A €349K dialysis deficit, made visible, then cut to €52K.

A real unit, with real throughput.

The Nephrology Service of the Centro Hospitalar do Porto was founded at the Hospital de Santo António in 1975. It is not a small operation. The dialysis unit treats around forty chronic hemodialysis patients who stay in the hospital on clinical grounds, runs a peritoneal dialysis programme that has cared for hundreds of patients since 1985, and supports renal patients admitted across the rest of the hospital.

A unit this size moves a lot of cost. But like most hospital services, it knew that cost only as an average: a department total divided by activity. Reimbursement, meanwhile, is paid per procedure, set against national tariffs. When the two are measured in different shapes, the gaps between them stay hidden.

A loss that nobody could locate.

A preliminary look suggested a deficit of around 10%. That was already expected, and worse than expected once you accounted for the resources needed to sustain patients admitted under other services. But "around 10%" is not a number you can act on. It does not tell you which treatments lose money, which suppliers cost too much, or whether the problem is price, mix, or the way care is organised.

This matters beyond one hospital. In Portugal, only a small share of chronic dialysis happens inside public, SNS-integrated units, and there is a long-running suspicion that the state could deliver it more efficiently. The honest answer requires knowing the real cost, and almost nobody has measured it the way reimbursement is actually paid. The Board of the Centro Hospitalar do Porto decided to look. It commissioned a full costing of the unit, built with Cost and Profitability Consulting alongside the hospital's own management information team.

The accounts said the unit lost money. They could not say where, or why, or what to do about it.

Cost follows the patient, not the department.

The method at the core of the model is Time-Driven Activity-Based Costing, the approach Robert Kaplan and Steven Anderson published through Harvard Business School in 2004, and the one Kaplan and Michael Porter later brought into hospitals as the cost engine for value-based healthcare. Rather than survey staff on how they spend their time, TDABC builds time equations from real operational data and uses them to attribute cost to every procedure, episode and patient.

Around that core, the team built a costing architecture with six distinct levels of allocation. It lets some costs land directly on a patient, others flow through resources and activities, and the trickiest indirect costs reach their cost object through simple, explainable drivers. Crucially, every allocation is traceable, so the model can be re-run and updated each period rather than rebuilt from scratch.

Five moves, ranked by what they're worth.

None of the proposals touched the quality of care. They came straight out of the cost detail: where the unit was overpaying, where capacity was idle, and where the same activity could simply be recorded correctly. Two are worth pulling out.

The other three: an extra dialysis station carved out of existing space, lifting capacity with fixed costs unchanged (+€33K); a renegotiation of the peritoneal dialysis subcontract (+€68K); and a correction to how a no-therapeutic-impact procedure is coded and transfer-priced (+€48K). Run together, the five interact slightly in the hospital's favour, which is why the published combined figure, a €296K gain, is a little better than adding them up one at a time.

From a vague 10% loss to a managed number.

The headline is the €296K. The deeper result is the shift from a deficit nobody could explain to one that is quantified, sourced and managed, line by line. The remaining €52K is no longer a mystery; it is a known gap with a name on each part of it.

That is the difference between a report and an operating model. The hospital did not buy a one-off study. It now holds a model it can re-run as tariffs, pay scales and patient mix change, which is exactly what is needed to run the dialysis unit as a centre of results: a service with the result placed at its centre, broken down by patient, episode, treatment type, supplier and procedure, with the economic detail attached.

The model did not just produce an answer. It gave the unit a permanent way to see itself.

You cannot manage value without the cost side.

Value-based healthcare measures the outcomes that matter to patients against the cost of achieving them. The outcomes side gets most of the attention. The cost side is where the data is weakest, because hospitals almost always know cost as a department average rather than a cost per patient or per pathway.

An average is true for nobody. It blends a routine session with a complicated one, a self-sufficient outpatient with an inpatient who needs far more support, and produces a number that hides exactly the variation a manager needs to see. Until cost is measured the same way care is delivered and reimbursement is paid, the value equation has a hole in its denominator.

This case is a worked example of closing that hole. TDABC gave the dialysis unit a defensible cost per procedure and per patient, which is what makes funding conversations, tariff negotiations and service redesign rest on evidence instead of assertion. The same method applies to any clinical service where reimbursement is set per case and cost is only known on average: surgery, oncology day units, imaging, emergency pathways.