Management Accounting for Healthcare

The following sections are included:

• Japan Society of Organization and Accounting (JSOA)
• Editorial Board
• Preface
• Contents
• About the Editors
• List of Contributors

The purpose of this study is to present the prevailing feature of cost management in Japanese hospitals. Using the data from a survey of 4,163 hospitals, in this study, we examine (1) to what extent cost information is utilized for cost management, (2) to what extent accounting information is utilized for hospital management, and (3) which performance indicators are used to measure a medical outcome. The result indicates that (1) cost management for a medical service or department has not been introduced sufficiently into hospital management, (2) the utilization of performance indicators including finance and non-financial indicators is widespread, and (3) accounting information has not been used effectively in cost management and hospital management. When cost management is adapted to practical application, it is necessary to consider factors and hospital attributes that may influence such situations in the future.

The objective of this chapter is to describe the purpose of using cost information for internal use of the organization by interviewing several hospitals, and to compare the differences in performance measures from the perspective of information system and influence system. The results of the survey suggested that all hospitals intended to use cost information as an influence system. The performance measures differed among the hospitals, with measures of profit scale by department, and a rate of change in revenue and some costs by department. The use of performance measures as an influence system differed among the three facilities. In other words, it became clear that each hospital used the indicators and non-financial indicators obtained from departmental costing with the intention of influencing the improvement of profit, the reduction of cost, and the improvement of motivation. When implementing departmental costing, it is necessary to consider not only what measures are used to evaluate performance, but also what impact the measures are intended to have.

The purpose of this paper was to examine the healthcare system in Japan, to review hospital management based on the results, and to discuss the necessity of the management accounting system, especially focusing on structure, process, and outcome as elements that comprise the quality of care.

The healthcare system in Japan has been highly evaluated from the viewpoint of outcome represented by life expectancy. To those outcomes, the government has controlled the mechanism of professional training and allocating healthcare expenditures, while private institutions have played a significant role.

However, in the context of soaring healthcare expenditures due to the ageing population, the healthcare system has challenges in terms of strategy, structure, and process. Therefore, management accounting helps to solve such issues. At present, although it is gradually becoming popular, it cannot be said that it has satisfied its full function. In summary, regarding management accounting methods, future introduction and results are expected.

1. Background to the study:

Studies of target costing in the manufacturing industry have so far reported that while there is progress on the accumulation of success cases and sophistication of methods, dysfunctions such as “designer exhaustion or burn-outs,” “supplier fatigue,” “intra-organizational conflicts,” “technique-dependent syndrome,” and “loss of pricing power” exist. Here, “dysfunction” refers to the evil that sometimes manifests and its usefulness is inevitably latent. As a result of their inability to respond appropriately to dysfunctions in product development, many manufacturers face problems such as low profitability, scandals related to quality, as well as the malfunction of the business system that supports the industry. Meanwhile, in the service industry, the usefulness of target costing has been attracting attention since early 2000’s. In particular, the use of “clinical protocol” in the medical service industry has been advancing as a groundbreaking method that aims to improve both the quality of medical care and the dramatic reduction of costs and expenses. However, at present, the focus is only on its usefulness, and studies on the dysfunctions are insufficient. This study derives the dysfunctions of the “clinical protocol” and confirms their existence through an interview survey with persons in medical care services.

2. Main research objectives and research questions:

This study tries to derive the dysfunctions of the “clinical protocols” and confirms their existence through an interview survey with persons in charge of medical care services.

3. Research methodologies:

To identify the existence of dysfunctions of clinical protocols, 12 interviewees were selected and interviewed about an hour for each. Interview protocols are carefully prepared. Information gathered are systematically coded and documented with grounded theory approach.

4. Results:

Five dysfunctions, 1) method-dependent syndrome, 2) intra-organizational conflicts, 3) problems caused by the progress of systemization of medical care service, 4) limited application of clinical protocol to acute care phase, and 5) never-ending cost reduction activities of clinical protocols were identified. Some dysfunctions were expected ex ante and others are unidentified prior to the study. What is impressive is the efforts of doctors and hospitals to overcome dysfunctions for better medical treatments and patients’ satisfaction.

5. Discussions:

Based on the literature survey of target costing dysfunction in manufacturing sector, authors hypothesized dysfunctions of medical services, as in the manufacturing sector, will exist in the medical treatments with clinical protocols. As we hypothesized, various dysfunctions are observed along with the merits of using clinical protocols. Efforts of doctors and hospitals were worth noticing to minimize the negative effects of using clinical protocols.

6. Contribution and Conclusion:

This paper made the first examination of dysfunctions of clinical protocols, target costing in medical care service. We confirmed the existence of dysfunctions. Also, we noticed that observed efforts of doctors and hospitals would be beneficial for the better management of hospitals and satisfactory treatment of patients.

The purpose of this study is to investigate how physician individuality affects the profitability of medical treatment in hospitals where standard management is more difficult than in the manufacturing industry, through analysis using a hierarchical linear model. The purpose of this study is to examine the factors that cause individuality using interviews with physicians. The analysis showed that the physician’s individuality had a significant effect on profitability, and that the materials used and the physician’s personal surgical style also had an effect. Standardization of inputs and processes may affect the quality of medical care and physicians’ motivation, and it is necessary to consider the target disease and the tightness of standardization management in promoting standardization.

Background: The DPC (Diagnosis Procedure Combination) is a flat-sum reimbursement system, which was introduced in Japan; its charge of care decreases according to the hospitalization. Therefore, the need for cost management per DPC has been significantly increased. Thus, we address practical issues about how to allocate indirect cost to patients to understand the profitability of each patient for hospital management.

Methods: We examined the data from 40 patients who underwent artificial knee joint replacement surgery between April and June 2015 at Hospital A (a private hospital with 410 beds). And we compared and verified two costing models, the frequency of practice treatment (FPT) model and the frequency of practice treatments and contribution margin ratio (FCM) model.

Results: The correlation coefficient between the patient revenue and fixed indirect cost was 0.843 (p < 0.001) and 0.830 (p < 0.001) for the FPT model and FCM model. And the correlation coefficient value between patient revenue and patient costs (patient direct cost + patient indirect cost), which is 0.887 (p < 0.001) in the FPT model and 0.989 (p < 0.001) in the FCM model.

Conclusions: Our findings demonstrate that the FCM model realized a fair cost burden to each patient; further, it was convincing for medical staff based on an interview with a senior staff member.

This chapter clarifies the attributes of profit management in its traditional form by tracing the evolution of the profit management concepts that have been central to managerial accounting theory up until the present. Next, we clarify the characteristics, and the circumstances that led to the implementation, of Toyota profit management, which differs from traditional profit management. Further, the concept of “delta management”, an attribute of Toyota profit management that strengthens risk tolerance and cost competitiveness, will be understood by comparing traditional and Toyota profit management. Finally, the significance of delta management to managerial accounting and its significance for medical organizations, which often face severe financial constraints, will be considered.

The purpose of this study is to identify the reasons why healthcare professionals neglect to reach their cost performance goals. It has been pointed out that healthcare professionals often ignore goals (e.g., cost targets), despite the clear need for effective performance management, especially in healthcare organizations.

To identify the factors behind this behavior, this study applies social and psychological perspectives to conduct a survey of 150 nurses belonging to a hospital.

In accordance with Baron and Kenny(1986)’s mediation analysis, the result shows that nurses’ perceptions of occupational professionalism, especially occupational perception toward their expertise, have a significantly negative effect. Second, unlike the results of previous studies, the effect of the degree of autonomy,which is one of the important factors, is found to be limited. The result indicates that the perception of one’s career consciousness itself has a significantly negative effect.

This study suggests that giving positive cognitions of having acceptable discretion to nursing and other healthcare professionals is one of the necessary conditions for the effective functioning of cost management systems.

This case study addresses the problems the office director of Bethlehem Hospital faced in implementing the balanced scorecard (BSC) and sheds the light on the steps the author took to remedy these problems. Initially, the director of the hospital developed the BSC at the corporate level without cascading it down to the departmental levels. Independently, managers at lower levels developed their departmental strategy maps but failed to connect them to the hospital corporate BSC. In addition, the director had some issues linking the hospital BSC with the electronic medical record system. Therefore, he developed the electronic medical record system independently of BSC. In order to mitigate these problems, the author redesigned the corporate BSC aiming at cascading its aggregate measures and strategic initiatives down to its departmental levels to align the departments goals with those of the corporate and ensure successful implementation of the BSC.

Public hospitals established by local governments in Japan are supposed to provide medical care in rural areas, unprofitable medical care, and advanced medical care that is difficult for private hospitals to provide. Public hospitals play a significant role in society, but in recent years, many public hospitals have been running at a loss and are in need of drastic management improvement. The author conducted interviews with 42 public hospital top managers (hospital directors and administrators) from 2017 to 2019 throughout Japan. Based on the results, this chapter presents an analysis of the management control systems of public hospitals, with a particular focus on the financial performance measurement system. It will clarify what kind of financial performance measurement system public hospitals have adopted and how top managers choose to design their financial performance measurement system in response to external institutional pressures.

Amoeba management is a cost management technique that entails an entrepreneurial thought process and is a leading system in management accounting in Japan. Its fields of application have expanded in recent years to include the medical and social welfare industries. However, few examples exist of its introduction in hospitals, and the factors leading to its adoption are yet to be explained. This chapter aims to clarify the organizational learning process necessary for the adoption of amoeba management by drawing on the perspective of the enabling control design principle, and takes Ohchi Municipal Hospital as a field study to examine its adoption of the technique. Results show that in order to establish amoeba management, the use of both coercive and enabling control afford each amoeba the opportunity to learn by trial and error, thus increasing motivation. In addition, in this study, hospital staff were not seconded from a central government office, but were instead almost exclusively employed by the hospital itself, thus suggesting that the accumulation of organizational memory is likely.

Today, promoting team healthcare, a project in which diverse healthcare professionals, has become an important management issue for hospitals. Previous management accounting research on medical organizations has shown that financial control is not useful for motivating professionals. This study aims to examine management control systems (MCS) that promote collaboration among healthcare professionals in team healthcare. We do not limit the concept of MCS to financial MCS but invoke the management control package framework, which includes various control systems. A field study was conducted at the Breast Center of St. Luke’s International Hospital, a leading example of team healthcare in Japan.

The study results showed that a non-financial MCS called Quality Indicator is operated at the Breast Center. Besides, a foundation for interpersonal relationships within the team is formed under administrative and cultural controls, such as establishing “Centers,” forums for dialogue, and middle managers’ leadership. These systems are developed and operated consistently to embody the hospital’s basic operational policies, thus creating a “package” of MCS.

The following sections are included:

• Introduction
• The United Nations’ Request for “Sustainable Goals”
• Mechanism of the Lithium-Ion Battery
• Managerial Significance of Electric Vehicles
• Conclusions: Building a Network for Horizontal Division of Organizational Units by Modularization
• References
• Reference Materials (in Japanese)

Eiichi Shibusawa was chosen as the new portrait for the 10,000-yen bill from the first half of 2024. Known as the “Father of Japanese Capitalism,” Eiichi Shibusawa (1840-1931) was involved in the creation of more than 500 companies in Japan, including a bank. This paper aims to tackle Eiichi Shibusawa from the standpoint of a management and accounting researcher; in particular, accounting studies, with its consciousness of the relationship between companies and the society. First, we introduce the fact that Drucker (P.F. Drucker), an authority in management studies, evaluates Eiichi Shibusawa exceptionally. Second, we clarify how Eiichi Shibusawa’s remarkable practical ability in accounting, especially management accounting, was evaluated and came out into the world based on the land where he was nurtured. Eiichi Shibusawa appears as a pioneer in management accounting and made an important contribution to the introduction and establishment of Western bookkeeping methods during the Meiji period. Third, we discuss Eiichi Shibusawa’s management philosophy, “The Theory of the Union between Morality and Economy,” its contents, and their significance. Lastly, we study the fact that CSV (Creating Shared Value) proposed by Porter and Kramer (Porter, M. E. and M. R. Kramer), which is currently attracting worldwide attention, is highly compatible with Eiichi Shibusawa’s “The Theory of the Union Between Morality and Economy.”

The appropriation system, which was initially established by DuPont Powder Company in the early 20th century, is a mechanism by which top management allocates funds to each division or department efficiently and systematically, and plays a significant role in supporting decision-making in management accounting. The appropriation system was adopted by DuPont, which acquired DuPont Powder Company in 1915, as well as by the General Motors Corporation (GM). After adopting the appropriation system, each company converted the organization management from a functional organization into a divisional organization. In response to the conversion, they modified the original appropriation system to establish new appropriation systems. This paper aimed to examine why and how the new appropriation systems were developed, which were suitable for the divisional organization at DuPont and GM, based on original materials from the 1900–1920s. Particular attention was paid to the relationship between management accounting and company organization, by considering DuPont and GM’s business environment in the early 20th century. This study allowed us to extract and illustrate the actual states of the appropriation system and management accounting at DuPont and GM.

The following section is included:

• Index