The case for implementing activity based costing

ABC identifies profitable volumes to give managers information to better manage volumes. Managers must balance the demand for service while maintaining a reasonable profit margin. Disparate systems work extremely well for their intended purposes, but they do not communicate with one another. The strength of the data they hold individually may be leveraged when implementing ABC methodology. Mayo Clinic in Rochester, Minnesota implemented a pilot of ABC to evaluate CT services where there is a high volume, multiple service location for cost comparison, variety of patient acuity and service mix, and large capital investments.The goal was to reveal the actual cost of CT services at the procedural level.