Design of an activity based costing system for a public hospital: a case study

Healthcare systems are under pressure to adopt contemporary management practices including activity-based costing (ABC). This paper reports an intensive case study of the design of an ABC system in a newly-organised public foundation hospital in Spain. The study covered several years and was based on interviews, observations and extensive review of documentation. The analysis draws on an institutional sociology framework. A primary finding is that there was no conflict between physicians and administration, unlike the previous wisdom that such conflict is inherent in ABC implementation in hospitals. Training and involving medical personnel in management, as well as educating implementers in medical issues represented major reasons for no conflict. Although not generalisable outside this specific context, this study provides the basis for broader empirical research.