A variety of cost constraints threaten the financial viability of home health agencies. Thus, tools must be developed that expand the critical information resources that will be the key ingredient in successfully navigating the challenges in the volatile home health market. Identifying and analyzing the core processes with the pediatric home care team provided a template that could be used with other agency patient populations by producing cost trajectories based on anticipated care requirements and capturing information that could be used for both internal and external benchmarking. The cost drivers of key processes and activities must be known so that they can be controlled and appropriate rates for capitation contracts can be established. Activity-based management uses cost driver analysis, activity analysis and performance analysis, to determine strategies for redirecting the work processes and agency activities to achieve lasting cost reductions.