Time-Driven Activity-Based-Costing to Improve Healthcare Resource Use: Patient Pathways and Cost Comparisons for...

Rising healthcare expenditures demand more efficient resource allocation to maximize the return on health for the entire population of a healthcare system while minimizing opportunity costs. Accurate cost measurement is crucial for value-based healthcare, but often neglected in favor of outcomes measurement to guide resource allocation in policy making. Among methods that have been applied in industrial sectors to estimate productions costs, time-driven activity-based costing (TDABC) has made inroads in health care as an effective means to identify and reduce inefficiencies through better resource management and use. This study applied TDABC to estimate and compare full hospital pathway costs for 5 high-cost cardiac interventions-surgical aortic valve replacement (SAVR) and 4 electrophysiological procedures (pacemakers [PM], cardiac resynchronization therapy [CRT] PM [CRT-P], implantable cardiac defibrillators [ICD], and CRT ICD [CRT-D])-across 5 hospitals in Northern Italy.

Using standardized clinical vignettes and structured interviews with multidisciplinary teams, the study quantified time and resource use across pre-, peri‑, and postoperative phases. Unit costs were derived from hospital accounting data. TDABC was applied to compute full benchmark costs (minimum, average, maximum) and identify major cost drivers.

Labor costs emerged as the predominant cost driver, accounting for 37-61% of full benchmark costs. Inter-hospital variability was most pronounced in length of stay (especially for SAVR), time in the operating room, and nursing workloads. Benchmark costs for electrophysiology procedures ranged from €1387-1967 (USD: 1540-1967) for PM and ICD and €2057-2921 (USD: 2283-3242) for CRT-P and CRT-D, and for SAVR €7278-8537 (USD: 8079-9476). The benchmarking approach enabled meaningful comparisons despite differences in hospital type and clinical and organizational practices.

TDABC offers granular insights into cost variability, enabling benchmarking and more efficient resource use. Findings here from 5 different hospitals showed that with similar labor and unit prices for supplies and services, labor and the intensity and length of hospital care had the greatest impact on costs, an important finding for policy interventions to contain costs and identify best practices from different hospitals. Providing a detailed picture of cost drivers of inter-hospital variability in full costs and a structured, practical methodology, this study supports hospital managers and policymakers in improving cost transparency, pathway design, quality improvement across hospitals, tariff-setting, and value-based care implementation.