ACCT-116-900
Individual Case Study
Summary
An article from the November/December issue of the Journal of Healthcare Management
entitled “Using Time-Driven Activity-Based Costing to Identify Value Improvement
Opportunities in Healthcare” discusses how healthcare providers can gain control of
skyrocketing costs by adopting an activity-based costing system. The current costing systems
rely on imprecise and arbitrary expense allocations that make it difficult for providers to
understand the true cost drivers of care given to patients. In 2013, healthcare spending reached
$2.9 trillion and accounted for over 17% of the United States Gross Domestic Product
[ CITATION Cen15 \l 1033 ] and it is projected to reach $5 trillion and 20% of GPD by the year
2022 [ CITATION Cen14 \l 1033 ]. Facing both regulations from the Affordable Care Act that
limit coverage gaps and healthcare spending that grows at an estimated average annual rate of
5.8%, insurance payers are looking to pass some of the cost burden back to providers by
modifying or lowering reimbursement methods. The authors believe that by instituting Time-
Driven Activity-Based Costing (TDABC), providers can find opportunities to lower costs while
maintaining or improving patient care (Kaplan et al., 2014). The article presents research from
several healthcare organizations that have implemented TDABC and the effects that it has had on
