Time-Driven Activity-Based Costing: A Better Way to Understand the Cost of Caring for Hip Fractures

Geriatric hip fractures are a common and costly injury. They are expected to surge in incidence and economic burden as the population ages. With an increasing financial strain on the healthcare system, payors and providers are looking toward alternative, value-based models to contain costs. Value in healthcare is the ratio of outcomes achieved over costs incurred, and can be improved by reducing cost while maintaining or improving outcomes, or by improving outcomes while maintaining or reducing costs. Therefore, an understanding of cost, the denominator of the value equation, is essential to value-based healthcare. Because traditional hospital accounting methods do not link costs to conditions, there has been little research to date on the costs of treating geriatric hip fractures over the entire cycle of care. The aim of this article is to summarize existing costing methodologies, and in particular, to review the strengths and limitations of Time-Driven Activity-Based Costing (TDABC) in orthopaedic trauma, especially as it pertains to the needs and challenges unique to hip fracture care. TDABC determines costs at the patient-level over the entire care cycle, allowing for population variability, while simultaneously identifying cost drivers that might inform risk-stratification for future alternative payment models. Through process mapping, TDABC also reveals areas of variation or inefficiency that can be targeted for optimization, and empowers physicians by focusing on costs in the control of the provider. Although barriers remain, TDABC is well-positioned to provide transparent costing and targets to improve the value of hip fracture care.