Academic journal article Research in Healthcare Financial Management

Measuring the Intangibles ... the Challenge of Management Control in Public Hospitals: A Study of Intensive Care Units in Norwegian Hospitals

Academic journal article Research in Healthcare Financial Management

Measuring the Intangibles ... the Challenge of Management Control in Public Hospitals: A Study of Intensive Care Units in Norwegian Hospitals

Article excerpt

The intangibility and ambiguity of health care services demand criteria that measure performance from several perspectives other than the financial. In this paper, we illustrate the challenges of fabricating comprehensive performance measures in a national sample of Intensive Care Units (ICUs) in Norway. In these hospital units, patients are mostly in a state of acute and severe illness. Quality perception and performance indicators are under these circumstances very difficult to evaluate.

The debate as to the relative efficacy of conventional vs. more elaborate and broad performance measures are dominating the field of accounting as a part of the New Public Management concept (Hood 1995). Built on this managerial concept, we find a strong focus on management control of health care services to cut rising hospital expenditures. The pricing of life and death has became a challenge for many governmental agencies, and the main problem is to define measures of health care services which can be used for the purpose of calculating prices. The characteristics of health care products make the fabrication of such standard-prices for services an extremely challenging task.

While management accounting procedures may be necessary to exercise control over the use of resources, the informational value of such systems is insufficient to capture the key features of the basic processes that produce differences in performance levels with regard to efficiency and quality of health services. Our basic assumption is that the main characteristics that affect both production and evaluation of health care services are of a nature that cannot be accounted for by conventional accounting measures alone. Consequently, management control systems should be developed that are more multidimensional.

A trend toward more multidimensional performance-measures has been observed also in the corporate world, where managers have recognized that competitiveness had to be based on the ability to transform intangible assets, using the concept of a Balanced Scorecard as a strategic management system (Kaplan & Norton 1992, 1996). Using the basic arguments from the Balanced Scorecard can be helpful in understanding the complexity of fabricating performance measures in health care settings.



During the last 10 years, different reforms have been introduced in the USA, Australia and European countries which have led to a process of company-ization of public hospitals, where these have taken the image of private companies (Brunsson 1994; Rea 1994; Parker & Guthrie 1993). These reforms have been imposed to improve efficiency, eliminate waste and mismanagement and reduce the role of government. A main argument has generally been that more services could be provided for less money (Humhrey et al. 1994; Lapsley 1991; Lawrence et al. 1994). It is assumed that improvements are brought about largely through the design and implementation of various accountable management techniques, like cost improvement programs, financial management information systems, resource allocation rules and per-case payment systems. These reforms rest on the assumption that service production efficiency depends on information provided through more refined monitoring systems, e.g. accounting tools such as more accurate budgets and cost reports with emphasis on case-mix cost accounting and cost-allocation. The tilt toward a more managerial approach is reflected in the rhetorics, which accompany the reform processes ("production," "consumption," "input-output-ratios" etc.).

Despite these accountable management reforms in hospital settings, evidence suggests that accounting changes associated with the reforms have played only a modest part in helping medical staff to make sense of accounting information, and the reforms have gotten lost in implementation (Jones & Dewing 1997). One explanation may be that the reforms have over-focused on financial performance measures, which the medical staff often cannot interpret and use for clinical purposes. …

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