Time-Driven Activity-Based Costing Accurately Determines Bundle Cost for Rotator Cuff Repair

The purpose of this study was to determine the cost of the episode of care for primary rotator cuff repair (RCR) from day of surgery to 90 days postoperatively using the time-driven activity-based costing (TDABC) method. The secondary purpose of this study was to identify the main drivers of cost for both phases of care.

This retrospective case series study used the TDABC method to determine the bundled cost of care for an RCR. First, a process map of the RCR episode of care was constructed in order to determine drivers of fixed (i.e., rent, power), direct variable (i.e., healthcare personnel), and indirect costs (i.e., marketing, building maintenance). The study was performed at a Midwestern tertiary care medical system, and patients were included in the study if they underwent an RCR from January 2018 to January 2019 with at least 90 days of postoperative follow-up. In this article, all costs were included, but we did not account for fees to provider and professional groups.

The TDABC method calculated a cost of $10,569 for a bundled RCR, with 76% arising from the operative phase and 24% from the postoperative phase. The main driver of cost within the operative phase was the direct fixed costs, which accounted for 35% of the cost in this phase, and the largest contributor to cost within this category was the cost of implants, which accounted for 55%. In the postoperative phase of care, physical therapy visits were the greatest contributor to cost at 59%.

In a bundled cost of care for RCR, the largest cost driver occurs on the day of surgery for direct fixed costs, in particular, the implant. Physical therapy represents over half of the costs of the episode of care. Better understanding the specific cost of care for RCR will facilitate optimization with appropriately designed payment models and policies that safeguard the interests of the patient, physician, and payer.

IV, therapeutic case series.