Activity‐based cost management in health care ‐ another fad?

By providing improved information for strategic planning purposes, activity‐based cost management (ABM) systems can help hospitals and other health care providers improve the quality and efficiency of the care they provide, control costs and manage their resources better. The NHS is starting to evaluate the ABM approach. Describes a research project in one specialist hospital in Sheffield, UK, which found that conventional approaches to costing can be inaccurate by as much as 100 per cent; conventional approaches will consistently undercost complex, specialist, infrequent episodes of care and overcost straightforward, frequent episodes; and the resulting information from ABM about costs and processes significantly improves the decision‐making capabilities of managers, particularly in relation to “what if” situations.