Contingency Factors Affecting the Adoption of Cost Accounting in Greek Public Hospitals

Abstract

During the last decades, several countries worldwide have introduced financial management reforms, as an important part of the New Public Management (NPM) initiative at one or more levels of government sector. These reforms were largely concentrated on the replacement or transformation of their traditional budgetary cash accounting systems towards business-like accrual accounting. Following the example of this upcoming managerial trend, in 2003 the Greek government introduced an accrual based accounting system and double-entry book-keeping method in all public hospitals, in an attempt to promote efficiency in service production.

The purpose of this paper is twofold. First, to provide an overview of the government sector reform initiatives and to present evidence regarding the adoption of the management accounting practices, such as cost accounting systems (CAS), into public hospitals that are part of the Greek National Health System (GNHS). Second, to examine the reasons why this reform has not yet shown any serious progress in the 5 years of its official enactment.

This analysis is based on the results of an empirical survey that took place during 2009. For the purposes of this survey, a structured questionnaire was prepared and sent to the Finance Directors of 132 Greek public hospitals.

The empirical evidence reveals that the process of introducing cost accounting in public hospital organizations is inadequate, with adoption rates at a mere 23%. Regarding the potential contingent factors that affect the extent of hospitals’ CAS adoption, this study demonstrates that the complexity of the imposed legal accounting framework, the accounting staff business accounting experience, the reform related training of the accounting staff, the professional support of consultants and the hospital’s director support were found to be significant determining variables.

Other variables, such as the level of accounting staff education, existing information technology status, hospital size, political support and optimal relation between management-physicians, were not found to have a significant influence on CAS adoption. Implications of these results for practice and research are provided.

Keywords: New Public Management, Accrual Accounting basis, Cost accounting systems, contingency factors

JEL Classification: M4, M48