Boston Children's Hospital: Measuring Patient Costs

Robert S. Kaplan; Mary L. Witkowski; Jessica A. Hohman

Case | HBS Case Collection | March 2012 (Revised January 2013)

Boston Children's Hospital: Measuring Patient Costs

by Robert S. Kaplan, Mary L. Witkowski and Jessica A. Hohman

Abstract

The case describes two pilot projects on applying activity-based costing to measuring the cost of treating patients. It presents process maps and financial data relating to the processes used during (1) an office visit to a plastic surgeon for three different diagnoses and (2) application and removal of three different casts in the orthopedic cast room. Students calculate and compare the costs and margins of the three procedures at the two different sites using the hospital's existing cost system and a proposed new system based on time-driven activity-based costing.

Keywords: health care; Time-Driven Activity-Based Costing; Costing; Hospitals; Activity Based Costing and Management; Mathematical Methods; Health Industry;

Language: English

Format: Print

28 pages

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Citation:

Kaplan, Robert S., Mary L. Witkowski, and Jessica A. Hohman. "Boston Children's Hospital: Measuring Patient Costs." Harvard Business School Case 112-086, March 2012. (Revised January 2013.)

Related Work

Case | HBS Case Collection | March 2012 (Revised January 2013)

Boston Children's Hospital: Measuring Patient Costs

Robert S. Kaplan, Mary L. Witkowski and Jessica A. Hohman

The case describes two pilot projects on applying activity-based costing to measuring the cost of treating patients. It presents process maps and financial data relating to the processes used during (1) an office visit to a plastic surgeon for three different diagnoses and (2) application and removal of three different casts in the orthopedic cast room. Students calculate and compare the costs and margins of the three procedures at the two different sites using the hospital's existing cost system and a proposed new system based on time-driven activity-based costing.

Keywords: health care; Time-Driven Activity-Based Costing; Costing; Hospitals; Activity Based Costing and Management; Mathematical Methods; Health Industry;

Citation:
Kaplan, Robert S., Mary L. Witkowski, and Jessica A. Hohman. "Boston Children's Hospital: Measuring Patient Costs." Harvard Business School Case 112-086, March 2012. (Revised January 2013.) View Details

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Teaching Note | HBS Case Collection | June 2013

Boston Children's Hospital: Measuring Patient Costs

Robert S. Kaplan and Robert S. Kaplan

Keywords: health care; Activity-Based Costing; Hospitals; Costing; Time-Driven ABC; Activity Based Costing and Management; Health Industry;

Citation:
Kaplan, Robert S. "Boston Children's Hospital: Measuring Patient Costs." Harvard Business School Teaching Note 913-419, June 2013. View Details

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Supplement | HBS Case Collection | June 2013

Boston Children's Hospital Assignment Worksheet

Robert S. Kaplan

Keywords: health care; Time-Driven Activity-Based Costing; Costing; Hospitals; Activity Based Costing and Management;

Citation:
Kaplan, Robert S. "Boston Children's Hospital Assignment Worksheet." Harvard Business School Spreadsheet Supplement 913-801, June 2013. View Details

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Teaching Note | HBS Case Collection | June 2013

Boston Children's Hospital: Measuring Patient Costs

Robert S. Kaplan and Robert S. Kaplan

Keywords: health care; Activity-Based Costing; Hospitals; Costing; Time-Driven ABC; Activity Based Costing and Management; Health Industry;

Citation:
Kaplan, Robert S. "Boston Children's Hospital: Measuring Patient Costs." Harvard Business School Teaching Note 913-419, June 2013. View Details

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Case | HBS Case Collection | September 2013

Boston Children's Hospital: Measuring Patient Costs (Abridged)

Robert S. Kaplan

The case describes a pilot project on applying activity-based costing to measure the cost of treating patients. After an overview of Boston Children's Hospital and its local health care market environment, the case presents process maps and financial data relating to patients making office visits to a plastic surgeon for three different diagnoses. Students use the hospital's existing cost system and a proposed new system, based on time-driven activity-based costing, to calculate and compare costs and margins of the three types of office visits.

Keywords: health care; Time-Driven Activity-Based Costing; Costing; Hospitals; Activity Based Costing and Management;

Citation:
Kaplan, Robert S. "Boston Children's Hospital: Measuring Patient Costs (Abridged)." Harvard Business School Case 914-407, September 2013. View Details

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Supplement | HBS Case Collection | May 2017

Boston Children's Hospital Process Map Video

Robert S. Kaplan and Mary Witkowski

The 13 minute video simulates a discussion among orthopedic surgeons and cast room technicians about the processes and resources used when applying long leg casts for patients. The video should be used when teaching Boston Children’s Hospital (Abridged) case, #914-407, or the unabridged case, Boston Children’s Hospital: Measuring Patient Costs, #112-086. The video allows students to create a time-driven activity-based costing (TDABC) process map for two types of leg casts. Students should view the video when preparing the case. The instructor can elicit the process map, in real time, on a blackboard or white board, using 5-10 minutes of class time. The teaching goals are for students to learn that process maps – the key component in a TDABC model - are not difficult to create, and what appropriate level of detail and precision is required for a TDABC process map.

Keywords: Activity based costing; Healthcare Costing; Process Maps; Activity Based Costing and Management; Health Care and Treatment;

Citation:
Kaplan, Robert S., and Mary Witkowski. "Boston Children's Hospital Process Map Video." Harvard Business School Multimedia/Video Supplement 117-703, May 2017. View Details

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In 2016 the newly appointed surgeon general of the Navy launched a value-based health care pilot project at Naval Hospital Jacksonville to explore whether multidisciplinary care teams (known as integrated practice units, or IPUs) and measurement of outcomes could improve the readiness of active duty personnel and lower the cost of delivering care to them, their dependents, and local retirees. This article describes the formation of the project’s leadership structure; the selection of four conditions to be treated (low back pain, osteoarthritis, diabetes, and high-risk pregnancy); the creation of the care team for each condition; outcomes and costs measured; and the near-term changes in outcomes during the twelve-month pilot period. Patient outcomes improved for three of the four conditions. We describe factors that contributed to the project’s success. After the pilot concluded, the Navy combined the back pain and osteoarthritis IPUs into a single musculoskeletal clinical unit and established a similar IPU at another naval hospital and its clinics. The diabetes IPU was continued, but the high-risk pregnancy IPU was not. We offer several observations on the elements that were key to the success of the project, explore challenges and opportunities, and suggest that the pilot described here could be taken to greater scale in the Military Health System and elsewhere.

In 2016, the Centers for Medicare & Medicaid Services (CMS) launched its first mandatory bundled payment program, the Comprehensive Care for Joint Replacement (CJR) model, by randomizing metropolitan statistical areas (MSAs) into the payment model. The paper analyzed Medicare costs for beneficiaries undergoing lower extremity joint replacement between April 1, 2016, through December 31, 2017. The introduction of the CJR was associated with reduced Medicare Part A spending ($582 per episode, a 2.5% savings) largely through lower post-acute spending in skilled nursing facilities. The CJR hospitals had no significant differences in hospital length of stay, readmissions, complications, 30- or 90-day mortality, volume of episodes, or patient characteristics relative to the non-CJR hospitals. We conclude that mandatory bundled payments may help to change clinicians’ and facilities’ behavior without harming quality.

Article | Accounting Horizons

Reverse the Curse of the Top-5

Robert S. Kaplan

The past 40 years has seen a large increase in the number of articles submitted to journals ranked in the top-5 of their discipline. This increase is the rational response, by faculty, to the overweighting of publications in these journals by university promotions and tenure committees. The ranking factors for academic journals, however, arose for a completely different purpose, to guide the journal acquisition decisions by budget-constrained university librarians. Using journal impact factors to infer the quality of faculty members’ publications incurs a high incidence of both Type 1 errors, when we conclude incorrectly that a paper published in a top-5 journal is a high-impact paper, and Type 2 errors, when we conclude that papers (and books) not published in top-5 journals have low impact. In addition, a third type of error gets introduced as faculty pursue the research they perceive is favored by editors of top-5 journals, at the potential expense of more innovative and relevant research, perceived to be unpublishable in a top-tier journal. Accounting scholarship, in particular, has underinvested in research about innovative practices or the emerging accounting issues faced by contemporary organizations (Kaplan, 2011), likely because such research is viewed as unpublishable in top-5 journals. This gap persists despite recent scholarship that has documented how important, fundamental ideas can emerge from “use-inspired” research (see Pasteur’s Quadrant (Stokes, 1997)). The paper concludes by suggesting reforms to overcome the dysfunctional fixation on publication in top-5 journals.

Keywords: Information Publishing; Journals and Magazines; Power and Influence; Research;

Citation:

Kaplan, Robert S. "Reverse the Curse of the Top-5." Accounting Horizons 33, no. 2 (June 2019): 17–24. View Details

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