Table.

Comparison of TDABC and Typical RVU Costing Systems

Process	TDABC	Typical RVU systems
Direct costs	Bottom-up, based on actual processes and resources used to treat patients	Top-down allocations based on derived (RVU) metrics
Scope	Includes hospital physician costs in an integrated calculation	Hospital costs only
Type of costing system	Standard costs based on estimates of resource's capacity cost rates	Actual costs; general ledger expenses allocated to procedures; easy reconciliation
Clinical input	Performed by teams of clinicians, administrators, and finance staff; highly actionable	Led and updated by finance; clinicians do not understand how costs are assigned
Care cycle	Assigns costs to all processes used during a patient's complete cycle of care	Costs assigned only to reimbursable processes; all other costs in allocated “overhead”
Pricing	Supports transparent and defensible pricing	Pricing unrelated to actual costs
Process improvement	Links naturally to lean and performance improvement initiatives	No connection to lean and process improvements
Benchmarking	Compares efficiency and resource costs across different units by clinical condition	Not used for benchmark (no visibility into underlying processes and personnel)
Unused capacity	Measures cost of unused capacity	All costs allocated to billable volume; no visibility into used vs unused capacity
Updating	Requires clinical teams to keep up-to-date maps of their processes	Requires finance to update RVU complexity metrics

RVU = relative value unit; TDABC = time-derived activity-based costing.