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Using time-driven activity-based costing to identify value improvement opportunities in healthcare
Summary
Healthcare providers can improve patient value by implementing time-driven activity-based costing (TDABC) to redesign care processes. This innovative costing method identifies opportunities for better outcomes and lower costs, supporting new payment models.
Area of Science:
- Healthcare Management
- Health Economics
- Process Improvement
Background:
- Healthcare providers face increasing pricing pressures and performance accountability.
- Improving patient value (better outcomes, lower costs) is a critical goal for healthcare organizations.
- Traditional costing methods may not adequately support process redesign for value improvement.
Purpose of the Study:
- To introduce and evaluate time-driven activity-based costing (TDABC) as a tool for healthcare process redesign.
- To identify opportunities for enhancing patient value through TDABC implementation.
- To explore the potential of TDABC as a foundation for bundled payment models.
Main Methods:
- Description of early TDABC implementation experiences at leading US and European healthcare organizations.
- Qualitative analysis of identified opportunities for value improvement.
- Exploration of the linkage between TDABC and bundled payment strategies.
Main Results:
- TDABC implementation revealed specific opportunities for redesigning care processes to improve efficiency and patient outcomes.
- The costing approach provided a data-driven foundation for understanding cost drivers in healthcare delivery.
- Early findings suggest TDABC can facilitate the transition to value-based care and bundled payments.
Conclusions:
- Time-driven activity-based costing offers a promising methodology for healthcare organizations to enhance patient value.
- Systematic implementation and evaluation of TDABC are crucial for realizing its full potential in healthcare.
- TDABC can serve as a foundational element for developing innovative reimbursement strategies like bundled payments.
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