A model for hybrid use of Activity-based Costing approaches

The Activity-Based Costing (ABC) is an approach to manage costs particularly discussed in the past. A lot of works had as topic this costing system but several authors highlighted as relevant the academic discussion more than the use in the companies. By the point of view of theoretical approach the ABC is an effective tool for defining cost object, resources consumption and so on, but the practical use was limited. The adoption of ABC is complicated and there numerous problems to resolve for its application. The ABC is revamped in the research field as an important costing system that could resolve the growing welfare costs in the countries more developed. In particular, the healthcare sector needs advanced costing systems and this is increasing over time. Activity-Based Costing and newest model Time-Driven Activity-Based Costing (TDABC) are being more widely adopted with regards to healthcare issues. At the same time, however, we only see a sporadic use of them as they are difficult to use or because they do not provide an overall solution. So by using our own previous empirical study referring to the adoption of ABC in measuring two healthcare processes (at Perugia’s Hospital, Umbria Region - Italy) we come across a model for dividing the cost of resources in four levels of analysis. Using a hybrid ABC system, namely with the combination of the features of traditional ABC and the lighter approach of TDABC, and finally, the traditional cost allocation. So, we build up a matrix that helps us to map and track the costs of resources absorbed in accordance with both variables: the relevance in costs sustained and its variability over time. The method used is a case analysis and by identifying resource costs of object costs we have singled out these two variables as being important for defining a framework that could improve the chances of being able to adopt the ABC system. We take into consideration the more accurate and more complex analysis of ABC, to the simpler TDABC and traditional allocation, depending on specific resource which is under analysis. The main result is the increase of the theory on the application of ABC in the healthcare sector and, in particular, how to shift between different activity-based models in order to achieve the information and reduce, on the other hand, the cost of implementing this costing system in a healthcare institution. We can conclude that this study needs more in-depth analysis because it is based on the only research of its kind, and it therefore requires more detailed case studies to support it, while it does highlight some interesting aspects for future analysis and for discussion on this field of research.