Time-driven Activity-based Costing More Accurately Reflects Costs in Arthroplasty Surgery

Area of Science:

• Healthcare Economics
• Surgical Cost Analysis

Background:

• Traditional hospital accounting systems have limitations for process and quality improvement measurement.
• Time-driven activity-based costing (TDABC) may provide more precise cost estimates.
• Systematic exploration of TDABC versus traditional approaches in arthroplasty surgery is lacking.

Purpose of the Study:

• Compare costs of primary total hip arthroplasty (THA) and total knee arthroplasty (TKA) using TDABC versus traditional accounting (TA).
• Evaluate cost differences across three surgeons performing total joint arthroplasties (TJAs).

Main Methods:

• Developed process maps for preoperative, intraoperative, and postoperative phases of TJA.
• Measured personnel costs using TDABC with fully loaded labor rates.
• Calculated consumable costs, including implants, at direct purchase price.
• Aggregated costs for 677 primary TJAs over 17 months for comparison.

Main Results:

• TDABC yielded substantially lower cost estimates than TA for THA and TKA.
• TDABC costs were 49%-55% of TA costs for THA and 53%-55% for TKA.
• Operating room services and room and board showed the most significant cost variability between methods.

Conclusions:

• Traditional accounting overestimates surgical procedure costs, including TJAs.
• TDABC offers a more accurate measure of resource utilization for TJAs.
• TDABC can identify high-cost/high-variability processes for targeted improvement.