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Case | HBS Case Collection | September 2016 (Revised October 2018)

Springfield Hospital

by Susanna Gallani and Robert Kaplan

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Abstract

One of the key roles of costing systems is to support the evaluation of performance and facilitate appropriate resource allocations. Through participation in a comparative cost study, management at Springfield Hospital, known for its heavy focus on operational excellence, become aware of opportunities for further improvement. Analysis of the differences in costs, uses, and allocations of resources will inform management in the decision and implementation of strategic plans. This case stimulates reflections on the importance of costing systems, in particular Time-Driven Activity Based Costing, and variance analysis as decision support mechanisms.

Keywords: Time-Driven Activity-Based Costing; Variance Analysis; Activity Based Costing and Management; Health Care and Treatment; Health Industry;

Language: English Format: Print 11 pages EducatorsPurchase

Citation:

Gallani, Susanna, and Robert Kaplan. "Springfield Hospital." Harvard Business School Case 117-025, September 2016. (Revised October 2018.)

Related Work

  1. Background Note | HBS Case Collection | October 2016 (Revised October 2018)

    Cost Variance Analysis

    Robert S. Kaplan and Susanna Gallani

    This note was written to provide students with fundamental concepts and methods for the analysis of cost variances. It focuses on the decomposition of cost variances into price, quantity, and mix variance components, an approach that allows students to identify the root causes of differences between expected and actual costs.

    Keywords: Cost Accounting;

    Citation:

    Kaplan, Robert S., and Susanna Gallani. "Cost Variance Analysis." Harvard Business School Background Note 117-006, October 2016. (Revised October 2018.)  View Details
    CiteView DetailsEducatorsPurchase Related
  2. Case | HBS Case Collection | September 2016 (Revised October 2018)

    Springfield Hospital

    Susanna Gallani and Robert Kaplan

    One of the key roles of costing systems is to support the evaluation of performance and facilitate appropriate resource allocations. Through participation in a comparative cost study, management at Springfield Hospital, known for its heavy focus on operational excellence, become aware of opportunities for further improvement. Analysis of the differences in costs, uses, and allocations of resources will inform management in the decision and implementation of strategic plans. This case stimulates reflections on the importance of costing systems, in particular Time-Driven Activity Based Costing, and variance analysis as decision support mechanisms.

    Keywords: Time-Driven Activity-Based Costing; Variance Analysis; Activity Based Costing and Management; Health Care and Treatment; Health Industry;

    Citation:

    Gallani, Susanna, and Robert Kaplan. "Springfield Hospital." Harvard Business School Case 117-025, September 2016. (Revised October 2018.)  View Details
    CiteView DetailsEducatorsPurchase Related

About the Authors

Photo
Susanna Gallani
Assistant Professor of Business Administration
Accounting and Management

View Profile »
View Publications »

 
Photo
Robert S. Kaplan
Senior Fellow, Marvin Bower Professor of Leadership Development, Emeritus
Accounting and Management

View Profile »
View Publications »

 

More from these Authors

  • Article | Health Management, Policy and Innovation | 2019

    Mandate Outcomes Reporting

    Robert S. Kaplan and Michael E. Porter

    Currently, few health care providers measure and report their patient outcomes, which leads to several problems. Attempts to introduce price transparency without outcomes transparency could trigger a “race to the bottom.” Should Medicare coverage be expanded to non-elderly populations, its much lower reimbursements will create pressure on providers to lower their spending in ways that produce even worse outcomes. Even without Medicare expansion, the lack of systematic outcomes measurement has made the migration from fee-for-service to value-based reimbursements, especially bundled payments, less effective and more difficult to implement. Hidden variation in outcomes prevents providers from learning from others how to produce better outcomes for their patients. We propose that the Congress elected in November 2020 mandate the Centers for Medicare and Medicaid Services to begin requiring outcomes measurement by all providers reimbursed under government Medicare and Medicaid programs.

    Keywords: outcomes reporting; outcomes measurement; Medicare; Medicaid; Health Care and Treatment; Outcome or Result; Measurement and Metrics;

    Citation:

    Kaplan, Robert S., and Michael E. Porter. "Mandate Outcomes Reporting." Health Management, Policy and Innovation 4, no. 3 (2019).  View Details
    CiteView Details Read Now Related
  • Working Paper | HBS Working Paper Series | 2019

    Intelligent Design of Inclusive Growth Strategies

    Robert S. Kaplan, George Serafeim and Eduardo Tugendhat

    Improving corporate engagement with society, as advocated in the Business Roundtable’s 2019 statement, should not be viewed as a zero-sum proposition where attention to new stakeholders detracts from delivering shareholder value. Corporate programs for sustainable and ethical sourcing practices, however, have fallen far short of solving the underlying causes of extreme poverty, extensive use of child labor, and threats to the environment and human health. We identify several causes to explain this disappointing shortfall in societal performance, including traditional company policies and incentives that inhibit the implementation of innovative, inclusive growth strategies. We propose the role for a new actor, a catalyst, to help companies forge new relationships with external funders, local intermediary companies, NGOs, and community leaders. The catalyst aligns the multiple stakeholders from multiple sectors into enduring, mutually beneficial relationships that produce more value than that currently produced when stakeholders connect only by transactional relationships. The catalyst attracts funding from public and private sources to invest in the new ecosystem, which can generate attractive financial returns while alleviating poverty and environmental degradation. Finally, the catalyst engages the multiple participants to collectively co-create explicit strategies and scorecards of metrics, which serve to motivate, create accountability, and enable an enduring governance model for a multi-stakeholder ecosystem.

    Keywords: inclusion; sustainability; performance measures; Environmental Sustainability; Social Issues; Strategy; Governance; Corporate Social Responsibility and Impact; Business and Stakeholder Relations;

    Citation:

    Kaplan, Robert S., George Serafeim, and Eduardo Tugendhat. "Intelligent Design of Inclusive Growth Strategies." Harvard Business School Working Paper, No. 20-050, October 2019.  View Details
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  • Working Paper | HBS Working Paper Series | 2019

    The Effect of Systems of Management Controls on Misreporting

    Aishwarrya Deore, Susanna Gallani and Ranjani Krishnan

    Organizations use systems of controls to encourage goal congruent employee behavior. Some control instruments within the system (e.g., cultural controls) guide employees and align their behavioral choices with organizational values, while other instruments (e.g., budgetary controls) facilitate resource allocation in the presence of asymmetric information. We explore how a system of controls comprising of cultural controls (i.e., mission statements) and budgetary controls influence budgetary misreporting. Experimental results indicate that a mission statement that emphasizes integrity results in lower misreporting when combined with budgetary controls that assume self-interested managers relative to its combination with budgetary controls that assume honest managers. Mission statements that emphasize financial performance do not reduce misreporting when combined with either type of budgetary controls. Organizational stewardship partially mediates the effect of systems of controls on misreporting. Our study contributes to the literature on systems of controls by providing evidence that certain combinations of control instruments are more effective than others in achieving important organizational objectives such as reducing budgetary misreporting.

    Keywords: directing controls; misreporting; mission statements; participative budgeting; stewardship theory; systems of management controls; Management Systems; Governance Controls; Mission and Purpose; Financial Reporting;

    Citation:

    Deore, Aishwarrya, Susanna Gallani, and Ranjani Krishnan. "The Effect of Systems of Management Controls on Misreporting." Harvard Business School Working Paper, No. 20-053, October 2019.  View Details
    CiteView Details Read Now Related
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