Cost and Performance: Complements for Improvement

Activity-based costing (ABC) and Data Envelopment Analysis (DEA) share similar views of resource consumption in the production of outputs. While DEA has a high level focus typically using aggregated data in the form of inputs and outputs, ABC is more detailed and oriented around very disaggregated data. We use a case study of immunisation activities in 24 New Zealand primary care practices to illustrate how DEA and ABC can be used in conjunction to improve performance analysis and benchmarking. Results show that practice size, socio-economic environment, parts of the service delivery process as well as regular administrative tasks are major cost and performance drivers for general practices in immunisation activities. It is worth noting that initial analyses of the ABC results, using contextual information and conventional methods of analysis such as regression and correlations, did not result in any patterns of significance. Reorganising this information using the DEA efficiency scores has revealed trends that make sense to practitioners and provide insights into where to place efforts for improvement.