Time-Driven Activity-Based Costing of care processes for patients with multiple chronic conditions
This thesis demonstrates that a hospital-based integrated multidisciplinary care approach to a complex medical condition makes economic sense for the hospital and the system. The TDABC approach developed in this thesis project brought to light a set of core capacities which can be prioritized in future quality improvement efforts. Through these core capacities, clinical organizations will hopefully become empowered to make wise, value-driven decisions that will serve as the new incentive for organizational improvement. Information that demonstrates value delivery will make financial needs clear to managers and policy makers, who in turn should understand that evidence-based investment in care facilities and services will ultimately demonstrate a return, benefiting not only IMD-Care patients, but also the larger populations they serve.
It is difficult to ignore the discussion about how health care costs have been rising for decades and how most countries are forecast to increase national spending on health care through 2030. To put it bluntly, this is a problem. Health care resources are already spread thin, and providers are struggling to provide quality care under limited budgets. The consequences are felt throughout society, as patients wait in long queues, are faced with higher deductibles, pay more out of pocket, or simply don’t get the care they need. To put things in perspective, Sweden spent 7% of its national budget on health care at the start of the century, and now spends 11%. The US has gone from 13% to 18% over the same period.
At the core of this problem, ironically, is the fact that health care has substantially improved. People now survive chronic diseases longer than they used to; many survive long enough to develop multiple chronic conditions (MCCs). One in ten people has five or more chronic conditions, and more than half the population has at least two. There are a range of other factors that drive rising costs including patient lifestyles and advances in technologies, but MCC patients require the bulk of health care resources. Health care policy makers, managers, and providers haven’t managed to find a way to mitigate rising costs, and they’ve been working at it for decades. This thesis has worked to get at the core of this problem and attempts to lay a path forward for health care managers, clinicians, and policy makers to consider. We feel that the secret to fixing this problem may lie within the combination of two ideas.
The first idea is integrated multiprofessional care within hospitals. Health care is divided into parts, where each part represents a field of medicine, like cardiology or pulmonology. These different parts all operate on their own, and don’t really work together much. Integrated care is a way of treating patients that brings together all the people and specialties that a patient with a certain type of condition can be expected to need in a coordinated, thought through manner.
The second idea is a modern cost-accounting tool called Time-Driven Activity-Based Costing (TDABC). TDABC is a unique cost-accounting tool that is relatively simple to apply and appropriate for costing care processes in health care but was difficult to apply to cost care for patients with multiple chronic conditions. This purpose of this thesis was to modify the TDABC costing approach for use on processes for patients with multiple chronic conditions, and then apply this modified method to cost care at an integrated multiprofessional care center at a hospital.
The impact was impressive. The integrated care center had been established to treat patients with heart disease, chronic kidney disease, and diabetes. The center demonstrated that it was beneficial for patients, and patients and providers were clearly satisfied with the results, in particular the patient-centered approach. However, the center appeared to be expensive under the existing (and less accurate) costing system. The TDABC analysis demonstrated that the Center was actually saving the hospital four times what it cost to keep the center in operation! The implications of these findings are profound, because this analysis was of a single center that accounts for less than 1% of the hospital’s budget. If the hospital were empowered to make heavy cost savings like this on a regular basis, massive savings could be realized.
We hope that this research can help hospitals to begin to invest in a few key elements that make this kind of analysis a success. These elements include integrated multidisciplinary approaches to chronic care, improved information systems in hospitals, and a time-driven activity-based costing tool to process data and deliver actionable information.
Thesis 2020. Stockholm: Karolinska Institutet, Medical management center, Department of learning, informatics, management & ethics; Sweden.