Activity-Based Costing in Hospital Sector in Gujarat: Opportunities and Challenges

The healthcare sector is characterized by complex service delivery processes and high operational costs, making effective cost management an essential requirement for hospital administration. Traditional costing methods often fail to provide accurate cost information because they allocate indirect costs using broad and generalized bases. This limitation has encouraged the adoption of more advanced costing techniques such as Activity-Based Costing (ABC). The present review-based study examines the concept, significance, opportunities, and challenges associated with the implementation of Activity-Based Costing in the hospital sector in Gujarat. The paper discusses the background of cost management in healthcare institutions and highlights the importance of accurate costing in improving financial transparency and operational efficiency. It further explains the conceptual framework of ABC and its relevance to complex healthcare environments where multiple activities contribute to patient care. The study identifies several opportunities of implementing ABC in hospitals, including improved cost allocation, better resource utilization, enhanced pricing transparency, and more effective managerial decision-making. At the same time, the paper also reviews key challenges such as high implementation costs, data collection difficulties, lack of expertise, and resistance to organizational change. The study concludes that although the implementation of ABC in hospitals may involve certain practical difficulties, it offers significant potential for improving cost management practices and supporting sustainable healthcare administration in Gujarat.