Activity-based Cost Analysis: A Method of Analyzing the Financial and Operating Performance of Academic Radiology Departments1

Department of Radiology, Indiana University Hospital, Indianapolis, USA.
Radiology (Impact Factor: 6.87). 07/2000; 215(3):708-16. DOI: 10.1148/radiology.215.3.r00jn45708
Source: PubMed

ABSTRACT To develop a methodology for an activity-based cost (ABC) analysis in an academic radiology department, to test the hypothesis that the business of academic radiology can be separated into three distinct businesses-clinical activity, teaching, and research-and to determine the effect of the current teaching paradigm on clinical productivity.
Forty-seven key departmental activities were defined and distributed among the teaching, research, and clinical businesses. Individual radiologists determined the time spent in each of these activities by completing a detailed log of every activity performed during 2 weeks. All departmental revenue and costs were assigned to each activity in each of the three businesses.
The methodology provided a successful understanding of the relative costs of each of the businesses of teaching, research, and clinical activity. It also provided the departmental costs of performing the separate activities typical of each business. Key findings included the following: Faculty spends 72% of time in clinical activities, research is the most expensive service per direct activity hour, and clinical reads (23%) are the single largest departmental cost element.
ABC analysis can separate academic radiology into three businesses-teaching, research, and clinical-and provide a detailed understanding of the cost structure of each. This analysis identifies opportunities for improved quality of service, productivity, and cost within each business.

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    • "To date, most of hospital managers rely on information from conventional accounting system that was designed when competition was local rather than global and when pace and quality of item or service was less decisive for success [3]. However, many companies have found a better cost accounting method named as activity based costing (ABC) [4]. "
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    ABSTRACT: Activity based costing (ABC) is an approach to get insight of true costs and to solve accounting problems. It provides more accurate information on product cost than conventional accounting system. The purpose of this study was to identify detailed resource consumption for chest x-ray procedure. Human resource cost was calculated by multiplying the mean time spent by employees doing specific activity to their per-minute salaries. The costs of consumables and clinical equipments were obtained from the procurement section of the Radiology Department. The cost of the building was calculated by multiplying the area of space used by the chest X-ray facility with the unit cost of public building department. Moreover, straight-line deprecation with a discount rate of 3% was assumed for calculation of equivalent annual costs for building and machines. Cost of electricity was calculated by multiplying number of kilo watts used by electrical appliance in the year 2010 with electricity tariff for Malaysian commercial consumers (MYR 0.31 per kWh). Five activities were identified which were required to develop one chest X-ray film. Human resource, capital, consumable and electricity cost was MYR 1.48, MYR 1.98, MYR 2.15 and MYR 0.04, respectively. Total cost of single chest X-ray was MYR 5.65 (USD 1.75). By applying ABC approach, we can have more detailed and precise estimate of cost for specific activity or service. Choice of repeating a chest X-ray can be based on our findings, when cost is a limiting factor.
    Pan African Medical Journal 06/2012; 12:40.
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    • "Another research from Laurila et al. (2001), studied the efficacy of continuous quality improvement (CQI) compared to ordinary management from a radiology department. Cohen et al. (2000) applied ABC to test the hypothesis that academic radiology can be separated into three distinct businesses –clinical activity, teaching and research-in order to determine the effect of the current teaching paradigm on the clinical productivity. This analysis identifies opportunities to improve quality of service, productivity and cost within each business. "
    Medical Imaging, 12/2011; , ISBN: 978-953-307-774-1
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    ABSTRACT: Diss. -- Helsingin yliopisto.
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