Extract

In the wake of global economic downturns, American organizations need innovative business practices to restore and preserve competitiveness (Porter and Rivkin, 2012). In the entire American economy, healthcare expenditures have been large and have continued to rise. Keehan et al. (2011) estimated healthcare expenditures to be 17.6 percent of the nation’s GDP in 2009. By 2020, the corresponding figure could reach 19.8 percent. These figures suggest that reforming the nation’s health sector is integral to restoring America’s competitiveness. Yet health reforms largely depend on accurate cost assessment – a seemingly easy task that is actually quite difficult for healthcare administrators. Healthcare administrators often rely on payments (from patients) and/or charges (by health professionals) data to arrive at incomplete estimates regarding the ‘cost’ of health services. This type of cost assessment is inaccurate and misses significant opportunities to improve efficiency. In this chapter, we report results of an exploratory study with an innovative costing method – time-driven activity-based costing (TDABC) – in the literature (Demeere et al., 2009; Kaplan and Porter, 2011). As our experience suggests, engaging different stakeholders is essential to implementing and benefiting from TDABC.