Cost & Performance Management Analysis of the Danish Hospital Sector: with a focus on acute and elective treatments

Alexander Lund

Student thesis: Master thesis

Abstract

The master thesis has investigated a claim that acute treatments cost more the elective treatments. The hospital sector has gone through a specialization so that some hospitals mainly treat acute patients. The distinction in costs for acute and elective treatments is not present in the cost or performance management systems. Instead cost and performance management systems are based on rates that assume an average, nation-wide cost per treatment. This thesis analyzes the effects of the cost difference in budgeting and performance evaluation. It is followed by a discussion of potential adjustments. It has been concluded in a case study that acute and elective treatments are subject to different measures of cost and activity. Especially, the direct, variable costs are significantly higher for acute treatments. A Cost-Volume-Profit analysis reveals the higher costs for acute treatments have a significant effect on the budgeting for the acute hospitals compared to the elective hospitals. A variance analysis elaborates on how the assumption of average costs has a distorting impact on the perception of performance evaluation. Two methods are proposed in order to take the cost difference between acute and elective treatments into account. The first method is transfer pricing and involve a budgetary change, where elective hospitals pay a specified amount to the acute hospital for every patient “transferred” from their region. The second method involves a standard cost system, expressed in flexible budgeting and performance reporting. The system seeks to disaggregate performance measures and create transparency and coherency between overall targets and the operational level

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages158