Using Time-Driven Activity-Based Costing to Establish a Tariff System for Home Health Care Services

Abstract

INTRODUCTIONIn Italy, as in other major industrialized countries, the recent economic crisis and the current epidemiological trends have highlighted the inadequacy of health systems to respond to the evolution of population requirements. In this regard, the most important societal challenge is aging, often associated with chronic disease and increased multimorbidity; nevertheless, the prospective cost of an aging society will not be sustainable in terms of healthcare and social services (Grabowski & Gruber, 2007; Kuhn & Nuscheler, 2011; Rechel, Doyle, Grundy, & McKee, 2009). The Italian regional administration does not often adopt health service delivery policies that address the challenge presented by the aging of the population. Few policies are aimed at increasing the delivery of local services for the elderly, and even fewer are able to provide for both health and social needs (Network Non Autosufficienza, 2013). This is particularly true for the Campania region, which, over the past several years, has experienced a steady increase in the number of elderly patients (and others) receiving home care; this increase has been accompanied by a growing commitment from the regional government to adopt strategies to promote an integrated home care assistance program that will be effective and economically sustainable.At the end of 2011, the Campania regional government launched a study aimed at implementing a tariff system for the provision of home and palliative care services. The study was carried out with the support of FormezPA (i.e., center services, assistance, studies, and training for the modernization of public administration; the organization acts for the Department of Public Administration of the Presidency of the Council of Ministers) as part of the POATI lealth Project (i.e., the Operative Project for Technical Assistance of the Italian Ministry of Health), with the aim of improving administrative and governance skills in regions identified by the European Union as having high levels of debt. To determine the tariff system, the regional government set up two working groups: one to identify profiles of home care and palliative care activities (i.e., a system for the classification of patient care complexity), and the second to propose a tariff system for home care and palliative care based on the profiles identified. The latter group used a time-driven activity-based costing (TDABC) system to analyze the average resources absorbed by each care profile identified.The local health authority managers for home care and palliative care services formed the working groups. This study has two distinguishing features: (1 ) it established a system of tariffs for services provided during a time frame defined by an individualized care plan (i.e., the care plan defined for each patient), and (2) the method of calculating the daily cost of care (i.e., the cost of a standard day, including access by all healthcare professionals needed to care for the patient at home). The daily rate of care forms the basis for calculating the average daily tariff, the monthly tariff, and the tariff for the entire patient cycle.The aim of this study is to use TDABC to analyze the experience of the Campania regional government in establishing a tariff system for home health care services delivered.BACKGROUNDObtaining accurate cost information for decision making on strategy, reimbursement tariffs, and management is a fundamental challenge for policymakers, healthcare administrators, and researchers in healthcare accounting (Cardinaels, Roodhooft, & Van Herck, 2004; Cardinaels & Soderstrom, 2013; Eldenburg & Kallapur, 2000; Gil & I lartmann, 2007; 1 Iovenga, 1996; 1 Isu & Qu, 2012; Pettersen, 2001). The cost accounting system plays a critical role, but it is difficult to design an effective system because healthcare organizations have different information needs; indeed, any effective cost accounting system is based on an understanding of the information that is needed and what it allows us to do (Cannavacciuolo, Illario, Ippolito, & Ponsiglione, 2015). …