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

Educators Purchase

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

Cite View Details Educators Purchase Related
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

Cite View Details Purchase Related
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

Cite View Details Purchase Related
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

Cite View Details Purchase Related
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

Cite View Details Educators Purchase Related
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

Cite View Details Purchase Related

Working Paper | HBS Working Paper Series | 2019

Intelligent Design of Inclusive Growth Strategies

Robert S. Kaplan, George Serafeim and Eduardo Tugendhat

Improving corporate engagement with society, as advocated in the Business Roundtable’s 2019 statement, should not be viewed as a zero-sum proposition where attention to new stakeholders detracts from delivering shareholder value. Corporate programs for sustainable and ethical sourcing practices, however, have fallen far short of solving the underlying causes of extreme poverty, extensive use of child labor, and threats to the environment and human health. We identify several causes to explain this disappointing shortfall in societal performance, including traditional company policies and incentives that inhibit the implementation of innovative, inclusive growth strategies. We propose the role for a new actor, a catalyst, to help companies forge new relationships with external funders, local intermediary companies, NGOs, and community leaders. The catalyst aligns the multiple stakeholders from multiple sectors into enduring, mutually beneficial relationships that produce more value than that currently produced when stakeholders connect only by transactional relationships. The catalyst attracts funding from public and private sources to invest in the new ecosystem, which can generate attractive financial returns while alleviating poverty and environmental degradation. Finally, the catalyst engages the multiple participants to collectively co-create explicit strategies and scorecards of metrics, which serve to motivate, create accountability, and enable an enduring governance model for a multi-stakeholder ecosystem.

Keywords: inclusion; sustainability; performance measures; Environmental Sustainability; Social Issues; Strategy; Governance; Corporate Social Responsibility and Impact; Business and Stakeholder Relations;

Citation:

Kaplan, Robert S., George Serafeim, and Eduardo Tugendhat. "Intelligent Design of Inclusive Growth Strategies." Harvard Business School Working Paper, No. 20-050, October 2019. View Details

Cite View Details SSRN Read Now

We applied a value (outcomes and cost) analysis to extracorporeal life support (ECLS), a relatively rare but very expensive ICU therapy with highly variable outcomes. To address the outcome component of the value approach, we created guidelines for ECLS delivery; to address the cost component, we applied time-driven activity-based costing to identify opportunities for more efficient care. We learned that patient and family preferences for more humane and sensitive end-of-life care, if respected, will lead to less intensive use of ICU resources. Patients will have outcomes concordant with their goals and preferences, and society incurs lower costs to help them achieve those preferences. Cost reduction can be achieved by increasing efficiencies in the delivery of care and minimizing care outside of locally developed appropriate use guidelines. Reducing ECLS demands on ICU resources allows these resources to be redeployed to patients who are more likely to benefit from them, which also helps the institution financially.

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.

Faculty & Research

Boston Children's Hospital: Measuring Patient Costs

Abstract

Citation:

About the Author

More from the Author