Activity-based costing and cost analysis in public hospitals

Abstract

This paper reports findings from a research aimed at analyzing the applicability of Activity Based Costing (ABC) as a financial management tool for public hospitals. The aim of the study was to analyze hospital costs identified through ABC systems. Despite health investments made by the Brazilian government, public hospitals cannot still cope with demand and their financial management is problematic. Further problems are posed by insufficient financial transfers by the Single Health System (Sistema Único de Saúde SUS) to reimburse costs and lack of budgetary resources for expanding and modernizing the health system network and hiring specialized health care providers. Public hospital management is one of the most backward sectors in Brazil when it comes to implementation of management tools. The present research is based on two case studies focusing on gynecology and obstetrics in public teaching hospitals. The study concluded that for the two hospitals surveyed, which make no use of financial management tools, ABC provides useful and reliable data for financial management, though its implementation requires adequate facilities and specialized personnel, both of which are not yet available.