Time-Driven Activity-Based Costing to Identify Patients Incurring High Inpatient Cost for Total Shoulder Arthroplasty

As payment models shift toward a focus on value, an accurate understanding of surgical costs and preoperative correlates of high-cost patients is important for effective implementation of cost-saving strategies. This study used time-driven activity-based costing (TDABC) to explore inpatient cost of total shoulder arthroplasty (TSA) and to identify preoperative characteristics of high-cost patients.

Using TDABC, we calculated the cost of inpatient care for 415 patients undergoing elective primary TSA between 2016 and 2017. Patients in the top decile of cost were defined as high-cost patients. Multivariable logistic regression modeling was employed to determine preoperative characteristics (e.g., demographics, comorbidities, American Society of Anesthesiologists [ASA] score, and American Shoulder and Elbow Surgeons [ASES] score) associated with high-cost patients.

Implant purchase price was the main driver (57%) of total inpatient costs, followed by personnel cost from patient check-in through the time in the operating room (20%). There was a 1.3-fold variation in total cost between patients in the 90th percentile for cost and those in the 10th percentile; the widest cost variation was in personnel cost from the post-anesthesia care unit through discharge (2.5-fold) and in medication cost (2.4-fold). High-cost patients were more likely to be women and chronic opioid users and to have diabetes, depression, an ASA score of ≥3, a higher body mass index (BMI), and a lower preoperative ASES score than non-high-cost patients. After multivariable adjustment, the 3 predictors of high-cost patients were female sex, an ASA score of ≥3, and a lower ASES score. Total inpatient cost correlated strongly with the length of the hospital stay but did not correlate with operative time.

Our study provides actionable data to contain costs in the perioperative TSA setting. From the hospital's perspective, efforts to reduce implant purchase prices may translate into rapid substantial cost savings. At the patient level, multidisciplinary initiatives aimed at reducing length of stay and controlling medication expenses for patients at risk for high cost (e.g., infirm women with poor preoperative shoulder function) may prove effective in narrowing the existing patient-to-patient variation in costs.

Economic and Decision Analysis Level IV. See Instructions for Authors for a complete description of levels of evidence.