Time-driven activity-based costing can be an effective strategy to support value-based healthcare

Reviewed by James Ives, M.Psych. (Editor)Jun 17 2020

Value in Health, the official journal of ISPOR-;the professional society for health economics and outcomes research, announced today the publication of results of a study suggesting that time-driven activity-based costing can be an effective technique to support value-based healthcare initiatives.

The report, "Advances in Value-Based Healthcare by the Application of Time-Driven Activity-Based Costing for Inpatient Management: A Systematic Review," was published in the June 2020 issue of Value in Health.

This study was developed in collaboration with the Brazilian Health Institute for Technology Assessment, coordinated by Carisi A. Polanczyk, MD, ScD, who is actively working with Ana Paula B.S. Etges, Eng, PhD, in developing several healthcare costs analyses using time-driven activity-based costing.

The study reviewed the use of the time-driven activity-based costing methodology and estimated its impact on the value-based healthcare concept for inpatient management.

Results indicate that time-driven activity-based costing could be a strategy for increasing cost accuracy in real-world settings, and the method could help in the transition from fee-for-service to value-based systems.

The results could further provide a clearer idea of the costs, help with resource allocation and waste reduction, and might support clinicians and managers in increasing value in a more accurate and transparent way.

In a healthcare system continually marked by a significant waste of already limited resources, innovative methods to redesign healthcare service delivery are necessary and can achieve significant cost savings. Our systematic review suggests that time-driven activity-based costing can be an effective technique to support value-based initiatives when it is defined as the objective of studies that use this method."

Richard D. Urman, MD., MBA., Department of Anesthesiology, Perioperative and Pain Medicine, Brigham and Women's Hospital/Harvard Medical School, Boston, MA,USA

"This review allowed us to conclude that the highest contributions to value-based initiatives achieved using time-driven activity-based costing are the episode of care-cycle optimization throughout the care trajectory and the identification of care benchmarks."

Successful implementation of value-based healthcare requires an assessment of real healthcare costs by using methods that allow the evaluation of how each patient consumes resources in the healthcare system.

The cost assessment method, which is termed time-driven activity-based costing, allows more detailed direct and indirect cost accounting and data accuracy by identifying patient-specific resource consumption over the course of the care trajectory.

As such, the findings of this systematic review suggest that the time-driven activity-based costing methodology could become the gold standard to achieve better cost accuracy, understand healthcare resource allocation, reduce waste, and improve transparency in real-world settings.

Additional information about improving the quality of studies that apply time-driven activity-based costing methodology to healthcare, can be found at the Healthcare Consortium.