A Research On The Cost Accounting Of Public Hospital Under The New Medical System Reform

The new medical system reform prevented hospitals from making profits throughselling medicines. Thus the income structure of public hospitals was affected and theoverall revenue declined. With the development of the health insurance policy, more andmore people got health insurance. People who got health insurance together with thehealth insurance institutions had more bargain powers towards public hospitals so that thecontribution rate of the service provided by public hospitals was declined. In recent years,the development of private hospitals whose advantages were low cost and low priceconstituted a great threat to public hospitals. The improvement and optimization of costaccounting methods in public hospitals is around the corner.Before the new medical system reform, the cost accounting method in publichospitals was on department basis. Even now there are still quite a few hospitals usingthis method. However, the cost allocated on a department-basis was too general toprovide detailed information for cost analysis and cost management. So this method wasgradually phased out. As the new reform deepened, cost accounting based on medicalservice items has been widely used. The cost of medical service items is the unit ofdepartment cost and disease cost. The new method would provide sufficient basis for costcontrol and management in public hospitals. Although the new hospital accountingstandard advocated this cost accounting method, it did not give clear rules on how toconduct this particular method.Time-Driven Activity-Based Costing-the most advanced cost accounting method inwestern countries, was come up with by Robert S. Kaplan, who was also the founder ofActivity-Based Costing. Time-Driven Activity-Based Costing method has been widelyused in industries such as medical, logistics, hotel and library since it is easy to use andthe result is accurate. This method has been introduced to China for a very short periodand has not yet attracted the attention of scholars. Relevant research on hospitals in Chinais rare.This paper gives a full picture of the current development of public hospitals andanalysis the cost accounting problems hospitals encountered during the new medicalsystem reform. And then, through a series of necessity, feasibility and applicabilityanalysis, this paper proposes a solution by constructing a Time-Driven Activity-Based Cost accounting model for medical service items. This research intends to demonstratethe usefulness of the cost model through a case study in an upper first-class hospital.Results show that: first of all, Time-Driven Activity-Based Costing could be viewedas an effective tool for cost control and management in hospitals because it providescomprehensive and accurate cost information. Time-Driven Activity-Based Costingtakes effective capacity and idle capacity into account and only allocates the real cost tothe medical service items. Secondly, the medical service item cost accounting based onTime-Driven Activity-Based Costing provides sufficient information for cost of differentdisease categories and different departments. Therefore, it will provide a reasonable basisfor cost analysis and performance assessment. Thus this method can help enhance thesense of responsibility of medical staff, motivate employees to optimize medicalprocesses, and ultimately achieve optimal allocation of resources.The contributions of this paper are:(1) This paper introduces Time-DrivenActivity-Based Costing method to medical service items cost accounting;(2) This paperconstructs a Time-Driven Activity-Based Cost accounting model for medical serviceitems in public hospitals in China and tests its effectiveness through theoretical analysisand a case study. Thus this paper provides theoretical analysis and practical experiencefor using Time-Driven Activity-Based Costing methods in Public hospitals in China;(3)Time-Driven Activity-Based Costing is not only an accounting method, but also amanagement tool for cost control and cost management. Based on theoretical analysis,model building and case application, Time-Driven Activity-Based Costing proves to bean effective method for cost control and cost management in public hospitals. Thus thispaper provides an option for public hospitals to deal with the cost management problemsunder the new medical system reform.