Lean & TDABC - Assigning Cost Metrics to Process Improvement projects

Updated: Nov 5, 2018

Over the last five decades, the US has faced an increase in health care expenditure growth causing a major national concern. A core aspect of the growing cost revolves around the amount of health care waste defined as spending that could be eliminated without harming consumers or reducing the quality of care delivered.

A tool often used by healthcare settings to cut down on waste by cutting out activities that do not bring value to patient care is known as “Lean Management” or “Lean Thinking.” This strategy identifies and removes activities that produce waste in time and resources. These are commonly referred to as "non-value-added" activities.

E&A performed a Time-Driven Activity-Based Costing (TDABC) study alongside a Lean Management process improvement initiative at a primary care clinic in Kansas. We believe that TDABC provides a valuable cost baseline for each activity determined by factoring robust financial data and time values. Therefore, by combining two evolving workflow management tools - Lean Management and TDABC - the clinic was able to plan a future state workflow that reduces waste and shows direct savings on costs in dollar amount.

The results of this study show:

  1. The clinic workflow diagram with accurate cost amounts for each activity

  2. The cost incurred for the hospital in performing each patient care activity with each care team member.

  3. Detailed graph of costs variances.

  4. Time equations that calculate the total time it takes to perform the patient activities.

  5. Recommendations on where to maximize efficiency, reduce patient time, and its respective cost increases or decreases.

View our study publication for more insight.