See which care covers its cost.
A healthcare service line can look balanced while specific pathways quietly run at a loss and routine ones subsidise them. The average hides it. We make profitability visible at the pathway and case level with TDABC, comparing true cost to the tariff that pays for it, so leaders can see exactly where the surplus and the deficit sit.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
An average covers the deficit.
Service-line reporting divides total cost by activity to reach an average per case, then compares it to the average tariff. On that view the line breaks even. But the line is made of pathways that look nothing like each other: the routine day-case that comes in well under tariff, and the complex admission that runs over by days.
Averaged together they net to roughly zero, and the deficit disappears into the surplus. Nobody can see that a handful of pathways are deeply underwater, funded by the routine work, because the report never looks below the line.
TRUE COST VS REIMBURSEMENT BY PATHWAY
Illustrative. The same tariff across pathways. Routine and day-case sit below it; complex and chronic pathways cost more to deliver than they are paid.
Cost to the case, against the tariff.
Map the pathway
Every step a patient passes through, with the staff and equipment each one uses, for the conditions that matter most.
Cost each step with TDABC
Each step is costed per minute of the capacity it consumes, summing to a true cost per case and pathway.
Compare to reimbursement
True cost sits next to the tariff or bundled payment, turning each pathway into a clear surplus or deficit.
Rank and surface
Pathways and service lines rank by contribution, so the deficits an average hid are finally on the table.
Break-even on top, two truths underneath.
| Routine pathway | Complex pathway | |
|---|---|---|
| Share of cases | 70% | 30% |
| Tariff per case | €3,200 | €6,400 |
| True cost (TDABC) | €2,450 | €7,700 |
| Contribution per case | +€750 | −€1,300 |
| On the service-line average | looks like break-even | |
Blended, the line breaks even. Seen by pathway, the routine work funds a complex pathway running €1,300 under tariff per case, which is the conversation to have with commissioners, not bury.
EVERY PATHWAY, BY VOLUME AND CONTRIBUTION
Illustrative. Plot pathways by volume and contribution against tariff and the deficits an average kept hidden separate from the work that covers its cost.
Fund and redesign with eyes open.
With profitability visible by pathway, leaders can negotiate tariffs with evidence, fund complex care deliberately rather than by accident, and redesign the steps that add cost without adding outcome. The surplus that was quietly cross-subsidising becomes a choice, not a blind spot.
You cannot manage a deficit you cannot see, and an average is built to hide it.
Frequently asked questions
- Why can a healthcare service line look profitable when it is not?
- Because reporting aggregates. A service line average blends routine cases that cover their cost with complex ones that run well over the tariff, so the line looks balanced while specific pathways quietly lose money and others subsidise them.
- What does pathway-level profitability visibility require?
- A true cost per case and pathway, measured the way reimbursement is paid. TDABC costs each step a patient passes through and compares it to the tariff, so surplus and deficit become visible where decisions are made.
- Does this mean cutting loss-making care?
- No. Visibility informs funding, tariff negotiation and pathway redesign. The aim is to fund complex care honestly and remove cost that adds no outcome, not to ration.
Find the pathways running at a loss.
The Profit Check needs no data upload. It points to where your service-line averages are most likely hiding pathways well below cost.
- Duration
- 12 to 15 minutes
- You receive
- Score, 7 dimensions, sector benchmark
- Price
- Free, no email needed
Workshops20-21 Oct · Online, ZoomReserve a seat
Reviewed by
Miguel Guimarães
Founding Partner, Cost and Profitability Consulting
More than 150 Time-Driven ABC engagements across 11 sectors since 2010, working within the Kaplan and Anderson framework.
About the author →Published Updated
Proof
A dialysis unit. A €349K deficit made visible, then cut to €52K. Published in the APDH hospital magazine, not a marketing claim.
Read the case study →Who you would be talking to
Miguel Guimarães, Founding Partner
Cost and profitability practitioner for 25+ years. Lectured alongside Professor Robert S. Kaplan at the CFO conference in Amsterdam (2009).
Call +351 910 313 731