Using Time-Driven Activity-Based Costing to Identify Value Improvement Opportunities in Healthcare

As healthcare providers cope with pricing pressures and increased accountability for performance, they should be rededicating themselves to improving the value they deliver to their patients: better outcomes and lower costs. Time-driven activity-based costing offers the potential for clinicians to redesign their care processes toward that end. This costing approach, however, is new to healthcare and has not yet been systematically implemented and evaluated. This article describes early time-driven activity-based costing work at several leading healthcare organizations in the United States and Europe. It identifies the opportunities they found to improve value for patients and demonstrates how this costing method can serve as the foundation for new bundled payment reimbursement approaches.