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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Leaders at six hospitals conducted a research study to assess and compare the health outcomes and costs of pediatric aerodigestive care. Four of the hospitals delivered care with an integrated practice unit (IPU) while two delivered care traditionally, with isolated specialists. The study used time-driven activity-based costing as a tool to measure and compare costs across the six sites. The results demonstrate that the four IPU sites improved clinical outcomes and had lower costs of care.

Value-based care models are becoming instrumental in structuring clinical care delivery in our healthcare climate. Our objective was to determine the value associated with implementation of a Family-Centered Care Coordination (FCCC) program for neonates undergoing tracheostomy.

Article | American Heart Journal

Are Cost Advantages from a Modern Indian Hospital Transferable to the United States?

R. S. Kaplan, F. Erhun, V.G. Narayanan, B. Mistry and K. Brayton, et al

We use time-driven activity-based costing to estimate the cost of personnel and space for an elective coronary artery bypass graft (CABG) surgery at two U.S. hospitals, Intermountain and Baylor Heart, and Narayana Health (NH), in India. All three hospitals use modern management methods to achieve excellent patient outcomes. We use variance analysis to remove the effect of differential prices paid for personnel and space at the three hospitals. NH, even at U.S. price levels, retains a cost advantage over the two U.S. hospitals by shifting tasks to less-credentialed and/or less-experienced personnel, supervised by highly-skilled personnel, a practice facilitated by NH’s high annual CABG volume. NH offsets some of its task downshifting cost savings by having lower-skilled employees spend more time counseling patients and their families for in-hospital and home recovery. NH’s cost-saving practices could be captured by U.S. hospitals by relaxing hospital and health professional licensing regulations, encouraging greater family participation in inpatient care, and performing complex surgeries in high-volume regional centers of excellence.

Keywords: Time-Driven Activity-Based Costing; Health Care and Treatment; Cost; Organizational Structure; Performance Efficiency; India; United States;

Citation:

Kaplan, R. S., F. Erhun, V.G. Narayanan, B. Mistry, and K. Brayton, et al. "Are Cost Advantages from a Modern Indian Hospital Transferable to the United States?" American Heart Journal 224 (June 2020): 148–155. View Details

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