BackgroundIn Chile, the use of costing systems in the public sector is limited. The Ministry of Health requires hospitals to manage themselves with the aim of decentralizing health care services and increasing their quality. However, self-management with a lack of accounting information is almost impossible. On the other hand, nutrition department costs have barely been studied before, and there are no studies specifically for activity based costing (ABC) systems. ABC focuses on the process and traces health care activities to gain a more accurate measurement of the object costs and the financial performance of an organization.MethodThis paper uses ABC in a nutrition unit of a public hospital of high complexity to determine costs associated with the different meals for inpatients. The paper also provides an activity based management (ABM) analysis for this unit.ResultsThe results show positive effects on the reduction of costs for the nutrition department after implementing ABC/ABM. Therefore, there are opportunities to improve the profitability of the area and the results could also be replicated to other areas in the hospital. ABC shed light on the amount of nutritionist time devoted to completing paperwork, and as a result, system changes were introduced to reduce this burden and allow them to focus on more relevant activities. Additional efficiencies were achieved through the elimination of non-value adding activities and automation of reports. ABC reduced the cost of the nutrition department and could produce similar results in other areas of the hospital.ConclusionsThis is a practical application of a financial management tool, ABC, which would be useful for hospital managers to reduce costs and improve the management of the unit. This paper takes ABC and examines its use in an area, which has had little exposure to the benefits of this tool.