From Activity Based Costing to Activity Based Management in Healthcare
The journey from Activity Based Costing to Activity Based Management is quite a trip. Welcome aboard!
Drive better outcomes, financial performance, and funding readiness with CBS - Health Costing Experts.
What is Activity Based Management in Healthcare?
Activity Based Management (ABM) extends the value of Activity Based Costing (ABC) by turning cost data into strategic and operational insight. Where ABC tells you what things cost, ABM helps you decide what to do about it.
It’s both a mindset and a system - empowering healthcare providers to:
- Identify inefficiencies and bottlenecks
- Improve patient flow and service delivery
- Optimise resource allocation
- Align operations with strategic goals
For example
If ABC reveals that post-operative recovery in one department costs significantly more than in another (with similar patient profiles) ABM helps uncover the root causes: longer stays, more diagnostics, or excess staffing. With that clarity, you can redesign processes, reallocate staff, or optimise care pathways to reduce costs without compromising care.
Journey to Activity Based Management
The journey from Activity Based Costing to Activity Based Management is transformational. In this video we explore how Activity Based Management can stop the bleeding of costs and heal your balance sheet.
Why Hospitals are Moving from Costing to Continuous Performance Improvement
The transition from ABC to ABM marks a shift in organisational culture – from passive cost reporting to proactive, data-informed decision-making.
This evolution supports healthcare’s growing focus on value-based care, where outcomes, efficiency, and transparency matter as much as service delivery.
ABM enables hospital leaders to:
- Link cost with quality
- Improve service line profitability
- Enable evidence-based management
Introducing Hospital At A Glance
Your Real-Time Hospital Performance Dashboard
One of the most powerful tools built on ABM principles is Hospital at a Glance (HAAG). As the name implies, HAAG provides a glance of your hospital and reveals where the critical points are. This real-time dashboard gives healthcare leaders a clear, visual snapshot of performance across every department – grounded in activity based data.
What HAAG Delivers:
- Improvement of patient care by monitoring staff resources according to patient demand
- Supporting a healthy and sustainable work environment and making best use of health resources
- Department-level visibility into costs, outputs, and key performance indicators (KPIs)
- Drill-down access from summaries to transaction-level details
- Cross-functional alignment across clinical, operational, and financial teams
- Real-time responsiveness to emerging issues and cost anomalies
Proven Results from ABM in Hospitals:
- Cost reductions of 10-20% without impacting patient outcomes
- Stronger operational decision-making across staffing, supplies, and investments
- Increased clinician engagement through transparent, data-informed evaluation
- Enhanced readiness for bundled payments and value-based care models
Case Study:
One public hospital discovered their orthopaedic unit had a 25% higher cost per knee replacement than peer facilities. With ABM and HAAG, they pinpointed the cause: longer diagnostic lead times and extended post-op physiotherapy. After redesigning the process, they reduced costs and redirected savings into a successful nurse-led home recovery program.
What to Know Before Implementing ABM in Healthcare
Transitioning to ABM requires more than just software, it’s a strategic commitment. Key success factors, which we can guide you through, include:
- High-quality data integration from clinical, operational, and financial systems.
- Cross-functional collaboration to break down silos and share accountability
- Executive leadership support for continuous improvement – not just cost control
Conclusion
From Cost Control to Strategic Hospital Management
In a sector where margins are tight and accountability is rising, ABM offers a smarter way to run healthcare.
- ABC helps you understand costs.
- ABM helps you act on them.
- HAAG shows you where to go next.
With CBS – Health Costing Experts as your partner, the journey from Activity Based Costing to Activity Based Management becomes a roadmap to sustainable care, improved margins, and better patient outcomes.
FAQ
Frequently Asked Questions
We can help you work through these questions and put your mind at ease. For those who make the leap, the payoff is significant: not only better margins, but better care. Contact us and let’s start you on your journey!