Under value-based care, traditional cost management methods fall short due to their lack of precision and insight, hindering healthcare organizations from accurately controlling costs to maintain margins. Traditional methods, like the ratio of costs to charges (RCC) or relative value units (RVUs), fail to capture the complete picture of patient care activities, leading to potentially harmful cost-cutting decisions. Activity-Based Costing (ABC) is highlighted as a superior approach, capturing every step of the patient journey and providing a comprehensive view of costs at the individual patient encounter level. This allows for more accurate cost management and supports value-based care by identifying areas for minimizing variation and ensuring cost predictability.

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