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In the last six years, a Harvard Business School team has worked with dozens of health care organizations to help them understand the true costs of their treatments for many medical conditions. These efforts were part of the providers’ quest to increase the value of their care delivery — in other words, achieve better outcomes at the lowest-possible cost. The HBS team has been using Time-Driven Activity-Based Costing (TDABC), an approach initially proposed by one of us (Bob Kaplan) and Michael Porter, to help providers pursue the value-based delivery of care.
One of the team’s central findings is that TDABC cannot be delegated to the finance function. The most successful implementations have had strong executive support, exceptional clinical leaders, and dedicated, multi-disciplinary project teams.
Among the implementing provider groups, Mayo Clinic stands out for its exemplary approach, which has enabled it to consistently enhance care delivery and realize cost efficiencies.