Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON,

Ashraf IMAM,
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285 273

Print ISSN: 2288-4637 / Online ISSN 2288-4645

doi:10.13106/jafeb.2022.vol9.no4.0273

The Effect of Departmental Accounting Practices on Organizational

Performance: Empirical Evidence from the Hospital Sector in India

Nidhish Kumar MISHRA1, Ijaz ALI2, Nabil Ahmed Mareai SENAN3, Moin UDDIN4,
Asif BAIG5, Asma KHATOON6, Ashraf IMAM7, Imran Ahmad KHAN8

Received: December 30, 2021 Revised: March 08, 2022 Accepted: March 17, 2022

Abstract
Using data from a departmental profit and loss management questionnaire survey conducted for a group of hospitals consisting of various
establishment entities, this study evaluates the effectiveness of departmental profit and loss management practices, such as break-even
analysis, based on objective performance data. The study also examines whether the implementation of departmental profit and loss
accounting is still effective in improving profitability in the financial year 2021 and whether the effectiveness of the implementation of
departmental profit and loss accounting is robust. This study reconfirmed that the implementation of departmental profit-and-loss accounting
has a positive effect on objective financial performance in hospitals and that the effect of improving profitability can be enhanced by
implementing it monthly with high frequency and regularity and by using the accounting results more actively. It was also found that the
department’s implementation of break-even analysis had a positive impact on financial performance, which was enhanced by more active
use of the data. Given the current economic climate, a hospital organization’s active participation in income statement management, not only
for the hospital as a whole but also for each department, would be an effective management activity.

Keywords: Break-Even Analysis, Departmental Accounting, Financial Performance, Hospitals, Medical Results

JEL Classification Code: G30, M40, M41

1. Purpose of the Study rapid progress of medical technology, and it is necessary to

At present, hospitals are forced to operate in a severe
financial environment due to the continued suppression
of medical fees, and at the same time, they are forced to
continuously invest large amounts of money due to the
First Author. Assistant Professor, Department of Basic Sciences,
1
accumulate minimum profits for investment. Therefore, it
is increasingly necessary to grasp and manage profits and
losses not only for the hospital as a whole but also for each
“department” such as departments of internal medicine and
surgery, central medical departments such as laboratories and
surgery departments, and support management departments
such as medical affairs and accounting departments.

College of Science and Theoretical Studies, Saudi Electronic

University, Riyadh, Saudi Arabia. ORCID ID: 0000-0003-4502- Assistant Professor, College of Business Administration, Imam
6
261X. Email: n.kumar@seu.edu.sa Abdulrahman Bin Faisal University, Dammam, Saudi Arabia. ORCID
Assistant Professor, College of Business and Management, Fahad
2
ID: 0000-0003-2704-7776. Email: akhusain@iau.edu.sa
Bin Sultan University, Tabuk, Saudi Arabia. ORCID ID: 0000-0001- Assistant Professor, Business Administration, University College of
7
5436-0624. Email: iali@fbsu.edu.sa Bahrain, Bahrain. ORCID ID: 0000-0002-9023-0998.
Associate Professor, [1] Department of Accounting, College of
3
Email: ashraf@ucb.edu.bh
Business Administration, Prince Sattam bin Abdulaziz University, Corresponding Author. Researcher and Consultant, Creative Heads
8
Al Kharj, Saudi Arabia. ORCID ID: 0000-0002-6848-588X. [2] Consultants, India. ORCID ID: 0000-0003-2383-0608. [Postal
Accounting Department, College of Administrative Science, Address: Fort Enclave, Nagla Patwari, Aligarh, 202001, India]
Albaydha University, Yemen. Email: nabil_senan@yahoo.com Email: imranalig77@gmail.com
Assistant Professor, College of Administrative and Financial
4

Sciences, Saudi Electronic University, Jeddah, Saudi Arabia. ORCID
ID: 0000-0002- 6330-5165. Email: m.uddin@seu.edu.sa
Assistant Professor, Jubail University College, Jubail, Saudi Arabia.
5
ORCID ID: 0000-0002-5779-6164. Email: baiga@ucj.edu.sa
© Copyright: The Author(s)
This is an Open Access article distributed under the terms of the Creative Commons Attribution
Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits
unrestricted non-commercial use, distribution, and reproduction in any medium, provided the
original work is properly cited.
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
274 Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285
Under these circumstances, it is extremely important
to verify whether departmental profit and loss accounting
and management effectively improve profitability, which is
their main purpose. On the other hand, it is also important to
examine whether there are any adverse effects (so to speak,
side effects) on the results of medical care, which is more
important for hospitals as non-profit organizations whose
main purpose is not to improve profitability. In addition, it is
also interesting to see what kind of effects can be observed in
the utilization of wards and the implementation of important
medical treatments, which are related to the processes before
the results are achieved, in addition to the financial and
medical results.
Therefore, this study evaluates the effectiveness of
departmental P&L management practices, such as break-
even analysis, which have not been verified in previous
studies, based on objective performance data by utilizing
data from a questionnaire survey on departmental P&L
management conducted for a group of hospitals (FY2021)
consisting of various establishment entities. The difference in
business performance with and without the implementation
of departmental profit and loss accounting has already been
verified by Sangwan et al. (2017), as will be clarified in the
next section, but we will attempt to evaluate its effectiveness
again. We will also examine whether the implementation
of departmental profit and loss accounting is still effective
in improving profitability in FY2021 and whether the
effectiveness of the implementation of departmental profit
and loss accounting is robust.
The difference in performance between companies
with and without the implementation of departmental P&L
accounting has already been examined by Sangwan et al.
(2017), as will be clarified in the next section, but we will
attempt to evaluate the effectiveness again.
First, previous studies on the effectiveness of
departmental profit and loss accounting and management in
enhancing profitability are discussed in this paper, and the
characteristics of this study are clarified in comparison to
the previous studies. The methodology for this investigation
is then detailed in-depth, followed by the analysis results.
Then, depending on the analysis results, a discussion is
added, and lastly, the study is summarized as a conclusion.
2. Prior Research
In the past, the evaluation of the effectiveness of
departmental profit and loss accounting and management in
hospitals in improving profitability has not been completely
unattempted (Harsvardhan et al., 2014; Ganai et al., 2016;
Sangwan et al., 2017; Endri et al., 2020; Fuadah et al., 2020;
Langroudi et al., 2017). However, Ganai et al. (2016) is a
study of medical corporations that manage hospitals, not
of hospitals of various establishments, including national,
public, and medical corporations, and only evaluates
profitability. Harsvardhan et al. (2014) is a study of a group
of hospitals with excellent business management capabilities,
and the number of hospitals subject to analysis is extremely
small. In addition, due to the limitations of data available
at the time, the assessment of the impact on outcomes and
process aspects of health care is very limited.
Sangwan et al. (2017), on the other hand, focused on
a large number of hospitals (1619), did not target a set of
hospitals with exceptional management capabilities, and
did not analyze a limited number of hospitals. The impact
assessment’s scope ranges from financial and medical
outcomes to procedural considerations. However, because the
report covers management accounting methods in general, it
is limited to evaluating the effects of departmental profit-and-
loss accounting management by whether or not departmental
profit-and-loss accounting is implemented, and it does
not evaluate the effects of differences in profit-and-loss
monitoring frequency (monthly or not) or differences in the
degree of profit-and-loss accounting use when departmental
profit-and-loss accounting is implemented. Furthermore, the
usefulness of break-even analysis has yet to be determined,
as there has been no assessment of whether or not break-even
analysis, a primary tool for controlling profit and loss by
department, is used or the extent to which it is used.
However, the relationship between profit and loss
accounting and profitability improvement (Chatterjee et al.,
2013), in for-profit companies is not necessarily the same as
that in hospitals, which are not-for-profit organizations. This
is because improving profitability, which is the purpose of
profit and loss management, is not the main objective of non-
profit organizations, and the consciousness and behavior of
the employees working there are often different from those
of employees in for-profit companies. Moreover, hospitals
do not necessarily have a high sense of belonging to an
organization, and they are also characterized as a group of
professionals with a high degree of autonomy. Therefore, it
is indispensable to conduct this study in hospitals.
3. Research Methodology
This paper evaluates the effectiveness of departmental
P&L management by combining the data from the
questionnaire survey on departmental P&L management
conducted for hospitals in fiscal 2021 and the financial
data of the hospitals that responded to the survey, which
were obtained separately. Specifically, among the 286 hos­
pitals (response rate: 17.2%) that responded to the survey
conducted in 2021 targeting hospitals (1667 hospitals),
we will examine differences in profitability and medical
outcomes due to differences in various practices related to
departmental P&L management, targeting 169 hospitals for
which financial data, etc. are available and can be used for
analysis. The following is a more specific description of the
research methodology.
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285
3.1. Performance Data Collection Methods
First, for this study, hospitals that responded to the
questionnaire survey on departmental P&L management
conducted in 2021 were the target hospitals for performance
data collection. This is because this study can only be
conducted in hospitals where departmental P&L manage­
ment practices are known.
Next, financial performance data, which is essential
for verifying the effectiveness of the departmental profit
and loss accounting management, was obtained through
additional surveys of financial data at the hospitals that
responded to the survey, as well as through the yearbooks
of local public corporations and the websites of the
National Health Portal and the Ministry of Health & Family
Welfare. As a result, we were able to obtain the financial
performance data of 177 hospitals. In addition, we tested
whether any outliers would have a significant impact on
the analysis of the medical profit margin and medical
profit per hospital bed (calculated using the total number
of hospital beds of each hospital), which were calculated
from the medical revenues and medical expenses obtained
above. Specifically, we conducted an outlier test (Smirnov-
Grubbs test) and identified the data (hospitals) that were
determined to be outliers at a significance level of 0.1%. As
a result of excluding the outlier hospitals from the analysis,
169 hospitals remained in the analysis.
On the other hand, for these 169 hospitals, we obtained
performance data on discharge outcomes, readmissions,
ward utilization, and implementation of key therapeutic
activities.
As a result, 19 national hospitals, 98 public hospitals,
19 Indian Red Cross Society, 24 medical corporations, and
9 other corporations were included in the analysis. In this
study, we will analyze all of these hospitals. However, for the
analysis of the impact of the implementation of departmental
profit and loss accounting on financial and non-financial
performance, we will limit the analysis to the group of public
hospitals in a broad sense (national, etc., public, etc., and the
Indian Red Cross), excluding private hospitals in a broader
sense (medical corporations and other corporations), because
a certain number of samples are available.
3.2. Selection of Performance Indicators for
Analysis and Basic Statistics
In this study, to evaluate the effectiveness of
departmental P&L management, we first analyzed the
performance related to profitability, which is the main
objective of this management. As aspects of performance
other than profitability, we analyzed performance related to
the results of medical care, such as discharge outcomes and
readmissions, and performance related to the efficiency and
productivity of inpatient operations, such as ward utilization
275
and implementation of important therapeutic activities. The
following indices were selected as specific indicators to
measure each performance aspect.
First, the medical profit margin and medical profit per
bed were selected as indicators of profitability.
Next, as indicators of the results of medical care, the
improvement rate of the outcome at discharge and the
worsening rate of the outcome at discharge were included
in the analysis as indicators related to the outcome at
discharge. The study classifies each patient as having one
of the following discharge outcomes: “cured or mildly
recovered,” “remission,” “unchanged,” “exacerbation,”
“death from the injury or disease for which the most
medical resources were invested,” “death from the
injury or disease for which the least medical resources
were invested,” and “other.” The improvement rate at
discharge is the percentage of patients whose outcome at
discharge was either “cure” or “remission.” The opposite
is the worsening rate, which is the percentage of patients
whose outcome at discharge was either “exacerbation,”
“death due to the injury or disease for which the most
medical resources were invested,” or “death due to an
injury or disease other than the one for which the most
medical resources were invested.” As an indicator related
to readmission status, the rate of unplanned readmissions
within 4 weeks under the same name as the previous
hospitalization (hereafter, unplanned readmission rate)
was included in the analysis. Although these indicators
of medical outcomes do not cover all aspects of medical
outcomes, they are the only indicators of medical outcomes
that are available as commonly defined indicators across a
wide range of hospitals today.
In addition, as indicators of ward utilization, we used
the bed utilization rate and the average length of stay as
the objects of analysis. Bed utilization is a performance
indicator that indicates high or low occupancy of wards,
and the average length of stay is a performance indicator
that indicates efficient use of hospital beds (efficiency
of the healthcare delivery process). The hospital bed
utilization rate was calculated based on the total number
of inpatients, the average length of stay, and the number
of beds and patients in each hospital (total number of
inpatients × average length of stay ÷ number of beds
× 365). On the other hand, the average length of stay
without correction, which is based on the actual disease
composition of the hospital and the actual length of stay
for each disease, is first used as a reference index for
analysis. The average length of stay after correction for
disease composition, which is calculated by changing the
actual disease composition of each hospital to the national
average disease composition and applying the actual
length of stay for each disease to each hospital, will be
used as the main indicator for analyzing the performance
of efficient use of hospital beds.
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
276 Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285

In addition, the number of patients with surgery per
hospital bed per year and the number of patients with
surgery/chemotherapy/radiation therapy per hospital
bed per year (number of patients with critical care) were
analyzed as indicators of the implementation of critical
care activities. The basic statistics of each performance
indicator are described below (Table 1).
3.3. Content Analysis
In this study, first of all, in the questionnaire, “The
accounting and management of profit and loss by
‘department’ refers to the accounting and management of
profit and loss by each of the four medical departments such
as internal medicine and surgery, four departments in the
central medical care system such as laboratory, pharmacy,
surgery, and rehabilitation departments, and four departments
in the support management system such as the medical
affairs department, accounting department, and information
system department. In this study, we will first evaluate the
effectiveness of departmental profit and loss accounting by
examining the differences in financial and medical outcomes,
as well as the differences in the utilization of wards and the
implementation of important medical treatments, which are
related to the processes leading to the outcomes, depending
on whether or not departmental profit and loss accounting
based on this definition is implemented.
In the previous studies, when examining the difference
in profitability depending on whether or not departmental
P&L is implemented, a comparative analysis was conducted
not only by simply comparing whether or not departmental
P&L is implemented but also by considering the year in
which departmental P&L was introduced (started). It is
known that many hospitals decide to introduce departmental
profit and loss accounting because they are in the red and
unprofitable, and therefore hospitals immediately after the
start of departmental profit and loss accounting are often in
the red. The reason is that it is not necessarily appropriate from
the perspective of evaluating the effect of departmental profit
and loss accounting to compare the profitability of hospitals
with and without the implementation of departmental profit
and loss accounting, including hospitals immediately after the
start of implementation. Even if departmental profit and loss
accounting affects improving profitability, it is not considered
that it will improve as soon as it starts. In many cases, business
managers first grasp the situation of profit and loss, think about
countermeasures based on the information, ask for action
change at the site, and after a short time after the actual action
change is convinced by the field medical staff, it leads to
improvement of profitability. Therefore, even if it is effective,

Table 1: Basic Statistics of Performance Indicators

Financial (Accounting) Results Medical Outcomes

Performance Rate of Deterioration

Medical Profit
Indicators Basic Improvement in Rate of the Unplanned
Medical Profit per Bed
Statistics Outcomes when Outcome Readmission
Margin (Thousand
Discharged from at Hospital Rate
Rupees)
Hospital Discharge
n 169 169 169 169 169
Average −7.8% −1,709 81.8% 3.4% 2.5%
Standard deviation 10.5% 2,354 9.2% 1.7% 0.7%
Median −5.7% −1,296 83.4% 3.3% 2.4%
Implementation Status of Key
Use of Wards
Therapeutic Activities

Basic Statistics The Average

Number of
of Performance The Average Number of Days Number of
Surgeries/
Indicators Bed Utilization Number of Days in Hospital Patients with
Chemo/Radiation
Rate in Hospital After Disease Surgery per Bed
Therapy per Bed
(Reference) Composition per Year
per Year
Correction
n 169 169 169 169 169
Average 65.2% 12.3 11.9 8.6 10.4
Standard deviation 13.1% 2.2 1.6 2.9 3.6
Median 67.5% 12.3 11.9 8.8 10.3
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285
there is a certain time lag from the start to the manifestation
of the financial results (Harsvardhan et al., 2014). Therefore,
in this study, as in the previous studies, we also conducted an
analysis in which the hospitals whose departmental profit and
loss accounting started in 2021, the year of this questionnaire
survey, and in 2020, the year before that, were excluded from
the analysis for reference. In other words, we also attempted
to examine the difference in financial performance in 2021
between the two groups of hospitals: those that started
departmental P&L accounting by 2019 and those that did not
start departmental P&L accounting.
Next, we will examine whether the effects and impacts
of departmental profit and loss accounting differ depending
on whether the frequency (interval) of the implementation of
departmental profit and loss accounting is monthly (quarterly,
half-yearly, yearly, or irregularly (as needed)), that is, whether
profit and loss are grasped and managed on a high frequency
and regular basis or not. We will also examine whether
differences in the degree of use of departmental profit and loss
accounting make a difference in the effects and impacts when
departmental profit and loss accounting is implemented. In
the questionnaire survey on which this study relies, the degree
of use of P&L by department is divided into two categories:
(1) use by management for business analysis (business
diagnosis, policy formulation, and decision making), and (2)
use by front-line managers and staff (to raise awareness of
business management and promote autonomy). We asked the
respondents to rate the degree of use on a 7-point scale: not used
at all (1), not used much (2), used a little (3), used (4), used a
lot (5), used fairly often (6), and used very often (7). In this
study, considering the sample size of each usage category to be
compared, we will examine the differences in the effects and
impacts of the different usage levels by comparing the hospitals
with usage levels of 3 (little usage) or higher for both analytical
usage and approach usage (23 samples) with the other hospitals
(29 samples). The following is a summary of the results.
Finally, we will examine the differences in financial
and medical outcomes due to whether or not departmental
breakeven analysis is implemented, as well as the differences
in ward utilization and the implementation of key therapeutic
actions related to the processes leading to the outcomes. We
will also examine whether differences in the degree of use
of break-even analysis by the department, if implemented,
make a difference in financial and other results. In the
questionnaire survey on which this study relies, respondents
were asked to rate the degree of use of break-even analysis on
the same seven-point scale as above, according to whether it
is used (1) for analysis by management, (2) for encouraging
front-line workers, (3) for unit price improvement, or (4) for
cost structure improvement. Therefore, in this study, taking
into account the sample size of each utilization category to
be compared, we will examine the difference in the effect
and impact of different levels of utilization by comparing
277
the hospital group (sample size: 19), which has a utilization
level of 2 or higher in any of the four utilization methods
(i.e., no utilization at all (1) in any utilization method), with
the other hospital group (sample size: 17).
The t-test (Welch’s test) was used to verify the difference
between the means of each category.
4. Results
First, we examined the relationship between departmental
P&L implementation and financial outcomes improvement,
which is the fundamental goal of this strategy. Although
the link was proportional to the deficit area, we discovered
that hospitals that implemented P&L were much better in
both medical profit margin and medical profit per bed
(Table 2). For comparison, after accounting for the start
year of departmental profit and loss accounting, we found
that hospitals that implemented the system performed much
better in both profitability measures. The profitability index
of the group of adopting hospitals was better in the case of
the analysis considering the start year than in the case of the
analysis not considering the start year, as in the previous
study (Sangwan et al., 2017).
Significant differences were observed in the previous
study only when hospitals that had just started departmental
profit and loss accounting were excluded. In contrast,
significant disparities were identified in this study regardless
of the year of introduction, depending on whether or not it
was applied. Because the analysis will be limited to the group
of implementing hospitals as indicated later in this study, the
following analysis does not take into consideration the start
year of the departmental profit and loss accounting to avoid
reducing the sample size.
We also conducted an analysis limited to public hospitals
and public hospital groups in a broad sense for reference
and found no difference in the effect of implementing
departmental profit and loss accounting on improving
profitability compared to the case of all hospital groups
(Table 3).
Then we examined the relationship between departmental
P&L implementation and the outcomes of medical care,
which is the primary goal of hospitals, and discovered that
the group of hospitals that implemented departmental P&L
had no worse results in any of the medical care outcome
indicators (Table 4). In the implementation hospital group,
however, the results of poor discharge outcomes and
unplanned readmission rates were much better. At least
in terms of these three health care outcome measures, the
introduction of departmental P&L does not appear to have
a negative influence on health care results. In addition, for
reference, a study confined to public hospitals and public
hospital groups, in general, was conducted. However, there
was no difference from the case of all hospital groups.
 278
Table 2: Implementation of Departmental Profit and Loss Accounting and Financial Results (All Hospital Groups)

Financial (Accounting) Results Financial (Accounting) Results

Medical Profit Calculation of Segment Medical Profit

Departmental Profit and Loss
Medical Profit per Hospital Bed Profit or Loss After Annual Medical Profit per Hospital Bed
Statement
Margin Thousands of Adjustment Margin Thousands of
Rupees) Rupees)
All hospitals n Average S.D. Average S.D. All hospitals n Average S.D. Average S.D.
Reference Implementation 54 −5.0% 6.8% −1,115 1,660 Reference Implementation 45 −4.1% 6.3% −904 1.563
Non- 115 −9.1% 11.6% −1,987 2,577 Non- 115 −9.1% 11.6% −1.987 2.577
implementation implementation
Welch Test t-value P-value t-value P-value Welch Test t-value P-value t-value P-value
2.90 0.004 2.64 0.009 3.49 0.001 3.24 0.002

Table 3: Implementation and Financial Results of Departmental Profit and Loss Accounting (Public and Public Hospital Groups in the Broad Sense)

Financial (Accounting) Results Financial (Accounting) Results

Departmental Profit and Loss Medical Profit Departmental Profit and Loss Medical Profit
Statement Medical Profit per Hospital Bed Statement Medical Profit per Hospital Bed
Margin Thousands of Margin Thousands of
Rupees) Rupees)
Broad public hospital group n Average S.D. Average S.D. Broad public hospital group n Average S.D. Average S.D.
Reference Implementation 38 −6.4% 6.9% −1,484 1,561 Reference Implementation 20 −7.8% 7.1% −1.710 1.426
Non- 98 −11.0% 11.1% −2,400 2,443 Non- 78 −13.3% 11.1% −2.888 2.430
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285

implementation implementation
Welch Test t value P value t value P value Welch Test t value P value t value P value
Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,

2.85 0.005 2.59 0.011 2.73 0.009 2.80 0.007

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Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285 279

Table 4: Departmental P&L Implementation and Medical Outcomes

Medical Outcomes

Rate of Improvement Rate of Deterioration

Departmental Profit and Loss Statement in Outcomes when of Outcomes Upon Unplanned
Discharged from Discharge from Readmission Rate
Hospital Hospital
All hospitals n Average S.D. Average S.D. Average S.D.
Implementation 54 83.0% 6.4% 2.7% 1.4% 2.2% 0.7%
Non-implementation 115 81.3% 10.3% 3.8% 1.8% 2.6% 0.7%
Welch Test t-value P-value t-value P-value t-value P-value
1.31 0.193 4.10 0.000 2.74 0.007
The broad public hospital group n Average S.D. Average S.D. Average S.D.
Reference Implementation 38 82.4% 4.9% 2.8% 1.3% 2.3% 0.7%
Non-implementation 98 80.7% 10.7% 3.8% 1.7% 2.6% 0.7%
Welch Test t-value P-value t-value P-value t-value P-value
1.24 0.218 3.52 0.001 1.88 0.064
Public hospitals n Average S.D. Average S.D. Average S.D.
Reference Implementation 20 83.4% 4.3% 3.1% 1.2% 2.4% 0.5%
Non-implementation 78 81.2% 9.0% 3.9% 1.8% 2.6% 0.7%
Welch Test t-value P-value t-value P-value t-value P-value
1.57 0.121 2.44 0.019 1.72 0.093

In addition, we examined whether there were differences
in the utilization of wards and the implementation of
important medical treatments, which are related to the
processes leading to financial and medical results, depending
on whether or not departmental profit and loss accounting
was implemented. Although there was no significant
difference in the utilization rate of hospital wards, which
indicates the efficient utilization of hospital wards, there
was a significant difference in the adjusted average length
of stay, which indicates the efficient utilization of hospital
wards, at the 10% level (there was a significant difference in
the normal average length of stay at the 5% level). Table 5.
On the other hand, there was a significant difference in both
indices for the implementation of critical care, and it was
found that the number of patients who underwent critical
care such as surgery per hospital bed per year was higher
in the group of hospitals that implemented departmental
profit and loss accounting. In addition, we also conducted
an analysis limited to public hospitals and public hospital
groups in a broad sense, but the results were the same for all
hospital groups. In other words, the group of hospitals that
implemented departmental profit-and-loss accounting had
a significantly higher number of patients who underwent
important treatment procedures in both indicators, and
the group of hospitals that implemented profit-and-loss
accounting was more efficient in all indicators in the
respondent hospitals, although the utilization of wards was
not significant due to the reduced sample size.
Then we examined whether there was a difference in the
financial results of hospitals that used departmental profit
and loss accounting, whether it was done monthly or on a
more frequent basis and whether there was a difference in
the performance of hospitals that didn’t. In terms of financial
results, it was discovered that hospitals that adopted the
monthly programs were much more profitable than hospitals
that did not, although the difference was only 10%. (Table 6).
In terms of medical care outcomes, there was no significant
difference in any of the variables depending on whether it
was completed monthly or not. Furthermore, the hospitals
that implemented monthly care had a much higher bed
utilization rate and a more significant number of patients
with surgery per bed per year, both are tied to the process
before the results are accomplished. There was no significant
change in the average length of stay before and after disease
composition correction, nor in the annual number of patients
treated with surgery, chemotherapy, or radiotherapy per
hospital bed.
We also examined whether disparities in the extent to
which departmental profit and loss accounting was used
resulted in variances in hospital performance, such as
 280

Table 5: Calculation of Profit and Loss by Department, Use of Ward, and Implementation of Important Treatment Actions

Implementation Status of Key

Use of Wards
Therapeutic Activities

Average Number
Departmental Profit and The Average of Days in Number of Number of
Loss Statement Bed Utilization Number of Days Hospital After Patients with Surgeries/Chemo/
Rate in Hospital Correction Surgery per Bed Radiation Therapy
(Reference) of Disease per Year per Bed per Year
Composition
All hospitals n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Implementation 54 66.9% 13.3% 11.8 1.8 11.6 1.6 9.9 3.2 11.8 3.8
Non-implementation 115 64.4% 12.9% 12.6 2.3 12.1 1.6 8.0 2.5 9.7 3.3
Welch Test t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
1.15 0.252 2.34 0.021 1.79 0.077 3.80 0.000 3.59 0.001
Broad public hospital group n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Reference Implementation 38 66.5% 13.1% 12.0 1.2 11.6 1.2 9.6 2.7 11.6 3.3
Non-implementation 98 64.5% 13.1% 12.4 2.0 12.0 1.4 8.1 2.4 9.9 3.2
Welch Test t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
0.80 0.429 1.51 0.135 1.62 0.108 2.86 0.006 2.69 0.009
Public hospitals n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Reference Implementation 20 66.9% 9.6% 12.0 1.0 11.6 0.8 9.4 2.4 11.3 3.0
Non-implementation 78 63.3% 13.6% 12.2 2.0 11.9 1.5 7.9 2.4 9.7 3.3
Welch Test t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
1.37 0.178 0.58 0.565 0.99 0.327 2.46 0.020 2.16 0.039
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285
Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
Table 6: Relationship between the Frequency of Performing Departmental Profit and Loss Accounting and Hospital Performance

Financial (Accounting) Results Medical Outcomes

Profit and Loss Rate of Improvement
Calculation Frequency Medical Profit per Deterioration Rate
in Outcomes when Unplanned
of Implementation Medical Profit Margin Bed of the Outcome at
Discharged from Readmission Rate
(Thousand Rupees) Hospital Discharge
Hospital
n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Monthly 28 −3.5% 6.2% −792 1.777 82.5% 5.7% 2.7% 1.3% 2.3% 0.7 %
Non-monthly 24 −7.1% 7.1% −1.593 1.466 83.3% 7.3% 2.9% 1.4% 2.2% 0.6 %
Welch Test t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
1.95 0.058 1.78 0.081 0.47 0.644 0.30 0.767 0.97 0.337
Implementation Status of Key Therapeutic
Use of Wards
Activities
Profit and Loss Average Number
Calculation Frequency Number of
Average Number of Days in Hospital Number of Patients
of Implementation Surgeries/Chemo/
Bed Utilization Rate of Days in Hospital After Disease with Surgery per Bed
Radiation Therapy
(Reference) Composition per Year
per Bed per Year
Correction
n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Monthly 28 70.1% 11.0% 11.4 1.6 11.3 1.1 10.7 3.5 12.7 3.9
Non-monthly 24 63.6% 15.0% 11.9 1.2 11.5 1.2 9.1 2.7 11.0 3.4
Welch Test t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285

1.77 0.084 1.23 0.223 0.59 0.556 1.92 0.061 1.65 0.105
Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
281
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
282 Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285

financial results. First and foremost, in terms of financial
results, the group of hospitals with high utilization was
shown to be significantly more profitable than the group of
hospitals with low utilization in terms of both profitability
metrics (Table 7). In terms of medical care outcomes, there
was no significant difference in any of the variables between
hospitals with high and low usage levels. Furthermore, while
there was no significant difference in ward utilization for any
of the indices, the number of critical therapeutic practices
was significantly higher in the group of institutions with high
utilization for both indices.
Then we examined whether financial results and other
hospital performance differed depending on whether the
department completed a break-even analysis or not. In
terms of the relationship between break-even analysis by
the department and improved profitability, it was confirmed
that hospitals that implemented break-even analysis by the
department were significantly better in terms of medical
profit margin and medical profit per hospital bed. However,
the relationship was relative to the deficit area (Table 8).
In terms of the relationship with the outcomes of medical
care, which is the primary goal of a hospital, there was no
significant difference in any of the indicators depending on
whether the department used break-even analysis or not.
Furthermore, whether or not the department’s break-even
analysis was applied, there was no substantial difference
in the usage of wards and the execution of critical medical
treatments, which are related to the procedures before the
financial and medical outcomes.
Finally, we examined whether differences in the degree to
which departments applied the break-even analysis resulted
in disparities in hospital performance, such as financial
results when it was implemented. First and foremost, in terms
of financial results, hospitals with a high usage rate were
found to be significantly more profitable in terms of both
profitability indices (Table 9). In terms of medical treatment
outcomes, only the rate of improvement in outcome at
discharge was considerably lower in the group of institutions

Table 7: Relationship between the Degree of Use of Departmental Profit and Loss Accounting and Hospital Performance

Financial (Accounting) Results Medical Outcomes

Rate of Deterioration
Profit and Loss Medical Profit per
Improvement in Rate of the Unplanned
Calculation Medical Profit Bed
Outcomes when Outcome Readmission
Margin (Thousand
Discharged from at Hospital Rate
Rupees)
Hospital Discharge
n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Both methods 23 −2.4% 6.1% −666 2,020 81.5% 6.9% 2.6% 1.4% 2.3% 0.6 %
3 or more
Other 29 −7.1% 6.9% −1,492 1,291 84.2% 6.0% 2.8% 1.5% 2.2% 0.7 %
t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Welch Test
2.61 0.012 1.71 0.097 1.49 0.143 0.56 0.579 0.75 0.456
Implementation Status of Key
Use of Wards
Therapeutic Activities

Average
Profit and Loss Number of
Average Number of Days Number of
Calculation Surgeries/
Bed Utilization Number of Days in Hospital Patients with
Chemo/Radiation
Rate in Hospital After Disease Surgery per Bed
Therapy per Bed
(Reference) Composition per Year
per Year
Correction
n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Both methods 23 69.0% 12.5% 11.4 2.4 11.5 2.2 10.9 3.3 12.8 3.7
3 or more
Other 29 64.7% 14.1% 12.1 1.1 11.7 1.1 9.0 2.9 10.9 3.7
t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Welch Test
1.15 0.257 1.31 0.200 0.48 0.633 2.14 0.038 1.83 0.074
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285 283

Table 8: Relationship between Implementation of Break-Even Analysis by Department and Hospital Performance

Financial (Accounting) Results Medical Outcomes

Break-Even Rate of Deterioration

Medical Profit
Analysis by Improvement in Rate of the Unplanned
Medical Profit per Bed
Department Outcomes when Outcome Readmission
Margin (Thousand
Discharged from at Hospital Rate
Rupees)
Hospital Discharge
All hospitals n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Implementation 36 −4.1% 8.7% −728 2,138 83.6% 6.6% 2.9% 1.5% 2.3% 0.8 %
Non- 68 −8.0% 9.9% −1,845 2,063 82.8% 6.7% 3.2% 1.7% 2.5% 0.7 %
implementation
t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Welch Test
2.07 0.042 2.56 0.012 0.61 0.544 1.07 0.286 1.40 0.165
Implementation Status of Key
Use of Wards
Therapeutic Activities

Break-Even Average Number of

Analysis by Average Number of Days Number of Surgeries/
Department Bed Utilization Number of Days in Hospital Patients with Chemo/
Rate in Hospital After Disease Surgery per Bed Radiation
(Reference) Composition per Year Therapy per Bed
Correction per Year
All hospitals n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
Implementation 36 66.1% 14.5% 11.8 2.1 11.6 2.0 9.6 3.6 11.5 4.2
Non- 68 65.2% 11.8% 12.0 1.8 11.7 1.2 8.9 2.5 10.4 3.0
implementation
t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Welch Test
0.35 0.727 0.51 0.609 0.44 0.664 1.11 0.271 1.35 0.181

with high use, though it remained around 10%. Furthermore,
there were no significant differences in any of the indices
for hospital ward utilization or the implementation of critical
treatment activities.
5. Discussion and Recommendations
The fact that departmental profit and loss accounting
is effective in boosting profitability was reconfirmed, and
the certainty of the effectiveness of departmental profit and
loss accounting was increased, as in the previous study
(Sangwan et al., 2017). We also examined the impact
of departmental P&L on financial results, both with and
without considering the initial year of implementation.
We found that P&L increased profitability in both
circumstances, but when the first year of implementation
was evaluated, the profitability index of the group of
hospitals that implemented P&L was higher. When the
year of implementation was taken into account, however,
the profitability index of the implemented hospital group
was higher. This indicates that many hospitals began
implementing departmental profit and loss accounting at
a time when their profitability was declining. Furthermore,
even if limited to public hospitals and public hospital groups
in a broad sense, the effect of implementing departmental
profit and loss accounting on improving profitability was
confirmed, and it became clear that even public hospital
groups with a low implementation rate of this method
had the same financial effect as other established hospital
groups when this method was implemented.
In addition, the implementation of the departmental
profit and loss accounting confirmed that the indicators
analyzed in this study did not have any negative impact
on the results of medical care, which is the purpose of
the hospital.
In addition, it became clear that the departmental profit
and loss accounting is expected to improve the utilization of
wards, focusing on the efficient use of hospital beds. It can
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
284 Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285

Table 9: Relationship between the Degree of Use of Break-Even Analysis by Department and Hospital Performance

Financial (Accounting) Results Medical Outcomes

Breakeven Rate of Deterioration

Medical Profit
Analysis Improvement in Rate of the Unplanned
Medical Profit per Bed
Utilization Outcomes when Outcome Readmission
Margin (Thousand
Discharged from at Hospital Rate
Rupees)
Hospital Discharge
n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
All methods 2 19 −1.3% 8.7% −59 2,505 81.8% 6.8% 3.0% 1.5% 2.4% 0.6 %
or more
Other 17 −7.3% 7.8% −1,475 1,346 85.6% 5.8% 2.7% 1.7% 2.1% 0.9 %
t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Welch Test
2.16 0.038 2.14 0.041 1.78 0.085 0.55 0.586 1.24 0.225
Implementation Status of Key
Use of Wards
Therapeutic Activities

Breakeven Average
Number of
Analysis Average Number of Days Number of
Surgeries/
Utilization Bed Utilization Number of Days in Hospital Patients with
Chemo/Radiation
Rate in Hospital After Disease Surgery per Bed
Therapy per Bed
(Reference) Composition per Year
per Year
Correction
n Average S.D. Average S.D. Average S.D. Average S.D. Average S.D.
All methods 2 19 68.1% 13.1% 11.8 2.6 11.7 2.4 9.5 3.1 11.2 3.6
or more
Other 17 64.0% 16.0% 11.7 1.4 11.4 1.5 9.8 4.2 11.8 5.0
t-value P-value t-value P-value t-value P-value t-value P-value t-value P-value
Welch Test
0.83 0.413 0.14 0.892 0.31 0.756 0.27 0.786 0.39 0.702

be inferred that the implementing hospital group is trying
to improve profitability by increasing the total revenue
by increasing the number of patients while shortening
the average length of stay and improving the unit cost of
treatment. Furthermore, while the corrected average length
of stay (and the normal average length of stay), which
represents the efficient use of hospital beds, is significantly
shorter, the utilization rate of hospital beds, which represents
the utilization status of hospital wards, shows no significant
difference (the utilization rate of hospital beds is higher in the
implementation hospital group than in the response hospital
group). In addition to reducing the length of stay, the number
of patients increased to the point that the bed utilization
rate was maintained. From the perspective of the major
purpose of departmental profit and loss accounting, which
is to increase profitability, it can be said that departmental
profit and loss accounting has had a positive effect on the
process of ward utilization.
In contrast to the previous study (Sangwan et al., 2017),
which found no significant difference in the effect of
departmental profit and loss accounting on the implementation
of important therapeutic activities, it became clear that
departmental profit and loss accounting was considered
to significantly promote the implementation of important
therapeutic activities such as surgery. Important therapeutic
activities such as surgery are generally well reimbursed,
which leads to an increase in the unit cost of medical treatment
and an increase in the hospital’s overall revenue. As a result,
given the cost structure of hospitals, which has a high fixed
cost ratio, encouraging the implementation of vital medical
treatments will result in increased profitability. As a result,
departmental profit-and-loss accounting has a positive effect
on the process of conducting significant treatment operations
from the standpoint of increasing profitability.
Then, even when departmental profit and loss
accounting was established, the effect of profit and loss
 Nidhish Kumar MISHRA, Ijaz ALI, Nabil Ahmed Mareai SENAN, Moin UDDIN, Asif BAIG, Asma KHATOON, Ashraf IMAM,
Imran Ahmad KHAN / Journal of Asian Finance, Economics and Business Vol 9 No 4 (2022) 0273–0285
accounting on improving profitability tended to be larger
in hospitals that grasped profit and loss by the department
on a monthly and frequent basis and executed the PDCA
cycle often. Furthermore, it was confirmed that the high
frequency of PDCA management had no negative impact
on medical care outcomes. Furthermore, it was found
that hospitals that used monthly PDCA management had
a greater bed utilization rate and improved their ward
occupancy status, as well as a higher rate of critical
therapeutic activities, particularly surgery. In other words,
the high frequency of PDCA management by grasping the
profit and loss of each department improved and promoted
the utilization of wards and the implementation of
important treatment procedures, and enhanced the effect of
improving profitability, but did not have a negative impact
on the results of medical care.
In addition, the effect of increasing profitability was
proven when the degree of utilization was high, in addition
to the department’s implementation of profit and loss
accounting. Furthermore, it was found that the higher the
utilization level, the larger the impact on profitability. It
was also established that the higher the level of usage, the
less negative impact on medical outcomes. Furthermore, it
was found that the higher the utilization level, the more
critical therapy actions were promoted. To put it another
way, expanding the use of departmental profit-and-loss
accounting encourages the implementation of important
treatments and boosts the effect of boosting profitability,
although it is unlikely to have a negative influence on
medical outcomes.
Finally, it was established that the department’s use of
break-even analysis has an effect on improving profitability,
which is the objective of the analysis, but it has no negative
impact on medical care outcomes. Furthermore, it became
obvious that not only implementing the break-even analysis
by the department but also increasing the level to which the
analysis was used, had a positive influence on profitability.
On the other hand, as the level of use is raised, the possibility
of certain negative effects on medical care outcomes has been
suggested, and it has also been advised that when actively
using departmental break-even analysis, close attention to
side effects is required.
6. Conclusion
This study reconfirmed that the implementation of
departmental profit and loss accounting has a positive effect
on the objective financial performance of hospitals and that
the effect of improving profitability is enhanced not only by
implementing it but also by implementing it monthly with
high frequency and regularity, and by using the accounting
results more actively. It is also clear that the department’s
285
implementation of break-even analysis improves financial
performance and that the effect of increasing profitability
is enhanced not just by applying the analysis but also by
using it more actively. Furthermore, it was discovered that
this style of departmental P&L management had no negative
effects on the results of medical care.
Based on the assumption that we are in a financially
challenging business environment, active income statement
management would be an appropriate management activity
for a hospital organization, not only for the hospital as a
whole but also for each department. However, because
medical care outcomes have many different aspects, and
the indicators used in this study cannot be considered to
encompass all aspects of medical care outcomes, the side
effects of departmental P&L management must constantly
be closely monitored.
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