Time-driven activity-based costing and the impact on cost measurement in the face of health reform.

Abstract

262 Background: In 2010, the Institute for Cancer Care Innovation (ICCI) began measuring the true cost of cancer care delivery by following the patient treatment cycle from initial referral to survivorship or supportive care. The project was prompted by both internal and external concerns about the rising costs of health care, the ability to demonstrate value for services provided, and potential changes in reimbursement. Hospital cost accounting systems are historically charge-based and are inherently skewed to shift costs towards procedures or encounters that are higher volume and well-reimbursed. However, these systems do not accurately reflect the actual acquisition costs of the resources providing care. Methods: In order to more accurately and transparently capture costs, the ICCI piloted the use of the time-driven activity-based costing (TDABC) methodology. This methodology allowed the team to map the entire patient experience of care while also capturing costs and capacity associated with each activity in the care delivery cycle. Results: To date, the team has created over 150 maps made up of over 6,500 unique activities with associated cost and capacity rates, which make up various costing equations. Actual clinical volumes are then run through the model to produce cost and capacity results. Initial results provided an unexpected view of the costs of various processes occurring within the care delivery cycle with the ability to rank the processes from most to least costly. This provided a unique opportunity to target specific areas for improvement. Additionally, transparency of the costing equations allows for precise modeling of episode-based bundles of care for different diseases and treatments. Conclusions: TDABC provides a more accurate and transparent approach to developing cost and capacity rates for cancer care delivery to aid in identifying the greatest opportunities for improvement, as well as providing a mechanism for creating episode-based bundles of care that are reflective of actual treatment being provided.