#2912 - Topic 2 Reading The Attitudes Of Nhs Clinicians And Medical Managers Towards Changes In Accounting Controls - Accounting in the New Public Sector

• Delegation of responsibility for health care to the point of delivery, envisaged by the NHS reforms (Department of Health, 1989)

• Followed the 1970s oil crisis (Klein and O’Higgins, 1985)

• Cash limits were introduced in 1976 and continuous efforts were made by successive governments in Britain and many countries overseas, to find ways of improving efficiency and curtailing expenditure (Abel-Smith, 1984)

• Contractual or quasi-market forms, increasing delegation of resource decisions, more explicit and measurable standards, weakening trust in professionals, strengthening the hand of managers (Dunleavy and Hood, 1994)

• Externally imposed pressures

• Challenged culture within health care

• Griffiths’ management inquiry (DHSS, 1983) – NHS was a corporate or clan culture based upon the dominance of doctors and their clinical freedom

  • Proposals:

    • Appointment of general managers

    • Decentralization of cost and budget systems

    • Hierarchic control system (Bourn and Ezzamel, 1986)

• Internal markets… in the pursuit of efficiency and cost reduction

  • ‘Competition with other hospitals where it is effective, should also constrain costs’ (Department of Health, 1989)

• Revised organizational goals, devolved financial accountability to clinicians, threatened deep-seated cultures, challenged the balance of power between clinicians and administrators

• Resistance to revised control philosophies, such as managerial model proposed by the Griffiths Report (1983)

• Commercial ethos potentially conflicted with the dual hierarchies

• Hierarchies became more closely integrated

• Administrators/managers were appointed

• Literature related to the sociology of professions suggests that such imposition of formalized rules and procedures is unnecessary, and may even cause professional-bureaucratic conflict, leading to impaied performance (Hall, 1972)

• Nelson and Machin (1976)

  • suggested a model of control, based on breaking down goals and objectives

  • concentration on budgetary control was too simplistic for public services such as the NHS

  • costs and inputs cannot be related quantitatively to measures of outcome

• Empirical study of resource allocation in the NHS, Nahapiet (1988):

  • “…relationship between accounting and organization is a complex web of multiple connections and mutual inflences evolving over time”

• “Resistance and skepticism”

  • Resistance can lead to failure, and the management budgeting initiative was such a case (DHSS HN)

• Resource Management Initiative (1986)

  • GPs delegated unwelcome changes in financial and administrative procedures to practice managers and nurses, leaving their own role virtually unchanged

• Purdy (1993) observed ‘natural learning’ among ward sisters who appreciated accounting information providing they had been involved in budgeting and that activities were properly resourced

• Reasons to accounting-type controls were conditional upon contextual factors which potentially shaped the controls

• Accounting controls cannot be successfully imposed upon unwilling recipients

• 1990 reforms moved the control philosophies of units within the NHS towards those found within large commercial organisations

  • Sophisticated and complex control systems (Bruns and Waterhouse, 1975

• Accounting information has been criticized as being inaccurate, too late and too aggregated (Dew and Gee, 1973)

  • These limitations have encouraged the creation of informal non-legitimized records (Clancy and Collins, 1979)

    • These enhance the knowledge and hence the power or subordinates (Pettigrew, 1972)

• At the beginning of the study, the majority of clinical directors and operational managers anticipated that ACSs would be of high importance for overall institutional control

  • Sense of resignation that this was an inevitable consequence of the intensifying pressures on the NHS

• CDs and OMs were less convinced than finance staff of the importance of ACSs for the functioning of the revised structure

  • Finance staff perceived formal ACSs to be of the highest order of potential importance

• Service managers were less convinced of the importance of ACSs for overall institutional control

  • Some displayed rather more optimistic and altruistic opinions concerning the ability of the institution to balance financial and medical priorities

• Cultural difficulties and shortcomings in information as factors which inhibited the realization of the anticipated importance of ACS information

  • “Consultants in directorates are now more accountable for how they spend money. It is a slow process, a whole culture has to be changed”

  • “Appreciation of the reforms, by colleagues, has been slow”

• Progressively adopting the language of managerialism, although their expectations still did not match those of the finance staff

• SM and OM expressed views that were rather cynical about limited resources

  • “The directorate is financially not quality led”

• The thinking of CDs continued to be largely dominated by clinical rather than financial objectives

  • Personal distaste for the style of financial objectives and controls which were becoming dominant

  • ‘Success’ had little to do with meeting financial budgets, but was primarily concerned with meeting contracted numbers of procedures with appropriate quality of patient care

• ‘I worry that the environment does get more and more financial driven’

• ‘I feel I am constantly under pressure to keep within budget, quality etc. My personal goals are to provide a high quality service – this is being constantly constrained by the budget’

Participation

• Open door policy where CDs could discuss any issue informally with the new CEO

• Predominant style of management had become ‘autonomy for directorates but with clearly defined limits and frequent monitoring’

• Complete autonomy was allowed only over ‘little things’

• Consultation was not applied to the setting of budgets to any significant extent, and little progress was made in this direction

  • ‘Feeling you are just allocated a budget’

• No evidence of budgets being constructed in a bottom-up manner

  • They’re based largely upon historical patterns of resource allocation

  • Changes tended to be confined to the margin

• Two explanations why senior management of the hospital were unable to avail themselves of the benefits of collaborative budgeting:

  • 1) Little or no tradition of budgets being developed from the bottom

    • Budget allocations had been handed down from government, to region, to district, to unit

    • Based on demographic model and political parameters

  • 2) Accounting based explanation

    • Without knowledge of the behavior of costs, according to activity levels, it was difficult to prepare detailed bottom-up budgets

Understanding accounting information

• CDs lacked training on administrative and financial matters

• They were placed into managerial positions where such skills were implicit

• They were given some formal financial training but could not be expected to acquire more than a superficial understanding which enabled them to interpret internal accounting reports

• The accounting statements were fairly basic and well within the intellectual capabilities of CDs

• Many CDs preferred to distance themselves from financial control and delegate it to their SMs, part of whose official role was the guardianship of resources

• A good level of understanding of key expense items was important for them to function effectively

Matching accounting information to the needs of management

• Three levels of managers could be expected to use accounting information with differing degrees of emphasis upon strategic and operational control

• Several CDs considered a major part of their managerial function to be strategic

• The interests of OMs in accounting information was primarily for operational control, albeit the information was used mainly to check expenditure rather than to control it

Management action following accounting reports

• Some ward sisters had developed strong cost-efficiency cultures by such means as placing price tags alongside alternative disposable items so that nurses were aware of the cost of their choices

• Drugs were...