Cost follows the patient. Two parameters, no time studies.
Time-driven activity-based costing was brought to health care for one reason: traditional hospital costing tells you the average, not the case. TDABC needs only a capacity cost rate per resource and a time equation per pathway step. From those two inputs it builds the cost of any patient journey, defensible enough to put in front of a payer.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
TDABC in healthcare costs the full patient pathway using two parameters: a capacity cost rate for each resource (staff, theatre, bed, equipment) and a time equation describing how each step consumes those resources. Unlike traditional ABC it needs no staff surveys, and unlike step-down it does not flatten cases into department averages. It is the method behind procedure-level and service-line costing.
A rate per resource, a time per step.
The capacity cost rate is the cost of supplying a resource for a period, divided by its practical capacity, and in healthcare practical capacity is taken at 80 to 85 percent of theoretical, never 100, because no surgeon or scanner runs flat out. The time equation is the minutes each pathway step consumes, by resource. Sum the steps to the case, then aggregate cases to the pathway, the service line and the payer contract. No surveys, and the model updates as the pathway changes.
COST FOLLOWS THE PATIENT, STEP BY STEP
Illustrative surgical pathway. Each step is costed at the capacity cost rate of the resources it uses, then summed to the case. Theatre, the most expensive step, carries the full clinical team and room.
It can reverse the decision, not just refine it.
Step-down spreads overhead by ratios into department averages; TDABC follows the actual minutes and resources each patient consumes. The difference is not cosmetic. The sector already has a cautionary tale: under naive assumptions some telemedicine protocols looked far more cost-effective than they were, then overshot true cost by several-fold, well over 100 percent, once TDABC was applied. A method that can flip a sign is not a refinement; it is the difference between a good decision and an expensive one.
Frequently asked questions
- What is TDABC in healthcare?
- The method that costs the full patient pathway using two parameters: a capacity cost rate for each resource (staff, theatre, bed, equipment) and a time equation describing how each step consumes those resources. Unlike traditional ABC it needs no staff surveys, and unlike step-down it does not flatten cases into department averages.
- How is TDABC different from step-down allocation?
- Step-down spreads overhead by ratios into department averages. TDABC follows the actual minutes and resources each patient consumes, case by case, then sums the steps to a true cost per case and pathway. It is the method behind procedure-level and service-line costing.
- How much can the method change the answer?
- A great deal. Documented studies in the sector show telemedicine protocols that looked far more cost-effective under naive assumptions overshooting true cost by several-fold, by well over 100 percent, once TDABC was applied. The method does not just refine the number; it can reverse the decision.
Cost the pathway the way reimbursement is paid.
The Profit Check needs no data upload. It shows where a pathway-level model would change the numbers you take to a payer.
- Duration
- 12 to 15 minutes
- You receive
- Score, 7 dimensions, sector benchmark
- Price
- Free, no email needed
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
