This could force management to look at ways to better understand the causal link between costs and the activities that drive costs. The study aimed to determine the extent of ABC use in health care facilities in South Africa, what the perceived and actual benefits are of adopting ABC and what other management tools and techniques are considered important. A structured questionnaire was sent to a target population, to which 51% of recipients responded. The results revealed that the rate of ABC adoptions has increased from 1.2% in 1994 to approximately 46% today. The growth in ABC adoptions and the high level of ABC adoption in relation to hospitals in the USA and Ireland indicate that the hospital industry in South Africa acknowledges the value ABC can add.

Highlights

Worldwide, health care systems struggle with increased costs and an uneven distribution of health care quality, despite the best efforts of well-trained health care workers (Porter and Lee, 2013, Llewellyn and Northcott, 2005, Tang, Tao and Bekedam, 2012)
The results from the health care facility respondents indicated that 46% of health care facilities adopted Activity Based Costing (ABC), 22% currently consider ABC and 32% do not currently consider ABC
Over the past twenty years there has been a general growth of 29.8% in the adoption rate of ABC, which can be considered significant

Summary

Introduction

Health care systems struggle with increased costs and an uneven distribution of health care quality, despite the best efforts of well-trained health care workers (Porter and Lee, 2013, Llewellyn and Northcott, 2005, Tang, Tao and Bekedam, 2012). All these factors increase the need for governments’ continued monetary investment in health care. Even countries that spend less of their GDP on health care are experiencing increased health care costs (Kaplan and Porter, 2011, The World Bank, 2014). At 8.9%, South Africa spends just over half as much of its GDP on health care than the USA, but South Africa faces a twofold problem (The World Bank, 2014). The 3.9% that remains has to cater for approximately 41 million people This leads to a largely uneven distribution of the quality of health care provided to the South African population (Bateman, 2010)

Objectives

Methods

Results

Conclusion