Applying target costing under medical process reengineering to manage surgical costs and enhance hospitals’ competitive performance

Abstract

Healthcare organizations face increasing pressure to control costs, improve operational efficiency, and maintain the quality of healthcare services. Surgical procedures are particularly complex because they involve multiple resources, activities, medical personnel, equipment, and supporting services, making accurate cost management a significant challenge. This study aims to examine the role of applying Target Costing (TC) within the context of Medical Process Reengineering (MPR) in managing surgical costs and enhancing the competitive performance of hospitals. The study proposes an integrated approach in which target costing provides a forward-looking mechanism for determining and controlling the allowable cost of surgical services, while medical process reengineering focuses on redesigning healthcare processes, eliminating non-value-added activities, reducing waste, and improving resource utilization. The proposed approach links target costs with the activities and resources required to perform surgical procedures and subsequently examines their contribution to cost efficiency, service quality, and competitive performance. The study argues that integrating target costing with medical process reengineering can provide healthcare managers with more relevant cost information, support better resource allocation, improve operational efficiency, and contribute to enhancing hospitals’ competitive performance. The study therefore proposes an integrated framework linking target costing, medical process reengineering, surgical cost management, and competitive performance.