TDABC: Lessons from an Application in Healthcare

We estimate the costs of two substitutable medical procedures in a hospital as reported by a conventional two-stage system and from using TDABC concepts. Comparisons yield insights into the data needs for both systems, and practical issues that arise when implementing TDABC in an organization with a complex cost structure. As “lessons learned,” we list four insights relating to simplifying the data needs of a TDABC system. We also discuss how features of the traditional system influence the differences in the cost estimates from the two approaches. Based on our experience, we offer suggestions on how organizations might be able reap many of the benefits associated with TDABC without an overhaul of the entire costing system. JEL Classifications: M41; I19. Data Availability: Data are proprietary to the research site and are not publicly available.