Chapter 5: Activity-Based Costing and Management

MANAGING HEALTHCARE COSTS AND VALUE

Value-Based Health Care is a vital component in the Health care industry especially with the
inevitable illnesses and with some other critical conditions that burdened the pockets of the patients
where competition is present. The Time-Driven Activity-Based Costing (TDABC) is central to the
Value-Based Health program and is used to accurately estimate the cost of providing healthcare services
with consumed resources as a patient undergoes healthcare processes. It has been complicated to
manage and gauge costs especially in the healthcare sector making their costing less accurate. The goal
in delivering healthcare services is to make sure that there is a value being delivered to the patient and is
measure in terms of the patient outcomes achieved per dollar expended. Costs are being examined in
terms of the level of the patients and their medical condition. One example is by comparing the cost of
normal vaginal delivery with a cesarean section. Natural childbirth is said to be cost-effective than CS
based on studies. Since in CS, more processes must have to be undergone making the cost higher than
the normal childbirth. Another example is about the colonoscopy procedure. A normal patient waiting
times for a colonoscopy with anaesthesiologist-administered sedation was 14 days at the ambulatory
facility and up to 3 months at the main hospital. But with TDABC, shifting some of the colonoscopies
scheduled with an anesthesiologist from the main hospital to the ambulatory facility will make it more
cost-effective and improves waiting time. It could produce annual savings and reduce wait times.
Theoretical concepts are relative to the reports and these theories are highly applicable to
managing healthcare costs and value. Delivering patient’s healthcare needs is more important, valuing
patient’s recovery, and better patient outcomes relative to the costs of delivery services being provided.
And as a future managerial accountant, it is better to not be impulsive when it comes to decision making.
Everything must be planned and controlled to be able to provide greater healthcare services above
average at the lowest possible cost. Elimination of non-value-added activities has helped in the costing
process just like the inspection of supplies needed to cure a patient especially those suppliers who are
capable of supplying high-quality products. As the theory stated, a management accountant plays a vital
role in the healthcare services in focusing and aligning the myriad continuous improvement programs
now underway at many provider organizations. Ensuring that these programs will enable to provide
value improvements, it is also better to be part of the team where designing and implementation of new
value-based payment models is highly commendable for accountability for patient outcomes purposes.