Managerial control and cost accounting systems in national health care services: a case study

Many governments in Europe are struggling with the need to reduce public spending, especially because of the global recession and of the recent sovereign debt crisis. The reduced growth rates (or, in some cases, even recessions) that several European countries are currently experiencing are putting a strain on public spending, and have forced some governments to introduce drastic measures for increasing financial stability. National health care services, which normally constitute an important portion of public spending, are also affected. The compounded effect of an aging population and an increase in health care costs is forcing even more governments to focus on the efficiency in the management of their national health services. However, the critical relevance of health care expenditures in maintaining the welfare of the population advises against indiscriminate and non-focused cost reductions. Instead, it is essential to identify and understand the main health care cost drivers, in order to develop rational cost reduction plans, aimed at the patient or at the medical procedure level. In order for reduction plans to be successful, in fact, it is paramount that the health care administrators know about the costs related to the different therapeutic or diagnostic treatments (see: Francesconi, 1993; Grisi, 1997; Baker, 1998; Cinquini et al., 2009; Kaplan and Porter, 2011). In this paper we study the methods and results of cost analysis of selected medical and diagnostic treatments offered by the University Hospitals in Trieste, Italy (Azienda Ospedaliera Universitaria Ospedali Riuniti di Trieste). We describe the theoretical and practical implications of the determination of costs in this context, with a particular emphasis on the implementation of modern costing systems, such as Activity Based Costing (Kaplan and Cooper, 1998; De Rosa, 2000; Kaplan and Anderson, 2004). This paper represents the first step in a research project that aims to develop an international comparison of health care costs in neighbouring countries. Cross-country benchmarking and comparison, in fact, may be a precious tool for defining the most cost-efficient methods for offering therapeutic and diagnostic medical services.