Is it possible to achieve a "fit" of management control practices and strategies in Indonesia's reformed public hospitals?

Abstract

Research aims: This research aims to investigate the effectiveness of implementing management control practices (MPCs) and examine whether MPC is possible and how MPCs as a package "fit” with the strategic choices of Local Community Service Agency (BLUD) public hospitals (PHs) in Indonesia.Design/Methodology/Approach: This study applied mixed-method research with a sequential explanatory strategy. Quantitative data were collected through self-administered questionnaires distributed to 29 top management team members of eight BLUD PHs in East Java and Bali, Indonesia. Meanwhile, qualitative data were generated by conducting a semi-structured interview with four selected top management team members of BLUD PHs. The data were then analyzed quantitatively and qualitatively by implementing profile deviation analysis, cluster analysis, ordinal regression analysis, and content analysis.Research findings: Quantitatively, the researchers found a negative correlation, yet insignificant, between the “misfit” of MCPs and strategy and management control effectiveness. Thus, the “fit” hypothesis was not supported. Qualitatively, the researchers revealed that BLUD PHs extensively used MCPs and employed them in various ways, including cultural, administrative, and dominantly cybernetic controls. Finally, it can be concluded that using cybernetic controls as a dominant practice is unsuitable for the strategy chosen by BLUD PHs in Indonesia.Practical and Theoretical contribution/Originality: This study expands upon what has already been explored in the management control literature concerning how MCPs might be configured to align with organizational strategy, especially in the context of public healthcare organizations. Practically, the reformed PHs in Indonesia are expected to understand better the structure and characteristics of the BLUD-based financial management environment. It is essential for organizations, as it helps them figure out exactly how their management control practices and organizational strategies fit together.Research limitation: Due to the low questionnaire and interview participation, mixed-methods research was underutilized in this study.

Effectiveness and impact of management accounting in hospitals: Evaluation of the effectiveness of cost accounting and revenue budgeting

“…Of course, it is not possible to directly clarify the causal relationship between the two calculations. However, in a group of hospitals that are active in business management, where both calculations are implemented, departmental costing was practiced by the mid-2010s in many cases, while specific costing was basically implemented after the late 2010s, and departmental costing has been done relatively early in most hospitals (Nurkholis et al, 2023) 12 . Therefore, it is reasonable to infer that the practice of departmental costing has increased the need to understand profitability to manage profitability more fully and concretely in the department, and has induced specific costing 13 .…”

“…Specifically, of the 221 hospitals (13.7% recovery rate 1 ) that responded to the 2022 survey of hospitals (1619 hospitals), 146 hospitals for which financial and other performance data were available and could be used for analysis were selected to be evaluated for the status of implementation of cost accounting and revenue budgeting by the department. We examine whether differences in the implementation status of departmental costing and revenue budgeting and specific costing (Nurkholis et al, 2023) lead to differences in profitability. We will also examine how differences in the implementation of management accounting methods affect medical outcomes, such as ward utilization, implementation of key therapeutic actions, and discharge outcomes and readmission status.…”

“…In addition, there is a possibility of a strong linkage between the two due to the third factor of high awareness of management control (possibility that this is not a direct causal relationship between the two), but since it is thought that the awareness of management control is high and high awareness of management control is maintained thanks to departmental cost accounting in the first place (Nurkholis et al, 2023) It can be said that there is at least an indirect effect from departmental profitability management to specific profitability management.…”

Power Dynamics in Accounting-Related Strategic Decision-Making within Hospital Management: A Narrative Literature Review

“…However, the formulation and execution of such systems are susceptible to the influence of power dynamics within the organizational framework (de Harlez & Malagueño, 2016). Individuals or factions wielding power can significantly impact the selection of performance metrics, favoring measures that align with their own priorities or areas of expertise (Nurkholis et al, 2023). Likewise, they may mold the interpretation and utilization of performance data, employing it to rationalize their decisions or uphold their authoritative positions.…”