Activity-based costing for integrated delivery systems

The paradigm shift toward managed care is fueling new cost-finding demands. More sophisticated methods are emerging to meet these demands. Foremost among the new methods is activity-based costing (ABC). ABC is designed to eliminate cross-subsidies between products or services. Because costs are traced by activities across departments and cost centers, costs can also be traced by activities across integrated delivery systems (IDSs). The methodology makes ABC very applicable to combinations of providers including chains, affiliated groups, and IDS participants.