Time-Driven Activity Based Costing in Healthcare

This assignment delves into the implementation of Time-Driven Activity Based Costing (TDABC) within the healthcare sector, specifically at Brigham and Women's Hospital. Students are tasked with examining the application of this costing method in a complex healthcare setting, considering its benefits and potential drawbacks. The analysis should draw upon provided resources like hospital websites, academic publications, and research papers to illustrate TDABC's impact on cost management and decision-making in healthcare.

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Contents
Introduction......................................................................................................................................2
Overview of company......................................................................................................................3
Mission........................................................................................................................................4
Vision...........................................................................................................................................4
Values of company......................................................................................................................4
TDABC (Time-Driven Activity-Based Costing).............................................................................5
Time equation..............................................................................................................................6
Time-Driven Activity-Based Costing Features...........................................................................6
Difference between TDABC and Activity- Based Costing and Traditional costing system...........7
TDABC and Activity- Based Costing.........................................................................................7
TDABC and Traditional costing system......................................................................................8
Suitability of Time-Driven Activity-Based Costing for firm..........................................................8
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
Time-driven Activity-based costing methodology is an advanced system of the Activity-based
costing method. Traditional ABC method is one of the popular methods in business writing and
management circles. Though, this method is time-consuming and costly for the company to
implement this method in an organisation. Kaplan and Anderson decided to bring the
improvement in the process which is now known as Time-driven Activity-based costing. The
report will provide the description related to the concept along with its features.
The company that has been selected for the analysis is Brigham and Women’s hospital. The
report talks about the operations and the working of the company along with that how this
method is suitable for the company. This method is different from traditional costing system and
with the Activity-based costing approach which is discussed in the report.

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Overview of company
Brigham Health is a world-wide leader that devote to sustaining and restoring well-being for
people across the world. The company is consists of Brigham and Women's Hospital, Women's
Physicians Organization, and Women's Faulkner Hospital. BWH is an international leader which
is contributing to the improvements in the lives of the world. This hospital is also known as one
of the foremost training hospitals of HMS (Harvard Medical School). Thus, the company has the
legacy of superiority to continue to rise year after year. BWH consist of the 150 outpatient’s
practices with more than 1,200 medical doctors. The company attends patients from New
England all the way through the US with 120 countries globally (Brigham and Women’s
Hospital, 2016).
The company has the culture of research and innovation that emphasis on the business practices.
BWH emphasis on the development of new and innovative methods to keep the people in
optimal health and fight diseases that might threaten their well-being. The company provide the
access to the education, information and care through numerous places that consist of the
national and international affiliates. BWH is dedicated to offers the highest-quality, family and
patient-centered care. The company is an established supporter of Partners Healthcare systems
which is one of the greatest prominent incorporated delivery structures in the United States
(Partners Healthcare, 2017).
The company financed approximately $4.45 million to upkeep community-led health equity hard
work that takes place in the 5 important neighborhoods that include Mattapan, Mission Hill,
Dorchester, Roxbury and Jamaica Plain. BWH is known for its specialty in vascular and heart
care, neurosurgical and neurologic care, cancer care, arthritis and orthopedic treatment, women's

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health and the virtually every single other area of adult medicine. BWH is a second leading NIH-
financed healthcare center in the nation. The hospital was the first hospital that developed the
(CPOE) computerized physician order entry to prevent any kind of the medication errors and
now there is an accepted safety practice national and international (Harvard Medical School,
2018).
Mission
The mission of the Brigham and women’s hospital is to work for the requirements of the global
and native community by delivering the maximum quality healthcare to families and patients.
Through research, the company is trying to expand the restrictions of medicine. The company’s
mission is to coach the next generations of health care experts (Brigham and Women’s Hospital,
2016).
Vision
The vision of the Brigham and Women’s Hospital desires to convert the upcoming years of the
healthcare through science, research, training and kind-hearted care within the borders and across
the world (Brigham and Women’s Hospital, 2016).
Values of company
Brigham health believes that values are that set belief that guides the decisions and behaviors
over time (Brigham and Women’s Hospital, 2016). The values that the company has includes-
 Integrity
 Collaboration
 Inclusion
 Professionalism

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 Empathy
TDABC (Time-Driven Activity- Based Costing)
TDABC method is New Activity-Based costing method which was presented after the
improvement in the traditional ABC method. According to Kaplan and Anderson, this is a
method on of the simplest method that has the ability to measure accurately the cost to a more
targeted level. This method removes the requirement of the interviews and survey that save the
time of the managers of the company and they can utilize this time in other activities (Kaplan,
and Anderson, 2017). Time-driven ABC method reduces the volume of the data required. This
method required the estimations of two things which include: -
 The applied volume of committed resources and their cost
 Unit times for carrying out the transactional activities
The time-driven ABC needs fewer resources and time to apply the approach in the organization.
It only takes two employees of the company for two days per method that helps the company to
load, validate, calculate and report finding and the employees can spend their rest of time in
maintaining and organizing the TDABC (Ozyurek and Dinç, 2014). Thus, this method is more
effective than the traditional ABC method because in that method there is need of the ten-person
team who spend more than 3 weeks to maintain or track the records in ABC model. This method
is an accurate time-based algorithm that works as a template and this method is easy to apply for
the companies along with that they can customize this method to other plants or event to other
companies in the field of the manufacturing and service industry (Gervais, Levant, and Ducrocq,
2010).

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Time equation
The time equation makes simpler the prediction process and provide as far more accurate cost
model that was not possible with the implementation of the traditional ABC techniques.
Nowadays, many companies started making the use of the ERP systems that already store data
on order, distribution, packaging and other characteristics which makes it simpler to implement
(Gervais, Levant, and Ducrocq, 2010). The order and the transaction specific data helps the time
equation to simply calculate the time required to complete the particular order or activity.
TDABC models expand linearly with variations by adding a term in a time equation. This is the
best way for the companies to capture the complexities of the business (Szychta, 2010).
Time-Driven Activity-Based Costing Features
 This method provides a true picture to the suppliers for the cost of the products and
services offering so that they can better decide on services and prices, make outsource to
more specialized companies.
 TDABC allows the managers of the manufacturing and service companies to enhance
their capabilities of budgeting as with the implementation of this method the managers
will be able to identify the accurate resource necessity to fulfill the firm’s purposes;
overheads are appropriately allocated to cost objects (Antić and Georgijevski, 2010).
 This method is helpful for the companies who want to keep the record of the activities
and the use of the resources within the organization.
 This method is one of an essential and beneficial method for the large service-oriented
organization as the implementation of this approach will help the company in achieving
the complexity and better accuracy (Dejnega, 2011).

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Difference between TDABC and Activity- Based Costing and Traditional
costing system
TDABC and Activity- Based Costing
Activity- Based Costing Time-driven Activity-Based Costing
This method is one of the difficult methods to
implement and maintain because in this
method the companies need to obtain
information through interviews (Adioti, and
Valverde, 2013).
This method was introduced to simplify the
Activity-Based Costing method by using the
time to drive the volume cost rate. This process
eliminates the requirement of the interview or
surveys.
ABC permits the firms to appropriately assign
overhead costs to products and services.
TDABC permits the companies to have
improved cost visibility across service types,
customer groups, and service operations
practices.
ABC method has the problem of not providing
the accuracy of the redundant resources as it
normally practices the proportion of the
resources that have been used for each activity
bases.
Time-driven ABC method makes use of the
aggregation of time for each activity due to
which this method is able to provide more
accuracy as compared to the Activity-based
costing method.
TDABC and Traditional costing system
Traditional costing system Time-driven Activity-Based Costing

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Traditional costing method mostly helps the
companies in identifying the overheads cost by
dividing cost crossways products that are based
on the predicted ratio of resources which
include machine time and the space engaged.
TDABC method provides better cost visibility
across service types, customer groups, and the
service operations processes.
In this method, the overheads allocated are
generally not accurate due to which the
companies mostly get the inappropriate
anticipations of the costs.
The problem of the cots allocation was fixed
with the introduction of the ABC (Activity-
Based costing). The improvement in the
estimation was possible with the TDABC
method as this method provides the accuracy
related to the anticipations of the costs (Adioti,
and Valverde, 2013).
Suitability of Time-Driven Activity-Based Costing for firm
The implementation of the TDABC (Time-Driven Activity-Based Costing) methodology is
suitable for the Brigham and Women’s Hospital as it helps in understanding the compound non-
operating room setting of the endoscopy center for the objective of upgrading resource managing
and practicing care proposal. The reorganization of the resources can help the hospital in
decreasing the waiting times (from approximately 3months to 3 weeks) with this the company
will be able to save up to $ 102,000 per year and will enhance the ease of use of the preoperative

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clinic to an emphasis on greater-risk medical patients. The Brigham and Women’s Hospital can
implement the time-driven Activity-based accounting in the main hospital and in its ambulatory
site (Morris, et.al, 2017).
 TDABC is an innovative approach that is suitable for the compound health care system in
regards to enhancing the resource value and allocation with the help of organization cost
and process information.
 The implementation of TDABC can take place in non-operating room surroundings.
Thus, health care can implement this costing system because hospitals are often not well
organized as it involves medical disciplines and multiple locations (Morris, et.al, 2017).
 The endoscopy suite is one of the non-OR surroundings in which the requirement for
anesthesiology services is rising due to increase in the number of patients and
complication in the procedure. Hence, the increased demand will enhance the waiting
times of patients and to reduce that waiting time TDABC is one of the effective tools.
Therefore, the Time-driven ABC is suitable for the healthcare.
 The implementation of the TDABC method will help the healthcare updating the model
of operating state of affairs which include fluctuating a proportion of volume of patients
who are getting anaesthesiologist- administered sedation from the foremost hospital to
the ambulatory site acknowledge the extended waiting list, enhance resource
consumptions and last but not least built a monetary case to validate such changes
(Morris, et.al, 2017).
 The implementation of the TDABC in BWH effects the hiring of a additional triage nurse
to support the medical screening with the medical screening and triage of the patients

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available in the hospital before the process. This change will lead to the net saving of
approximately $15,000 (Morris, et.al, 2017).

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Conclusion
Time-Driven ABC method is one of the best methods for the multinational manufacturing and
services companies as with the help of this method they can easily analyze the cost of the
complex business activities of the company. The suitability of TDABC for Brigham and
Women’s Hospital is discussed in the report. The implementation of the TDABC in the hospital
is essential as this method will save the time as well as the cost of the Brigham and Women’s
Hospital. They can utilize their time by devoting their time for the treatment of the other patients.
Moreover, the report shows the detailed description of the concept, its features and the difference
between the TDABC and Activity- Based Costing and Traditional costing system.

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References
Adioti, A.A. and Valverde, R., 2013. Time-driven activity based costing for the improvement of
it service operations. International Journal of Business and Management, 9(1), p.109.
Antić, L. and Georgijevski, M., 2010. Time-driven activity based costing. ECONOMIC, p.497.
Brigham and Women’s Hospital, 2016, About Brigham and Women's Hospital, Accessed on; 16th
January 2018, Accessed from http://www.brighamandwomens.org/about_bwh/default.aspx
Brigham and Women’s Hospital, 2016, Brigham Health, Accessed on; 16th January 2018,
Accessed from http://www.brighamandwomens.org/About_BWH/brigham-health/default.aspx
Brigham and Women’s Hospital, 2016, BWH Milestones, Accessed on; 16th January 2018,
Accessed from
http://www.brighamandwomens.org/about_bwh/publicaffairs/aboutbwh/milestones.aspx?sub=3
Brigham and Women’s Hospital, 2016, Strategic Plan, Accessed on; 16th January 2018,
Accessed from http://www.brighamandwomens.org/about_bwh/mission.aspx
Dejnega, O., 2011. Method Time Driven Activity Based Costing. Journal of Applied.
Gervais, M., Levant, Y. and Ducrocq, C., 2010. Time-driven activity-based costing (TDABC):
An initial appraisal through a longitudinal case study. Journal of Applied Management
Accounting Research, 8(2), p.1.
Gervais, M., Levant, Y. and Ducrocq, C., 2010. Time-driven activity-based costing (TDABC):
An initial appraisal through a longitudinal case study. Journal of Applied Management
Accounting Research, 8(2), p.1.