Hospitals experiment with careful calculations to pin down the true cost of care

The Mayo Clinic, the Cleveland Clinic and other major hospital systems are looking for ways to bring transparency to health care pricing by carefully tabulating the costs of providing medical services. Called time-driven activity-based costing, the process requires determining the personnel and equipment costs for every step of a medical procedure, then adding in a share of overhead costs and a profit margin to develop the final price. The system was spearheaded by Harvard University professors Michael E. Porter and Robert S. Kaplan who believe value, rather than volume, should determine prices. "This is a big leap for the field," Porter said. "We've been flying without instruments and rewarding the pilot for crashing."

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