We cost accountants have wider subject and a wider role to play for the society as well as lifting India in World Health Organization Index through our costing tools and techniques. Today I will be discussing about how BSC can be applied to improve decision making and investment climate.
Why Balanced Score card with Activity based Costing is required in Indian Rural healthcare Industry?
The government of India and the state governments invest a millions for the Indian healthcare industry. According to the Confederation of Indian Industry found that India needs US$50b annually for the next 20 years in order to meet World Health Organization (WHO) standards. The Indian healthcare industry was estimated at USD 40 billion in 2010 is expected to reach USD 280 billion by 2020. Large investments by private sector players are likely to contribute significantly to the development of India’s hospital industry, which comprises around 80% of the total market, going forward this amount is just going to scale up. Highest allocation goes to rural India and this is the place where highest level of failure and delay in achievement of healthcare targets are being achieved. Aging population and increasing pollution is going to increase the demand of the Indian healthcare and hence we need efficient tools to increase investments by blocking the loopholes. But in order to identify the loopholes and increase efficiency mere cost control will not be sufficient. Application of Activity Based Costing can have limited affects as in most cases when generating profits become high cost we quickly switch into cost cutting which makes other investors scary and they avoid investments. This leads to problems none other than the rural people who lack healthcare treatment.
Its being found that costing tools and techniques can be of great help to resolve the issue of failures and wastage of resources. A further ABC and BSC lead to effective healthcare delivery involves providing high quality patient-centered care that is safe and utilizes the public funds efficiently. To improve rural health care system we need strategy and for that we need decision making tools and techniques.
Cost Accounting tools and techniques can be of great use for the companies as well as for the government healthcare segment contribution. Activity based costing and balanced score card application can be a yard stick to measure the success of investments and also design the long term strategy for passing more benefits to the patients. Activity based costing don’t need any explanation but in rural healthcare it can be a game changer as efficient resource management tool. Activity based costing takes new shape when balanced score card is being implemented. This place where getting feedback from the patients and villagers will help to design the service levels of the service providers in the form of mobile healthcare system and private/public health care system. When BSC is implemented financial aspects of the health care cost segment gets automatically linked up with the ABC which improves the efficiency levels of cost management. Hence BSC helps to achieve high levels of ABC in health care cost. BSC will improve the scoring of the internal business and process and will remove the bottlenecks of the corruption as this BSC will detect the failures and the low scoring reasons for the same.
Where BSC on ABC will be Game Changer?
Activity Based costing and Balanced score card in the following areas can be a game changer for converting the losses into profits:
Hospitals
Health care systems
University medical / health departments
Long-term care
Mental health centres
Pharmaceutical care
Health insurance companies
I find we are in the 3rd level of Balanced score card where the industry is well matured but inefficiency have eaten up the resources and end user is suffering despite of the highest allocation of resources. The benefits of adopting BSC to improve the ABC of rural healthcare industry are as follows:
Clarification and consensus of strategy
A framework for decision-making
Positive turn-around in financial performance
Improved patient satisfaction
Increased management and clinician accountability with clearly defined targets
Communication of priorities and focus on core business – ‘keep the clutter out’
Linkage of strategy and resource allocation
Greater management accountability
Learning and continuous improvement
Focus and alignment throughout all levels of the organisation, including the Board
The strategy map, through the cause and effect logic, helped the Board members and executives speed up their decision making on large investments in intangible assets
Improvements in performance results. Besides improvements in financials and patient satisfaction, there were improvements in a number of other areas.
Quality improvements in patient care and outcomes
In order to get success form the implementation of BSC with ABC in Healthcare we need the following things:
Senior management support
Central involvement of clinicians and some flexibility at lower levels
Demonstration of empirical benefits
Cascading to lower levels
Ongoing communication with all staff
Regular management review and monitoring
Supporting information technology for monitoring and reporting performance
How the Frame Work of BSC works in Healthcare and Its respective ABC?
The frame work of BSC in health care industry is the most important part to get efficient results from the same. From a blood bank to a clinical service provider all of them need balance score card with ABC since cost of operating in rural India is low but is expensive in terms of financing to establish and generating heath cash flow from the same.
Every investment has long term and short term strategy and hence setting a target is very important for the same. Balanced Scorecard approach provides a framework to link long term strategic objectives to short term targets, initiatives and accountability. These accountabilities are then translated into a “measurement” program.
Balanced score card over ABC will help in proper measurement of revenue generation and will develop the revenue generation cycle. It helps in decision making and indentifying the areas of improvement and blocks the leakages and corruption in the health care industry. ABC alone will not be of much help as if leaders and not able to measure in that case squeezing the resources becomes the survival point. This neither resolves the issues of the patient health care neither it improves the ranking of India on the global health care map.
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