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    Anybody have a link to an ABC real company video?
    question posted August 15, 2013 by Gulraze Wakil 
    515 Views, 2 Comments
    question:
    Anybody have a link to an ABC real company video?
    details:

    I am not looking for a video to explain how ABC works because I do that. What I need is a video showing it in action in a real company or real company employees talking about it. I had a VHS in 2008 before from Kent State U. library but now I am at Carleton U.

    Thanks, Gulraze Wakil, Assistant Professor, Carleton U. Canada.

    Comment

     

    • Gary Cokins

      Gulraze ... I am not a faculty member but a practitioner with 40 years industry and consulting experience. I was trained on ABC in the late 1980s and implemented ABC many times. I have authored ABC books. I do not have a video, but your students may find this audio recording of me discussing ABC of interest and to stimulate discussion. Feel free to communicate with me.

      http://www.robertgbarnwell.com/019-cfo-talk-radio-activity-based-management/

       

      http://www.youtube.com/watch?v=CwNcPwNgk10

       

      Gary ... Gary Cokins

    • Robert E Jensen

      Activity Based (ABC) Costing --- http://en.wikipedia.org/wiki/Activity-based_costing

      Jensen Comment
      Even though ABC Costing did not live up to its hype in terms of ongoing usage by business firms, it is not yet dead!

      Activity Based (ABC) Costing --- http://en.wikipedia.org/wiki/Activity-based_costing

      "A Review of ABC Implementations in Chinese Industries," by Kanitsorn Terdpaopong, Omar Al Farooque, Tomasz Wnuk-Pel, and Dhurakij, SSRN, August 18, 2014 ---
      http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2482345

      • Abstract:
        In a competitive environment, accurate costing information is crucial for every business including manufacturing and service firms, fishing and farming enterprises, and educational institutions. The Activity-Based Costing (ABC) system, argued to be superior to the traditional volume-based costing system, has increasingly attracted the attention of practitioners and researchers alike as one of the strategic tools to aid managers in better decision making. The benefits of the ABC system and its impact on corporate performance have motivated numerous empirical studies on ABC; it is considered to be one of the most-researched management accounting areas in developed countries. China, an emerging market with a growing rate of manufacturing industries, is no exception, as ABC entered China as a choice for an innovative accounting system. Previous research on ABC conducted in China examined pertinent issues related to ABC implementation, such as the levels of ABC adoption in various countries, the reasons for implementing ABC, the problems related to ABC and the critical success factors influencing ABC. In their case studies, several authors declared ABC implementation to be successful, but many have been reluctant to support this seemingly novel system for many reasons. This paper reviews 48 research studies on ABC carried out within the past decade in China, both case studies and questionnaire-based research, from 2000 to 2013. We found that ABC has been adopted in most manufacturing firms, many of which claim success in cost reduction and performance improvement since its implementation; in some service corporations, especially in logistics and hospitals; and in only a few firms in the construction sector. In our study, it should be noted that large firms with more than 1,000 employees were the dominant group (65.58 per cent) applying ABC. Even though many firms in China supported ABC’s use, many factors hindered its implementation: 1) difficulty in establishing activities and linkages to existing systems for gathering information to enter into an ABC system; 2) lack of adequate IT resources; 3) insufficient knowledge of ABC among employees, which leads to the fourth reason; 4) lack of management support. Despite these obstacles, our research review leads us to believe that the rate of ABC implementation in an emerging market like China will continue to rise.

      Jensen Comment
      I'm not certain that "accurate costing information" is the main goal of ABC costing. Perhaps a better phrase is "comprehensive costing information." For example, ABC costing declined in popularity in product costing in the USA due to derivation costs and limitations of ABC costing for product costing ---
      http://en.wikipedia.org/wiki/Activity-based_costing#Tracing_Costs

       The value of ABC costing may come more from the process of investigating activity costs than from the dubious inaccurate product costs using ABC models. One problem is that the benefits from a quality ABC costing effort often do not exceed the costs of the effort. The above Terdpaopong et al. paper suggests this may also be the case in China.

      Academics love ABC costing because it is relatively easy to teach and is one of the great 20th Century innovations (developed initially by practitioners) in cost accounting. But academics may pass over the decline in popularity in real-world implementations in practice.

      "Better Accounting Transforms Health Care Delivery. Accounting Horizons," by Robert S. Kaplan and Mary L. Witkowski, Accounting Horizons, June 2014, Vol. 28, No. 2, pp. 365-383 ---
      http://aaajournals.org/doi/full/10.2308/acch-50658 (Not Free)

      SYNOPSIS:

      The paper describes the theory and preliminary results for an action research program that explores the implications from better measurements of health care outcomes and costs. After summarizing Porter's outcome taxonomy (Porter 2010), we illustrate how to use process mapping and time-driven activity-based costing to measure the costs of treating patients over a complete cycle of care for a specific medical condition. With valid outcome and cost information, managers and clinicians can standardize clinical and administrative processes, eliminate non-value added and redundant steps, improve resource utilization, and redesign care so that appropriate medical resources perform each process step. These actions enable costs to be reduced while maintaining or improving medical outcomes. Better measurements also allow payers to offer bundled payments, based on the costs of using efficient processes and contingent on achieving superior outcomes. The end result will be a more effective and more productive health care sector. The paper concludes with suggestions for accounting research opportunities in the sector.

      Keywords:  cost management, health care, measurement, activity-based costing

      Received: October 2013; Accepted: October 2013 ;Published Online: June 2014

      Robert S. Kaplan is Senior Fellow and Professor Emeritus at Harvard University; Mary L. Witkowski is a Fellow and an MD candidate at Harvard University. Corresponding author: Robert S. Kaplan. Email: rkaplan@hbs.edu

      This research has been motivated and greatly enriched by collaborative work with our Harvard Business School colleague, Professor Michael E. Porter. His health care value framework provided the context for understanding how improved accounting can contribute to better delivery of health care.

      INTRODUCTION

      Health care spending in the U.S. has increased from 7.2 percent of Gross Domestic Product in 1970, to 9.2 percent in 1980, 13.8 percent in 2000, and 17.9 percent in 2011 (Centers for Medicare & Medicaid Services [CMS] 2013). At the same time, U.S. citizens have higher morbidity and mortality rates than citizens in countries that spend much less on their health care system (Nolte and McKee 2012). Much of the higher U.S. spending is caused by a fee-for-service reimbursement system that compensates providers for the volume of procedures they perform and not for the outcomes they deliver. Another cause is the extensive fragmentation of health care delivery and reimbursement (Reinhardt, Hussey, and Anderson 2004) in which patients are treated in diverse organizational units including independent physician practices, primary care clinics, hospitals, and rehabilitation and chronic care centers. These clinical organizational units are structured by medical and surgical specialty, not by a patient's medical conditions. As a result, patient treatment and its reimbursement are dispersed across multiple functional units, with each unit doing only one component of a patient's total care for a specific medical condition.

      Few incentives currently exist for treating a patient's complete medical situation, or for performing a more active role in preventive behavior and wellness. The 2011 Affordable Care Act improves residents' access to the U.S. health care system, but it includes only modest attempts to reform the system itself (Wilensky 2012). Increasing access to a poorly organized and inefficient system will likely eventually lead to government-imposed spending and price cuts, followed by lower quality of care, longer waits for patients, and the financial distress and exit of providers.

      Other countries, while spending a smaller percentage of their GDP on health care, are also experiencing cost increases comparable to those in the U.S. (Organisation for Economic Co-operation and Development [OECD] 2011). No country has yet to solve the fundamental problem of how to reimburse providers for providing health care to their populations. The U.S. fee-for-service model clearly does not work, but the capitated payments and global reimbursement mechanisms used in other countries lead to rationing of care and queues (Lee, Beales, Kinross, Burns, and Darzi 2013; Wilcox et al. 2007).

      Many of these problems are the result of a huge measurement gap: only a very few providers today—physicians, clinics, and hospitals—have valid measures of the outcomes they achieve or the costs they incur to treat individual patients for specific medical conditions. The lack of valid outcome information is partly a consequence of the fragmented way in which health care is delivered, with each provider entity responsible for only a component of the patient's complete care experience. But health care is a more complex setting for measuring outcomes than are manufacturing and most other service industries, which may explain why providers default to input and process metrics rather than patients' outcome metrics.

      The lack of valid cost measures in health care provider organizations might require accounting historians to explain. Hospitals have evolved an idiosyncratic system that assigns expenses to procedures and patients based on charges and allocation ratios known as Relative Value Units (RVUs) and not on the actual costs they incur to treat patients. Separately, physician's specialty societies determine, and periodically revise, RVUs for their procedures, which then get embedded into the list prices established through Medicare's Resource-Based Relative Value Scale (RBRVS) (Hsiao, Braun, Dunn, and Becker 1988a; Hsiao, Yntema, Braun, Dunn, and Spencer 1988b; Marciarille and DeLong 2011). Physician practices then measure the cost of their procedures by calculating a ratio of their practice costs to these list prices (ratio of costs-to-charges or RCC method). Health care administrators, seemingly unaware of the huge distortions and cross-subsidies embedded in their faulty cost systems, are in the situation described by former U.S. Defense Secretary Donald Rumsfeld as, “they know not what they do not know.”

      To summarize, few health care providers in the U.S. and rest of world have valid measures, by medical condition, on patient outcomes and costs. If you believe that “you can't manage what you don't measure,” then the current ineffectiveness and inefficiency of health care systems should not be a surprise. The best providers, lacking adequate data, have few ways to signal their superior capabilities to attract higher volumes at prices greater than their costs. Conversely, ineffective and inefficient providers remain in the system, delivering inadequate care at high societal cost, and depriving effective and efficient providers from delivering higher value to a larger population of patients (Birkmeyer et al. 2002; Birkmeyer et al. 2003). A poor industry structure with a dearth of measurements is a rich environment for accounting scholarship to play an important role through research and education on better ways to measure costs and outcomes.

      In the remainder of the paper, we describe the framework and preliminary results from an action research program conducted at multiple pilot sites in the U.S. and Europe. The program's goal is to explore how to remedy the severe measurement gaps in health care. We conclude by suggesting opportunities for accounting research in the sector.

      THE VALUE FRAMEWORK

      The over-arching goal for any health care system should be to increase the value delivered to patients (Porter and Teisberg 2006; Porter and Lee 2013). At present, however, many goals are advocated for health care delivery including quality, access, safety, and cost reduction. While each of these is individually desirable, none is comprehensive enough to serve as a unifying framework for health care delivery. Porter's framework (Porter and Teisberg 2006) defines value by two parameters: patient outcomes and cost. Value increases when outcomes improve with no increase in costs, or costs are reduced while delivering the same or better outcomes. Currently, however, health care systems have diverse incentives among their various participants. A provider's performance is measured with input and process metrics, such as certification of personnel and facilities, efficiency, access, quality, safety, and compliance. While these metrics are useful for internal cost and operational control, they are not sufficient to motivate health care providers to deliver more value—better outcomes and lower costs—to end-use customers.

      . . .

      RESEARCH OPPORTUNITIES

      The introduction of cost and outcome measures into health care delivery has just started, so the opportunities for research are immense. Every reader of this article is within walking, cycling, or a short driving distance to a potential field site and source of data. Developing, introducing, and implementing new measurements in this industry will require answering numerous technical questions—both conceptual and empirical—that can be informed by careful research. Our initial projects have focused on clinical departments delivering care to patients. Additional opportunities are to investigate cost assignments for important ancillary care departments such as radiology, laboratory, pharmacy, and central sterilization, as well as administrative support departments such as billing, laundry, housekeeping, and dietary. Researchers can explore the costs associated with medical mistakes, no-shows, administrative paperwork, inadequate documentation, processes that protect against malpractice claims, and end-of-life care.

      Beyond accounting and measurement issues, field studies of the leadership and change management issues from introducing new outcome and cost measurements would be fascinating. We know from past experience that introducing new measurement systems triggers individual and organizational resistance (Argyris and Kaplan 1994). Researchers should be able to study how health care leaders solve the behavioral issues arising from introducing change and modifying power relationships within health care providers. Behavioral researchers can also explore the informational processing issues when clinicians and administrators use multi-dimensional outcome and cost data to optimize medical processes.

      We have described how outcome and cost measurement allows for a new reimbursement mechanism to be introduced. What are the incentive and informational issues associated with changing the basis for reimbursement from fee-for-service, capitation, and global budgeting to bundled payments? Accounting scholars can participate in bundled payment experiments to study the tensions and conflicts as various players in the health care system attempt to work together to increase the value they deliver to patients, rather than to optimize within their own specialty and discipline. The complexity of interactions calls out for analytic research to sort out the informational and incentive issues among the various players in the system including patients, multiple providers, suppliers, and payers. Accounting historians can shed light on how health care systems, around the world, adopted reimbursement systems that are not aligned to deliver the best value to the end use customer, the patient. They can also explore how such a huge industry developed with so little calculation and reporting of outcomes and costs.

      The rationale for the Affordable Care Act in the U.S. is that costs will go down if more residents are insured and seek primary care rather than get treated, as charitable cases, when they show up in hospital emergency rooms. Is this true? How much additional resources do hospitals deploy to treat such patients and how many resources will no longer be needed when more patients are insured and seek care from primary care clinicians?

      Accounting scholars can participate in field experiments to document the value changes, both costs and outcomes, from introducing a new pharmaceutical or medical device into the treatment protocol for a medical condition. They can participate in field studies that document how innovative provider organizations restructure themselves to deliver the right care, at the right place, with the right mix of clinical and administrative personnel, and with high capacity utilization, to improve the value they deliver. Expertise in auditing of “soft” measures can be productively applied to the measurement and verification of the outcome measures that will be developed for each medical condition, and upon which future reimbursement and reorganization of the treatments will be based.

      In these ways, accounting scholars and educators can help to influence the future of one of the largest and most important sectors of society. The challenges are huge, but we already possess the tools that can be deployed to address the issues.