Health-care financial management in a changing environment

Concerns over escalating health-care costs have brought about significant changes in the way health-care organizations and professionals are compensated for their services. Capitation, the payment of a fixed fee to health-care providers in exchange for providing medical care when it is needed, has been a significant element of change in the health-care industry. The purpose of this paper is to propose a framework for the evolution of management accounting systems in a changing health-care environment. This framework suggests that the role of activity-based costing, life cycle costing, and value chain analysis becomes increasingly important as the payment for health-care services moves from fee for service reimbursement to capitation arrangements between insurance companies and health-care providers. Health-care organizations that design and implement accurate costing and evaluation systems will enhance their ability to compete successfully in this rapidly changing environment. (C) 2000 Elsevier Science Inc. All rights reserved.