Time driven activity based costing and flexible budgeting: Public hospital application

The aim of the thesis is to demonstrate the applicability of the time driven activity based costing (TDABC) method and the budgeting method based on time driven activity based costing (TDABB) in hospitals, and to evaluate the benefits of the methods to hospital enterprises in terms of revealing the current situation, determining future costs, capacity planning, and profitability analysis. For this purpose, a time driven activity based costing and flexible budgeting model suitable for hospitals was created based on the costing and budgeting model put forward by Kaplan and Anderson (2007b). The steps of the created model were applied in the emergency department of a second stage state hospital. The study consists of three parts in this direction. In the first part of the thesis, information is given about health institutions in Turkey, health services, and the importance of costing and budgeting in health institutions. In the second section, the transition process from activity based costing (ABC) to TDABC, the TDABC method and studies conducted in the health sector on the TDABC method are introduced. Then, TDABB, flexible budgeting, difference analysis definitions and studies conducted with the activity based budgeting (ABB) method and the TDABB method are introduced. In the third section of the thesis, a comprehensive application is included in the emergency department of a second level state hospital to show that the TDABC and TDABB conceptual modeling can be applied in hospitals in the service sector. In the emergency department, 41 health services that are carried out in primary activity centers and also have a price equivalent in the Health Practices Circular and activity centers connected to the emergency department were identified. The required primary data were obtained through observation and interview, and secondary data were obtained from the hospital's digital systems. For the mathematical calculations required by the model's steps, Excel tables, the Exponential Smoothing (ETS) algorithm, which is one of the estimation methods for future period demand estimation, and regression analyses were used to separate the fixed and variable parts of the expenses. A TDABC model that can be applied in hospitals was determined, and the current costs of emergency service activity centers and 41 health services were calculated, and current period profitability and capacity utilization analysis was performed. Based on TDABC, a flexible TDABB model was designed that is suitable for hospitals and can be adjusted according to different activity levels. Capacity budgeting was performed for the next period. The budgeted costs were compared with the budgeted prices, and a profitability analysis was presented for the next period. The finalized actual cost amounts of the next period were compared with the budgeted amounts, and double and triple difference analyses were performed. A roadmap has been created for the comprehensive application of the conceptual model of the TDABC and TDABB methods for hospitals in the service sector. Thus, it has been concluded that the conceptual model can be adapted to hospital enterprises and that its benefits are significant. With correct costing, correct capacity and resource planning, scarce resources are directed to the right areas, ensuring effective management of health services, quality delivery, sound process improvement decisions and sustainability of the entire system. Keywords: Time Driven Activity Based Costing, Time Driven Activity Based Budgeting, Flexible Budgeting, Profitability Analysis, Capacity Planning