Cover page

MANAGEMENT ACCOUNTING IN HEALTH CARE ORGANIZATIONS

Third Edition

David W. Young

Wiley Logo

List of Figures, Tables, and Exhibits

Figures

1.1 Demographic Trends

1.2 Percentage of the Population 60 Years Old and Over in 2015 in Selected European Countries and the United States

1.3 Health Care Costs in Catalonia (in Millions of Euros)

1.4 Medicare Spending Patterns

1.5 Morbidity among Those Not Yet Eligible for Medicare

1.6 Five Separate Health Care Markets

1.7 Health Care Cost Drivers

1.8 Number of Cases versus Cost per Case

1.9 Alternative Treatment Patterns for a 48-Year-Old, Presenting in the Emergency Room with Atypical Chest Pain, Positive Smoking, and Family History, with a Normal Electrocardiogram (EKG)

1.10 Health Care Food Chain

1.11 Estimates of the Medicare Part A Trust Fund Balance

1.12 Variation in Average 2009 Medicare Spending among Selected Hospitals for a 90-Day Episode of Congestive Heart Failure

2.1 The Stepdown Method

3.1 Types of Cost Behavior

3.2 Fixed and Variable Costs versus Mission and Support Center Costs

3.3 The Fundamental Profit Equation

4.1 Outsourcing Risk

5.1 Manufacturing Cost Terminology

5.2 Job Ticket for Buzzard Glen Hospital

6.1 The Management Control Process

7.1 Typical Matrix Structure

7.2 Matrix Structure in a Department of Mental Health

9.1 Simple Matrix Structure

9.2 Organizational and Budgeting Contexts

9.3 Budgeting in a Hospital

10.1 The Operating Cycle

10.2 The Financing Cycle

10.3 Business Risk versus Financial Risk

11.1 Reporting Hierarchy for an Integrated Delivery System (in Thousands of Dollars)

11.2 Reporting Hierarchy for a Department of Mental Health: Program Analysis (in Thousands of Dollars)

11.3 Reporting Hierarchy for Spenser Rehabilitation Hospital, First and Sixth Levels (in Thousands of Dollars)

11.4 Example of a Spidergram

12.1 Cross-Functional Activities in an Organization

12.2 Commitment to Change

12.3 Impact versus Difficulty

Tables

2.1 Examples of Cost Drivers in a Hospital

2A.1 Basic Information for a Reciprocal Cost Allocation

2A.2 Allocation of Support Center Costs to Mission Centers (in Thousands of Dollars)

6.1 Summary of Management Accounting Information

6.2 Types of Responsibility Centers and Their Financial Objectives

8A.1 Present Value of $1

8A.2 Present Value of $1 Received Annually for N Years

9.1 Line-Item and Program Budgets for a Public Health Department (in Thousands of Dollars)

9.2 Spreadsheet Model for a Hospital Budget

10.1 Balance Sheet for Homecare, as of January 31 (in Thousands of Dollars)

10.2 Examples of Leverage

10.3 Cash Needs Associated with Growth

10.4 Using Income to Finance Growth-Related Cash Needs

10.5 Two SCF Formats, for the Year Ending December 31 (in Thousands of Dollars)

11.1 Types of Variances and Controlling Agents

11.2 Measures of Nonfinancial Performance

11.3 Program Performance Report Framework: Commonwealth Medical School

Exhibits

P.1 Management Accounting Learning Objectives

1.1 Top 3 Outpatient Diagnoses for Ages 5 to 11 for the First 6 Months of the Current Fiscal Year

1.2 Top 10 Primary Inpatient Diagnoses for Ages 5 to 11 for the Last Fiscal Year

1.3 Fee Schedule for the Division of General Pediatrics for the Current Fiscal Year (All Amounts in Dollars)

1.4 Wages and Prices for the Current Fiscal Year

1.5 Tests and Procedures for the Top 3 Inpatient Diagnoses for Ages 5 to 11 for the Last Fiscal Year

2B.1 Pricing Alternatives in a Hospital

3A.1 Dietary Department Information for 3 Months

3B.1 Program Cost Analysis, Normal Year

5A.1 Direct Manufacturing Cost for One Meal

5A.2 Budgeted Overhead Costs

5A.3 Production Data

5B.1 Abbreviated Hospital Cost Report

5B.2 Computing the Average Full Cost per Unit

5B.3 Cost for 2 Patients

5B.4 Information Obtained by Mr. McCarthy

6.1 Profit Center Status Report

8.1 Example of a Qualitative Evaluation

8.2 Weighted Cost of Capital

9.1 Budget Data

10.1 Balance Sheet as of December 31

11B.1 Original Budget

11B.2 Actual Results

11B.3 Actual Results with Calculations

11B.4 Flexible Budget and Related Variances

B.1 Structure of Relationships

B.2 Cost Drivers and Controlling Agents

B.3 Cost and Price Projections

B.4 Projections for Capitation Rate

B.5 Contribution Analysis with New Assumptions (in RMB)

B.6 Computing Full Cost per Unit with 3 Departments Unbundled

B.7 Attaching Costs to 2 Patients (Using the ABC-Like System)

B.8 Operating Budget

B.9 Formulas

B.10 Revised Operating Budget 1: 10 Percent Reduction in Average Length of Stay

B.11 Responsibility Center Issues

B.12 Financial Statements

B.13 Formulas (October to March Only)

B.14 Productivity and Use Variances

B.15 Wage, Price, and Efficiency Variances

B.16 Summary of Variances

B.17 The Cross-Functional Framework

B.18 Group Practice Options

B.19 Goal Congruence Issues

B.20 Choices Made in the Implementation Process, and Possible Alternatives

This book is dedicated to the memory of Andy Pasternack,
a leader in the development of instructional materials for the
health care field, and a professional with quality standards that
the rest of us can only aspire to attain.
We all miss him.

Preface

This book provides introductory-level instruction for students of health care management who are studying management accounting for the first time, or for those who want a refresher as part of a course in advanced management accounting. It offers a user-oriented approach to management accounting concepts and techniques that will help prepare them for work in an environment where an understanding of management accounting is important to their success.

Management accounting is concerned primarily with the information needs of an organization's managers. In general, these needs arise in three areas: full-cost accounting, differential cost accounting, and responsibility accounting. The distinctions among these different types of accounting are discussed later in this preface.

To the Student

The working assumption of this book is that you have no prior knowledge of management accounting. My goal is that, on completing the book, you will be knowledgeable about both the uses and the limitations of management accounting information. To accomplish this, I place minimal emphasis on the technical aspects of preparing accounting information, covering only those technical matters that are essential to understanding the computations that the accounting staff typically makes. Most of the material focuses on the meaning and utility of accounting information for managers and other users.

In general, the learning process consists of developing new skills, which can be acquired only by practice. Learning management accounting is a bit like learning about a new city. If someone takes you on drives around the city, you will probably learn very little about how to get from one place to another. If you drive by yourself, however, you will learn a great deal about the city—acquiring far more knowledge on a single trip than you would in dozens of trips as a passenger.

In this book, you are the driver rather than the passenger. The idea is for you to practice (and learn) accounting while you read each chapter. You will have opportunities to prepare answers to problems that appear throughout the chapters and to analyze a practice case (sometimes two) at the end of the chapter. There are several features to keep in mind as you engage in this effort.

Minimal Memorization

Throughout each chapter, the important terms are defined in the margins. These terms also are contained in a glossary at the end of the book.

Having the definitions readily available means that you do not need to spend time memorizing them. Indeed, some management accounting terms are not used in a consistent way by everyone, so memorizing definitions may actually be counterproductive.

Rather than memorizing the terms, you should focus instead on mastering the concepts and analytical techniques discussed in each chapter. The book guides you as you work with these concepts and techniques so you can see how they are developed and applied. Please note that the discussion in each chapter assumes that you understand the material covered in the prior chapters, so it is important to work through the chapters in order.

Interactive Learning

A distinctive feature of this book is its interactive approach to the learning process. You are regularly asked to stop reading and work out the solution to a problem. The idea is to shorten the feedback loops in the learning process. Rather than answering questions or analyzing problems only at the end of each chapter, you can apply what you have learned about a topic immediately following the discussion about it. When the discussion of a topic is lengthy, problems may be presented throughout.

You may be tempted to shortcut this process, but please do not succumb to temptation. Shortcutting will compromise your mastery of the material. Indeed, the reasoning in the answer to a problem can be quite seductive: if you look at it before working out your own answer, you may find yourself in agreement with it, saying something like, “That's how I would have done it, if I had done it.” But you may not have fully internalized the analytical techniques. Actually working through a problem, arriving at a solution, and then comparing it to the answer will give you an understanding of the logic behind the related accounting concept and allow you to apply it to real-life problems. To take full advantage of the interactive feature, you should answer each problem to the best of your ability before looking at the answer provided in the text.

In short, to learn management accounting, you must struggle through the process of arriving at solutions yourself, gaining understanding from both your successes and your mistakes. To prepare for this learning process, you should have a pencil, a calculator, and a supply of paper next to you while you are reading each chapter. A problem begins as follows:


Problem fpref-fig-5001

The problem statement is in a different typeface and is indicated with a question mark, as shown here.


Answer fpref-fig-5002

The answer to the problem, also in a different typeface, immediately follows the problem, as shown here.

Use a blank sheet of paper to cover the answer as you work out the solution to each problem. Then compare your solution and associated reasoning with the answer provided. If your comparison shows that your solution is correct, continue reading. If you have an incorrect answer, spend as much time as you need to figure out where you went wrong. This may require rereading the section of the chapter immediately preceding the problem.

Short Chapters

Most of the chapters are relatively short. Reading a chapter and working your way through the problems can take several hours, however, so it's normal to feel that you are working slowly.

You should not try to cram the learning process into a short period of time, because you need to digest the material slowly as you go along. If you believe you already understand the material in a particular section and therefore do not need to read that section, you should prepare solutions to the problems in the section to confirm your understanding.

End-of-Chapter Tools

Each chapter contains, in addition to the problems for you to solve, three tools to help you verify your understanding of the concepts and techniques that were covered in the text.

To Bear in Mind

This section highlights two of the most significant issues in the chapter, with an emphasis on concepts that can be confusing or techniques that can cause difficulties when used in practice. These are just short “nudges” to make sure you understand.

Test Yourself

This section contains five questions (sometimes compound questions) that allow you to make sure you have grasped the chapter's major points. A short answer is usually all that is required for each question, although sometimes the answer can be longer. You should try to respond to each question as fully as you can before looking at the answer in appendix A.

Practice Cases

In addition to solving the problems in each chapter and answering the “Test Yourself” questions, you are asked to prepare an analysis of one or more practice cases at the end of each chapter. As with the problems contained in the chapter, you should attempt to analyze each practice case to the best of your ability before looking at the solution in appendix B. Each case covers some of the concepts discussed in the chapter and thus will give you an opportunity to test your knowledge of how the chapter's content would be applied in a practical setting.

The practice cases usually are rather short; some might even be thought of as extended problems. In some instances, however, the cases are longer and more detailed. Much depends on the chapter's content. The conventional distinction between an extended problem and a case is that a case usually presents a situation for which there is no single right answer. For many of the practice cases, there are right answers, although as you will see, there is sometimes more room for judgment than you might imagine initially.

Several practice cases are good candidates for relatively simple spreadsheet analysis, and you should use spreadsheet software in preparing your analyses of these cases. This approach not only will help you improve your spreadsheet skills but also will allow you to test alternative solutions more easily than if you had only written out the answer.

User Orientation

The book has a user orientation, focusing mainly on line managers and senior managers, and orienting the discussion to the decisions they make on a regular basis. Accounting details are discussed to the extent necessary for you to understand the concepts and techniques used in most organizations, but the text does not cover exceptions to the rules or some of the possible variations on each traditional theme.

Organizational Focus

Many texts use manufacturing examples to illustrate accounting concepts and principles. This book uses manufacturing examples, where appropriate, but these examples—as well as all the problems and practice cases—are set in the context of organizations that are in some way associated with the health care sector. Nevertheless, most of the examples, problems, and practice cases are about service organizations.

Although most management accounting concepts are universal, meaning that the type of organization used to illustrate a point is relatively unimportant, the learning process is much easier when the examples are related to your area of interest. The examples, problems, and practice cases have been chosen with the hope that they will resonate with you because they deal with organizations with which you may be somewhat familiar.

To the Instructor

This book has been written principally for use in a one-semester, user-oriented course in management accounting in health care. Each chapter is designed to be covered in a week, ideally over two classes of 1.5 to 2 hours each. Clearly a great deal depends on the depth you wish to pursue and how quickly or slowly you wish to move through the course. (The material in this book has also been used in a half-semester course on management accounting for MBA students. In this instance, each chapter was covered in a single 2-hour class meeting.)

Students' preparation for the first class session associated with a given chapter should include reading the chapter, engaging in the chapter's interactive activities, answering the “Test Yourself” questions, and analyzing the chapter's practice case or cases. Due to the interactivity, students will need considerably more time to read these chapters than they would if they were using a more traditional text. Moreover, they will need to spend time analyzing the practice cases.

It is sometimes useful to have an open class discussion after students have read a chapter and prepared the practice case or cases. This discussion can serve to clarify the chapter's concepts and address any difficulties the students are having in using them.

After this class session, each remaining class for a given chapter can focus on a case or cases that you select that will require students to use the chapter's concepts and techniques. This way, the concepts are first clarified and then applied in the analysis of case situations. At the end of each chapter is a list of suggested cases for that chapter.

If you would like assistance in selecting cases for your course, you may contact The Crimson Press Curriculum Center (www.thecrimsongroup.org) and review its online catalogue of materials. In addition, the Harvard Business School Press has a catalogue and a Web site (www.hbsp.harvard.edu) that can help you in selecting cases to supplement each chapter. An instructor who adopts the book for his or her course may obtain a course packet of cases from The Crimson Press Curriculum Center at no charge.

Case Method of Instruction

Educators increasingly are recognizing the power of the case method in teaching management accounting. The value of the case method lies in its ability to put students in the middle of the action, requiring them to be analytical—to apply principles rather than just memorize or reiterate them. In this way, it prepares students for work in an environment where analysis, judgment, and attention to nuance increasingly are required for success.

Changes for the Third Edition

This edition of the text contains several changes from the second edition:

  • The chapter on absorption costing has been eliminated. Its important techniques and concepts have been included in the chapter on activity-based costing (chapter 5).
  • A new chapter (chapter 1) has been prepared that sets the stage for the rest of the book. It discusses the many challenges health care organizations will face in the next five to ten years, such as the aging of the population and the presence of many more individuals with chronic conditions. Management accounting concepts and techniques have therefore become even more important than they were in the past.
  • The cases without solutions have been eliminated. Only practice cases remain. As mentioned earlier, instructors who adopt the book for a course may select as many cases as they wish from The Crimson Press Curriculum Center without a need to pay the normal copyright clearance fees. This results in a shorter book as well as increased flexibility for professors to choose cases that meet their pedagogical needs.
  • Five “Test Yourself” questions have been included at the end of each chapter. These questions help students to reflect on the concepts and techniques contained in the chapter.
  • Several new appendices have been added that allow students to pursue material that was not discussed directly in the chapter, such as pricing in nonprofit organizations or undertaking benefit-cost analysis in public-sector capital budgeting.

Organization of the Book

Exhibit P.1 contains the book's learning objectives for each of its three major areas: full-cost accounting, differential cost accounting, and responsibility accounting. The book's chapters move from the design of good cost measurement systems to the design of good cost control systems. Cost measurement can take place without cost control, but controlling costs requires an ability to measure them. Therefore, the chapters need to be read in the sequence presented. The overall theme for each chapter is discussed briefly in this section.


Exhibit P.1 Management Accounting Learning Objectives

Full-Cost Accounting

  • The meaning of such terms as cost object, cost center, direct costs, indirect costs, overhead, cost allocation methods, and cost systems
  • The way costs can be allocated to help determine the cost of a particular product or service
  • The distinction between mission (or revenue) centers and support centers
  • The nature of the managerial choices inherent in a full-cost accounting system
  • The concept of an overhead rate, for attaching a mission center's costs to its cost objects
  • The concepts of activity-based costing and cost drivers, including the use of multiple second-stage cost drivers

Differential Cost Accounting

  • The rationale for the statement, “Different costs are used for different purposes”
  • The distinction between full costs and differential costs, and when each should be used
  • The nature of the factors that influence changes in cost, including the distinctions among fixed, variable, step-function, and semivariable costs
  • The nature of alternative choice decision making, and the three major types of alternative choice decisions that most organizations make
  • The concepts of unit contribution margin and total contribution, and their roles in alternative choice decision making
  • The technique of cost-volume-profit analysis, how to prepare such an analysis, and its uses and limitations

Responsibility Accounting

  • The definition of a responsibility center, the different responsibility center options, and the basis for choosing the most appropriate type of center
  • The definition of a transfer price, and the role of transfer prices in a responsibility accounting system
  • The phases of the management control process, and the characteristics of each phase
  • The key elements in the budgeting phase of the management control process, and the relationship between budgeting and responsibility centers
  • The meaning of the term flexible budget, and how it can be used in a responsibility accounting system
  • The technique of variance analysis, and the different types of variances that can occur
  • The uses and limitations of variance analysis, and the relationship between variance analysis and the reporting phase of the management control process
  • Some of the difficulties involved in measuring nonfinancial (or programmatic) performance, and how to overcome them

Chapter 1: Management Accounting and Health Care's Impending Fiscal Crisis

Health care systems throughout the industrialized world are in trouble. As the population ages, and as people live longer, they will require increasing amounts of health care services, especially for the treatment of chronic conditions. In addition, individuals born shortly after the end of World War II (between 1945 and 1955) have now reached the age at which they will demand more services. Even nonelderly individuals who do not practice good health habits require greater care. This chapter discusses the details of this demographic and health behavior scenario. The inevitable conclusion is that if health care costs in industrialized countries are not better managed, there will be a fiscal crisis: either spending will skyrocket, or people will be denied needed care. Neither needs to happen if policymakers, managers, and physicians learn to understand their costs and manage them more appropriately. This chapter is, in effect, a call to action.

Chapter 2: Essentials of Full-Cost Accounting

“What did it cost?” is one of the trickiest accounting questions for all organizations, including those in health care. This chapter discusses the kinds of managerial decisions that are made in answering this question, as well as the utility of full-cost information for managers. Before managers can control their costs, they must know what they are. Unfortunately, many health care organizations do not have this rudimentary knowledge. Appendix 2A discusses the reciprocal method of cost allocation. Appendix 2B discusses the topic of pricing in nonprofit organizations.

Chapter 3: Cost Behavior

Chapter 2 classifies costs as either direct or indirect. This distinction is important for undertaking a successful full-cost computation, which is important for pricing and profitability analyses. For many managers, however, the distinction between direct and indirect costs is less important than the question of how costs actually behave. This chapter addresses cost behavior. It first distinguishes among fixed, variable, step-function, and semivariable costs. Next, it explains cost-volume-profit (CVP) analysis and the concept of contribution. It also discusses some tricky aspects of CVP analysis, including the approaches to take when step-function costs or multiple products are involved.

Chapter 4: Differential Cost Accounting

The notion that different costs are used for different purposes can be difficult to accept. This chapter explains why this notion is important, reinforcing the distinction between full costs and differential costs, and discussing when each should be used. The ideas contained in this chapter are important for managers when they are making what are called alternative choice decisions, such as outsourcing, keeping or eliminating a product that is unprofitable on a full-cost basis, or offering a special price.

Chapter 5: Activity-Based Costing

The discussion in chapter 2 focuses principally on what is known as stage 1 of a full-cost accounting system—the stage in which all costs end up in the organization's mission centers. This chapter looks at stage 2, which is the stage in which mission center costs are attached to the products that the center delivers. This absorption costing concept is applicable to service delivery units in almost all health care settings, ranging from a clinical department (such as surgery or medicine) to laboratories, radiology departments, and pharmacies, to name a few.

The major focus of the chapter is on the technique of activity-based costing (ABC), which is becoming increasingly prevalent in health care. Nevertheless, many users of ABC in health care organizations do not fully understand the kinds of problems it was designed to solve or the importance of what are called multiple second-stage cost drivers. The chapter shows how to make the computations, and it illustrates the importance of using ABC to determine the full cost of an organization's products.

Chapter 6: Responsibility Accounting: An Overview

There is an important distinction to be made between measuring costs and controlling them. This chapter makes that distinction, moving into the realm of responsibility accounting. To design a good responsibility accounting system, a manager must think about the system's structure and process. This chapter emphasizes structure, describing the different types of responsibility centers that can exist in an organization and the basis for choosing one type over another. The chapter concludes with a summary of the four phases of the management control process.

Chapter 7: Designing the Responsibility Accounting Structure

Chapter 6 raises but does not fully discuss several tricky issues involved in designing the responsibility accounting structure. This chapter takes the next step, discussing matters of fairness, goal congruence, the link between the responsibility center structure and an organization's motivation process, and the development of appropriate transfer prices for intraorganizational transactions.

Chapter 8: Programming

This chapter discusses some of the techniques for analyzing new programs or capital investments, emphasizing the concepts of net present value and internal rate of return. It also examines the issues involved in choosing a discount rate for assessing a capital project, and it assesses the impact of political and behavioral considerations on the choice of capital projects. Appendix 8A discusses the concept of present value, and Appendix 8B discusses some special programming issues in governmental organizations.

Chapter 9: Operational Budgeting

This chapter discusses the (usually) annual activity of forecasting operating revenues and expenses. Among the topics addressed are the key elements in the budgeting process, the relationship between budgeting and responsibility centers, the different contexts in which budgeting takes place, and the mechanical aspects of building a budget. Appendix 9A describes seven common budgeting “misfits,” or areas where the operational budgeting phase does not align well with other activities in the organization.

Chapter 10: The Cash Budget

Moving from preparing the capital and operating budgets to preparing the cash budget requires an understanding of both financial accounting and financial management. This chapter is concerned with the choices managers make about (1) the use of debt or equity to finance assets, (2) the structure of debt, (3) the size of net income, and (4) the management of growth. It discusses the operating, financing, and revenue cycles, along with several key concepts that are important to understanding a cash budget: debt structure, leverage, and the role of profit (or surplus).

Chapter 11: Measuring and Reporting

Two important phases in the management control process are measuring performance and reporting the resulting information to managers. This chapter discusses these phases, beginning with flexible budgeting and variance analysis. It includes the uses and limitations of variance analysis and moves to the relationship between variance analysis and the reporting phase. It also provides some examples of reports that can communicate action-oriented information to managers. It concludes by addressing an emerging concern of many health care organizations—the measurement of nonfinancial performance.

Chapter 12: Implementing a New Responsibility Accounting System

The value of the concepts of structure and process that form the basis of responsibility accounting systems is in their application to real-world situations and problems. The ultimate goal is to develop a responsibility accounting system that facilitates improved operations, which requires assessing how such a system fits into a broader organizational context. This chapter first summarizes the key characteristics of a good responsibility accounting system. It then positions the responsibility accounting system in an organizational context made up of seven separate activities (or processes). It concludes with a discussion of some of the important issues that managers need to keep in mind when introducing a new or redesigned responsibility accounting system.

An instructor's supplement is available at www.josseybass.com/go/young3e. Additional materials, such as videos, podcasts, and readings, can be found at www.josseybasspublichealth.com. Comments about this book are invited and can be sent to publichealth@wiley.com.

Acknowledgments

I thank reviewers Leslie K. Breitner, L. Kirk Harlow, Thomas E. McKee, Brandon Penick, Dennis Stillman, and Marci S. Thomas, who provided valuable feedback on the revision plan for this edition. John Raffoul and Simone Singh, along with Professors Harlow and McKee, provided thoughtful and constructive comments on the complete draft manuscript. I am grateful to them for their suggestions and guidance. Francie Jones did a masterful job of copyediting. Clearly, though, I am responsible for the final content of the book.

The Author

David W. Young is professor of management, emeritus, at Boston University (BU) School of Management, where he was nominated four times for BU's prestigious Metcalf Award for teaching excellence. During each of his last two years at BU, he was voted “best professor” by Cohort C of the school's MBA students. While at BU, he taught undergraduate, MBA, executive MBA, and executive nondegree courses on financial accounting, management accounting, and responsibility accounting systems. His courses were taught in for-profit, nonprofit, and health care contexts. During each of his last four years, he also taught the capstone course on competition, innovation, and strategy in the school's MBA program.

Professor Young has been a core faculty member for the past 37 years at Harvard University's School of Public Health, where he has taught in the Programs for Chiefs of Clinical Service and Leadership Development in Health Care. He has been the lead faculty member for the past 13 years in the Alliance for Academic Internal Medicines Executive Leadership Program for members of departments of internal medicine.

During the past several years, Professor Young has been a visiting professor in the international MBA and doctoral programs at the Universities of Ferrara, Messina, Bologna, and Pisa in Italy, and he has taught at the China Europe International Business School in Shanghai, the University of Reykjavik, ESADE and IESE business schools in Barcelona, and the Clinical Effectiveness Program in Buenos Aires. For the past three years, he has cotaught the managing public-private partnerships course at the Forlí campus of the University of Bologna. He also has lectured in Europe, Latin America, Asia, and the Middle East on a variety of topics.

In the late 1990s, Professor Young was appointed by the governor of the Commonwealth of Massachusetts to serve a three-year term as commissioner and chair of the state's Hospital Payment System Advisory Commission. This was a seven-member body charged with monitoring access, quality, and fair-market standards as the state shifted to a more market-oriented health care system. In 2006, he received the Special Recognition Award from the Association of Professors of Medicine, an award presented annually to a nonmember who has contributed the most to helping the association meet its mission of providing leadership and direction in the field of academic internal medicine.

In addition to his teaching and service awards, Professor Young has received several research awards, including “best article of the year” from both the American College of Healthcare Executives and (three times) the Healthcare Financial Management Association. In 2003, he published A Manager's Guide to Creative Cost Cutting: 181 Ways to Build the Bottom Line, and Techniques of Management Accounting: An Essential Guide for Managers and Financial Professionals (both have been translated into Mandarin).

This is the third edition of Management Accounting in Health Care Organizations. In 2012, Professor Young published the ninth edition of Management Control in Nonprofit Organizations; earlier editions of this text were translated into Italian and Japanese. Also in 2012, he published (with Emanuele Padovani of the University of Bologna) Managing Local Governments: Designing Management Control Systems That Deliver Value. His earlier book (coauthored with Richard B. Saltman), The Hospital Power Equilibrium, was a seminal study of the relationship between physicians and administrators in hospitals. Earlier in his career he served as a program economist with the US Agency for International Development in El Salvador, and as a consultant with the Social Administration Research Institute.

Professor Young earned a BA from Occidental College; an MA in economics from the University of California, Los Angeles; and a doctorate from Harvard Business School. He was selected to be a Milton Fund Fellow at Harvard Medical School, and he was elected to Beta Gamma Sigma (the national honor society for accredited business programs). For more information, visit his Web site, www.DavidYoung.org