Applying ABC to healthcare

Article Abstract:

Precise costing methods have become an important activity in the healthcare industry in the 1990s. Although activity-based costing (ABC) has its roots in the manufacturing environment, it can also be relevant to the healthcare world. In fact, it is already being used in several health organizations. One of these is an independent, nonprofit, full-service renal dialysis clinic, which has applied ABC to two alternative treatments. The experience of this facility suggests that ABC applications in healthcare may necessitate more planning and experiment even if one has enough background in manufacturing-based ABC. In this particular clinic, two steps were required in ABC implementation. The first involved a direct transfer of ABC from manufacturing by analyzing general overhead but not indirect nursing services. The second step involved analysis of nursing costs, resulting in a healthcare-based ABC model.

Health Care, Health Care and Social Assistance, HEALTH SERVICES, Health care industry, Accounting and auditing, Medical care

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ABM lifts bank's bottom line

Article Abstract:

Activity-based management is a major contributor to the success of the banking company First Tennessee National Corp. It is actually one of the several steps for increased profitability through cost management employed by the company. These steps were, in order of their application, financial accounting, management reporting, activity-based cost management, internal and external benchmarking, and process reengineering. Activity-based costing (ABC), the third step, was implemented as a replacement for an advanced product costing system, which failed to create operating management with the needed information for cost control and profit increases. In contrast, ABC facilitates process analysis, design and reengineering. The initial profit improvement when ABC was implemented in 1989 was $750,000. By 1994, total profit increased to approximately $11 million and could double that amount by the year 2000.

Banking industry, Management, Cover Story, First Tennessee National Corp., FTEN

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