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Semin Plast Surg. 2018 Nov;32(4):182-186. doi: 10.1055/s-0038-1672208. Epub 2018 Oct 22.

Activity-Based Costing.

Author information

1
Division of Plastic Surgery, Jamail Specialty Care Center, Baylor College of Medicine, Houston, Texas.
2
Department of Surgery, Baylor College of Medicine, Houston, Texas.

Abstract

Cost allocation for health care professionals can be an enigma within the health care system. Activity-based costing (ABC) is an accounting tool that allocates costs incurred through a company's practice of providing goods and services to the consumer. ABC can provide insight into inefficiencies across the supply chain and unlock excess capacity. This, in turn, can drive services provided toward generating more value for the hospital system. ABC can be tailored to focus upon a unit of measurement that holds value as it pertains to production. With time-driven ABC (Td-ABC), we look to use the advantages of both the fee-for-service and capitation model to transition to a value-based system. Providers are rewarded based on efficiencies and successful outcomes in patient care while disincentivizing poor outcomes and superfluous volume/expenditures. ABC, however, does not come without its own risks and disadvantages, and the user must exercise caution in applying this cost-allocating tool to avoid detriment to its practice. A review of the literature was conducted to analyze the implementation, medical application, and advantages and disadvantages of Td-ABC.

KEYWORDS:

accounting; activity-based costing; health care

PMID:
30357074
PMCID:
PMC6197877
[Available on 2019-11-01]
DOI:
10.1055/s-0038-1672208

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