Time-Driven Activity-Based Costing in Healthcare Management
Summary
Time-Driven Activity-Based Costing (TDABC) is a bottom-up costing methodology designed to overcome the limitations of traditional accounting in healthcare. It quantifies the time required for each clinical activity and multiplies this by a resource’s capacity cost rate to yield precise, patient-level cost data. By constructing process maps that detail every step of a care pathway—identifying personnel, equipment, consumables and their associated time units—organisations gain transparent insight into resource consumption. This patient-centred approach has been adopted in diverse settings, from high-income academic centres to low-resource clinics, revealing inefficiencies, informing process improvements and guiding resource allocation. Integration with digital platforms has expanded the scale and accuracy of TDABC analyses, supporting value-based reimbursement models and strategic decision-making. Globally, the method underpins efforts to link cost information directly to clinical outcomes, optimise workflows, reduce waste and promote financial sustainability within healthcare systems.
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Time-Driven Activity-Based Costing in Healthcare Management publication trend
The graph below shows the total number of articles in time-driven activity-based costing in healthcare management across all publications each year (not limited to Nature Index journals).
Technical terms
Time-Driven Activity-Based Costing (TDABC): A costing method that assigns healthcare costs by multiplying the time required for each activity by the cost per unit of time of the resources involved.
Activity-Based Costing (ABC): An accounting technique that allocates indirect and overhead costs to services based on the activities that generate those costs.
Capacity Cost Rate: The cost per time unit of a resource, derived from its total cost divided by practical capacity.
Process Map: A visual chart outlining each step in a care delivery sequence, showing required resources and time allocations.
Value-Based Healthcare: A model that links payment to patient outcomes and cost efficiency rather than service volume.
References
- Improvements in technology and the expanding role of time-driven, activity-based costing to increase value in healthcare provider organizations: a literature review. Frontiers in Pharmacology (2024).
- What Is the Inpatient Cost of Hip Replacement? A Time-Driven Activity Based Costing Pilot Study in an Italian Public Hospital. Journal of Clinical Medicine (2022).
- From centralized DRG costing to decentralized TDABC-assessing the feasibility of hospital cost accounting for decision-making in Denmark. BMC Health Services Research (2021).
- Rethinking the cost of healthcare in low-resource settings: the value of time-driven activity-based costing. BMJ Global Health (2016).
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