The persistent increase in healthcare expenditures in the last five decades and beyond has resulted in constant reviews and repeated debates on the need for green accounting as a part of healthcare expenditure reforms. Within the last decade, a series of green accounting reforms have been rolled out by countries, especially in Europe and the US, as part and parcel of sustainable healthcare expenditure control. These reforms have been initiated to look into improving efficiency and containing costs within the dynamic environment of healthcare provision (Geisller et al. 2011). Just as in other parts of the world, there has been a growing concern, within the public hospital environment in Saudi Arabia, over which would be the best accounting strategies that should be applied to improve the sector’s efficiency (Theurl & Winner 2007). These concerns have led to adoption of green accounting systems, such as the Provider Payment System (PPS), which is focused towards fund allocation and mechanisms within public hospitals in Saudi Arabia (Louis et al. 2009). Basically, the PPS is an ideal green accounting system, since it takes aim at influencing expenditure behaviour, especially when integrated within other accounting systems already in place (Langenbrunner, Cashin, & O’Dougherty 2009).
Besides, the PPS has the potential of creating an ideal economic incentive that might stimulate positive expenditure behaviour to guarantee sustainable expenditure, at ceteris peribus. This means that public hospitals within Saudi Arabia have had the incentive to not only maximise resource utilization, but have also reduced probable financial risks, since the costs can be tracked and claimed by the PPS (Broyles & Rosko 2005). The most common PPS in the public hospital environment within Saudi Arabia is the Diagnostic Related Group (DRG), which has been adopted widely as a part of the green accounting reforms in the last decade (McGuire & Ellis 2006). At a policy stage, this accounting system was meant to address the challenge of inefficient accounting practices, within the dynamic public hospital environment, that were brought about by the old manual expenditure and payment system. Under the DRG as a green accounting system, reimbursement in public hospitals is done per case and not per service delivery, as was the case with the previous traditional accounting systems. This means that reimbursement fees are decided by averaging the actual DRG costs (McGuire & Ellis 2006). As a result, the actual costs incurred by patients might prove very difficult to recover; thus, public hospitals will have to seek other cost-effective alternatives in offering medical care, to avoid loss or increase surplus (Geisller et al. 2011). Therefore, the DRG has the potential of giving public hospitals the incentive to proactively contain costs, which is the underlying principle of green accounting (Langenbrunner, Cashin, & O’Dougherty 2009).
As noted by McGuire and Ellis (2006), different types of DRG have been integrated into the accounting platforms within Saudi Arabia to address different needs, with the rationale of cost sustainability. For instance, the Saudi Arabia DRG system has been adopted, by the public hospitals, to review the case-mix and hospital expenditures, improve on transparency in managing expenditures, improve the general quality of service at the hospitals and manage the level of efficiency in accounting. At present, the DRG is also being used a payment system, especially when the government allocates resources to the public hospitals (McGuire & Ellis 2006).
Empirically, the DRG may create an ideal environment for incentive in public hospitals, by encouraging hospital accounting administrators to establish ways of shortening the number of days of hospitalisation for each case (Geisller et al. 2011). The rationale for this action is to increase profit, since each DRG case has a fixed reimbursement rate. For instance, several studies conducted in other regions have suggested that the average response to a hospital’s DRG payment system has been a positive influence towards consistency, efficiency and sustainability in cost accounting. The notable case studies that have been done on the significance of DRG in creating an environment of incentive for efficient cost accounting are Theurl and Winner (2007) in Australia, Louis et al. (2009) in Italy, and Broyles and Rosko (2005) in the US. The only challenge is that the positive responses cannot prove quantifiable efficiency-improvement success in the case study hospitals.
For instance, in a study to establish the probable causes of change in Average Length of Stay (ALOS) within the DRC payment method, McGuire and Ellis (2006) revealed that part of the reduction in ALOS may be ascribed to practice or moral hazard effects, which impedes optimal achievement of improving efficiency. The varying research findings above form a rationale for further research to scrutinize the repercussions of DRG as a payment system within the public hospital environment in Saudi Arabia, and a possible effective DRG system design. This research topic is worth investigating, because many regions have adopted the DRG-based PSS with varying results, despite having similar purposes (Broyles and Rosko 2005). Therefore, these varying results have led to a poor understanding of their application in green accounting. The proposed research will investigate the application of the DRG and its impact on efficiency and sustainability as a green accounting system within the public hospital sector in Saudi Arabia.
Research Problem Statement
This research dissertation proposal will explore the differences and similarities in recent accounting reforms within public hospitals in Saudi Arabia. Specifically, the research is based on the responses from a sample of public hospitals, and ideal preconditions for a sustainable implementation of the DRG system as a green accounting strategy. Besides, the practices and roles of sustainable green accounting in general have not been extensively studied, especially within the public hospital sector. Since the DRG accounting system provides comprehensive costing information, the proposed study aims at exploring current challenges in practicing green accounting within the selected public hospitals in Saudi Arabia, and making a comparative analysis to selected hospitals across the globe. The comparative analysis will enable the research to lead to designing and creating an ideal model for green accounting practices that should be incorporated in the current DRG payment systems used in public hospitals in Saudi Arabia. Besides, the proposed research intends to address the current debate on why the green accounting philosophy has not been effective and completely functional, even after multiple reforms have been rolled out to introduce the application of sustainable financial system management within public hospitals in Saudi Arabia. The comparative analysis will also enable the research to explain the reaction of the public hospitals to the DRG system, and how it can be remodelled to fit within the sustainable green accounting system. The study is limited to illustrating and exploring the rationale behind the responses by public hospitals within Saudi Arabia to the current DRG payment system, and what can be done to make the system more sustainable.
Comprehensive research studies on adoption of the DRG system and its effect on efficiency in hospital cost accounting have been focused on quantitative approaches at a macro level (Shmueli, Intrator, & Israeli 2009). These studies have only presented empirical proof in the correlation between performance of hospitals and adoption of the DRG payment systems. However, these studies are silent on the rationale for established behaviours after the implementation of DRG systems aimed at improving efficiency and sustainability. Therefore, there is a need for a comprehensive qualitative study to investigate the possible reasons behind practices in public hospitals after the adoption of DRG payment systems in Saudi Arabia. Besides, the few past qualitative research investigations were conducted in other regions, such as Europe and the US. Therefore, there is limited knowledge available on how the DRG payment systems have influenced hospital behaviours within the dynamic public hospital sector in Saudi Arabia. Thus, the objectives of this research proposal are:
- To establish and scrutinize the mismatch and match in hospital accounting reforms under the current DRG payment model within the public hospital sector in Saudi Arabia and other parts of the world.
- To examine and present the responses from the case study public hospitals within Saudi Arabia and other parts of the world to the DRG payment system, and its impact on efficiency and sustainability in expenditure management.
- To examine and relate the expected green accounting innovation resulting from the adoption of DRG payment system reforms within the Saudi Arabia public hospital sector.
- To emphasize and investigate the lessons learned, challenges identified and modifications proposed to facilitate design of a more appropriate green DRG payment system for the dynamic public hospital sector in Saudi Arabia.
Based on the above research objectives, the following research questions were formulated, and will be answered to achieve these objectives. Therefore, the research questions include:
- What are the similarities and differences in the public hospital financial management reforms in Saudi Arabia and other parts of the world, with reference to the integration of the DRG payment system in managing efficiency and sustainability?
- What are the similarities and differences in the responses within the case study public hospitals in Saudi Arabia and other parts of the world, with reference to the adoption of the DRG payment system as part of the green accounting approach to cost accounting?
- How is the DRG-based PPS effective in advancing the role of green accounting and other practices within the case study public hospitals within Saudi Arabia?
- From the responses gathered, what are the primary prerequisites and obligations for an effective DRG payment system as part of a green accounting model?
Rationale for the Research
The public hospital sector in Saudi Arabia was selected for this research, because this sector is still under pressure to design ideal green accounting systems to ensure that their financial management approaches are sustainable and efficient in the short and long-term. Besides, the public hospital sector in Saudi Arabia has not been successful in developing high capacity in the universal initiative for effective cost management and general financial management practices. In addition, the public hospital sector case study will give an ideal insight into the current situation and challenges that the public health sector is facing, in its bid to integrate green accounting for suitable and healthy financial management. Besides, the research is inspired by personal motivation to align green accounting knowledge with the current public accounting policies that are applicable within the public hospital sector in Saudi Arabia. This is because very little research has been carried out to scrutinise the current green accounting strategies for their relevance and sustainability.
The findings of this research proposal are expected to contribute towards policy making in financial management within the public hospital sector in Saudi Arabia and beyond. In addition, the dissertation will fill the current void in the literature of public hospital green accounting and financial management systems, especially in Saudi Arabia. This is because the results are intended to present an initial analysis of the Saudi Arabia DRG payment systems that have been integrated into the financial management system in public hospitals. In addition, the proposed study will evaluate the responses from case study hospitals and present the rationale behind the behaviour of the hospitals from the feedback gathered, with an eye to facilitating modification of the current DRG payment system to be more accurate and effective in promoting green accounting. Thus, with such information, policy makers at the Saudi government health ministry will be in a position to remodel the current DRG system to create an ideal system, that may improve the present level of positive outcome, and ensure sustainability in the long run. Lastly, the proposed study will give the researcher an opportunity to expand capacity for qualitative research while offering practical experience in examining financial accounting in the public hospital environment, in terms of greenness and sustainability.
The literature review will be organised into empirical and theoretical parts, to establish the link between theory and past case studies. The entire literature review will be based on past scientific case studies, authentic green accounting journals and books relevant to the research topic.
The research will adopt the case study approach, with an eye to facilitate the process of evaluation and theory development. The multiple-case study research will target four public hospitals in Saudi Arabia, in order to predict direct replication of results, and to address the foreseeable reasons. The research will commence with a macro analysis of the recent financial management situation within the public hospital sector in Saudi Arabia. A descriptive analysis will be used to underline the differences and similarities in responses and reactions within the four selected hospitals, in terms of their application of the DRG payment system as a part of green accounting for sustainability of healthy financial management.
Data will be collected through archival records, interviews, documentation and direct observation. The researcher will then carry out data triangulation to cross-check the quality of data collected. In the interviews, the research will target senior accountants, the controller and the head of the financial division.
This case study will use data coding to carry out comprehensive analysis of data collected. The data will be labelled and linked to establish a possible idea or pattern.
Structure of the Dissertation
The proposed dissertation will consist of seven chapters. The introduction chapter will present the overview in terms of background, aims and objectives, research questions, rationale and significance of the study. Chapter 2 will be the literature review, followed by methodology as the third chapter. The fourth chapter will cover findings, followed by analysis in Chapter 5. Chapter 6 will comprise discussion, and conclusions will be covered in the last chapter.
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