Using EHR Data to Calculate Cost of Care

Updated: Nov 5, 2018

In our previous research study, How Much Does That Cost, we evaluated use of Time-Driven Activity-Based Costing (TDABC) as a means to routinely measure the cost of care at the individual level. One of the major findings was that the cost to obtain and calculate the data on a consistent basis was prohibitive to the ongoing use of this model for cost analysis across a host medical conditions.

Recent research, conducted by a team at Palo Alto Medical Foundation Research Institute and published in the April 2017 edition of Health Affairs outlines how the EHR data could be used to capture the time stamps necessary for routine TDABC costing.

The Problem

In How Much Does That Cost? Measuring True Cost in Healthcare, we shared the results of our case study on application of TDABC to measure cost of care for an endocrinology clinic. While the method showed useful insights and the method’s potential to capture cost, the process was still very time-consuming to use on a routine basis, as workflow time stamps had wide variations which, when captured solely through front-line interviews, also incorporated significant availability bias and Hawthorne effects that skewed analysis of the process under review.

In our second case study, Lean & TDABC, we attempted to combine the value-stream mapping and waste reduction techniques of a Lean process improvement effort with the cost accounting methods of TDABC. While this demonstrated further potential to obtain more detailed cost data during a Lean waste reduction effort, the reliance on personnel interviews and bias remained a challenge with attempting to use this method to trend performance over time and analyze root causes behind wide variations in workflows.

The Solution

For this method to be viable as a routine costing solution, the information used to calculate the costs needs to be captured on a routine basis, without the participants being aware of the evaluation and without the need to schedule and conduct interviews of the participants. Use of the information systems to capture was the obvious solution to the problem, but there was concern that the time stamps in these systems were insufficient and would need to be augmented with video surveillance or additional technologies, such as GPS tracking.

Results from the study conducted by the Palo Alto Medical Foundation Research Institute as well as work conducted by UPMC and Health Catalyst show that we are beginning to see how we can better leverage our existing EHR systems to passively capture the information necessary for TDABC to be a more practical and valuable means for cost management for our healthcare system.

For more information or to commission a TDABC study at your organization, contact us at