Applying activity based costing in long term care

Abstract

As greater numbers of elderly use health services and health care costs climb, effective financial tracking is an essential activity. Cost management in health care can benefit if costs are linked to the care activities where they are incurred. Activity based costing (ABC) provides a useful approach. The framework aligns costs (inputs) through activities (process) to outputs and outcomes. It allocates costs based on client care needs rather than management structure. The ABC framework was tested in a residential care facility and in supportive housing apartments. The results demonstrate the feasibility and advantages of ABC for long term care agencies, including community based care.