Development of a method to analyze orthopaedic practice expenses.

Area of Science:

• Healthcare Management
• Orthopaedic Practice Operations
• Financial Analysis in Medicine

Background:

• Accurate analysis of practice expenses is crucial for financial sustainability in orthopaedic practices.
• Existing methods for expense analysis may not adequately capture the complexities of orthopaedic operations.
• A standardized approach is needed to facilitate consistent and reliable financial assessment.

Purpose of the Study:

• To present a standard, five-step method for analyzing practice expenses in orthopaedic settings.
• To adapt activity-based costing principles for application within an orthopaedic practice.
• To provide a reliable tool for orthopaedic practices to understand their financial expenditures.

Main Methods:

• A modified activity-based costing approach was developed.
• General ledger expenses were allocated to 17 identified orthopaedic practice activities.
• Financial data from 19 orthopaedic surgeons in Houston, Texas, were utilized for cost calculation.

Main Results:

• Key activities consuming significant workforce hours include patient servicing, medical record maintenance, and billing/collections.
• Major expense categories identified were facility maintenance, patient servicing, and practice management/coordination.
• The developed five-step process was found to be relatively easy to implement.

Conclusions:

• The proposed five-step method offers a reliable and accessible way for orthopaedic practices to analyze their expenses.
• Understanding the cost drivers within an orthopaedic practice is essential for effective financial management.
• This standardized method can support improved operational efficiency and financial health for orthopaedic practices.