What is Clinical Costing?

The Department of Health (DOH) Abu Dhabi has mandated a unified clinical costing framework for healthcare providers. The purpose is to standardize how hospitals and clinics calculate the cost of delivering patient care and to support cost-based pricing, regulation, and efficiency improvement across the health system.

What Clinical Costing Means

Clinical costing is the process of identifying and allocating all costs incurred in patient care—staff time, consumables, equipment, overheads—to specific clinical activities or patient encounters.

• Direct costs are assigned to the service that incurred them (e.g., medication, nursing time, laboratory reagents).
• Indirect costs are distributed through cost drivers such as area, time, or procedure counts.
• Patient-level costing connects cost data to each patient or episode, rather than to broad departments.

Who Must Comply

The standard applies to all DOH-licensed providers that deliver patient care:

• Hospitals
• Dental centers and clinics
• Clinics and polyclinics
• Rehabilitation and long-term care centers
• Specialized service providers (e.g., dialysis, IVF, dental)

Why DOH Introduced It

The objectives are:

• Establish a consistent cost calculation method across all providers.
• Support cost-based pricing and insurance reimbursement.
• Improve financial transparency and auditability.
• Identify inefficiencies in service delivery.
• Build data for future value-based payment models.

How the Process Works

1. Data Collection

Providers collect:

• Financial data from the General Ledger and cost centers.
• Clinical data from HIS/EMR systems (encounters, procedures, LOS, etc.).
• Operational data such as staff rosters, time allocations, and resource usage.

2. Cost Model

A cost model is built including direct and overhead cost centers, the relationships between those centers, as well as costing products that represent clinical services. Overheads are grouped into cost pools and allocated using defined cost drivers.

3. Model Calculation

Using activity-based costing or similar approaches, direct and indirect costs are allocated to individual activities or patient encounters. The model must reconcile with financial statements.

4. Validation

Providers validate and document cost drivers, assumptions, and reconciliations. Variances and errors must be resolved before submission.

5. Submission to DOH

Data is submitted through Shafafiya in a defined XML format according to DOH schemas. Submissions undergo automated and manual validation.

6. Review and Audit

DOH reviews submissions, may request clarifications, and conducts audits. Noncompliance or inaccurate data can lead to penalties.

Do things the right way

Following a proper Clinical Costing process is important. This is how we do things at CostVitals, the right way.

First, it involves building a cost model with clear and well-defined elements. This is important if you want to tweak the model at a later point.

Having a cost model is also important for review and audit purposes, as well as the ability to reproduce results. This means that not only can we apply the model to other and future data, if anything changes, or in response to feedback from DOH, the effort to response or change things is easier.

Second, the process is organized such that each step depends on the next. This way, all the steps are done in the correct way avoiding problems and wasting a lot of time, potentially weeks, looking for issues. Doing things right from the start saves everyone time and effort.

The various steps in the process produce results that can be used for audit and to justify your cost model with DoH in case they ask questions. We will be with you every step of the way and support you even after the cost submission is completed.

To learn more on how to actually perform Clinical Costing, check out How to perform Clinical Costing following DoH Standards?