Time-driven activity-based costing to identify opportunities for cost reduction in pediatric appendectomy

Area of Science:

• Healthcare Management
• Health Economics
• Surgical Process Improvement

Background:

• Value-based payment models necessitate understanding true healthcare costs.
• Efficient patient care delivery is crucial for quality and cost-effectiveness.
• Simple appendicitis is a high-volume surgical condition with potential for cost optimization.

Purpose of the Study:

• To identify cost-reduction opportunities in simple appendicitis management.
• To apply time-driven activity-based costing (TDABC) methodology to determine precise patient care costs.
• To inform strategies for optimizing value-based care in surgical settings.

Main Methods:

• Process mapping using medical record time stamps.
• Calculating labor capacity cost rates from national physician salaries and hospital data.
• Deriving consumable costs from hospital general ledger data.

Main Results:

• TDABC enabled precise per-minute personnel cost calculation.
• Highest cost areas identified: operating room ($747.07/min), hospital floor ($388.20/min), and emergency department ($296.21/min).
• Total cost for simple appendicitis management was $2753.39, including $1712.16 in personnel and $1041.23 in consumables.

Conclusions:

• TDABC effectively identifies inefficiencies in healthcare delivery processes.
• Proposed interventions include triage-based standing delegation orders and advanced practice providers.
• Same-day discharge protocols can further optimize value-based care for simple appendicitis.