Activity-based cost analysis: a method of analyzing the financial and operating performance of academic radiology departments.
OBJECTIVE
To develop a methodology for an activity-based cost (ABC) analysis in an academic radiology department, to test the hypothesis that the business of academic radiology can be separated into three distinct businesses-clinical activity, teaching, and research-and to determine the effect of the current teaching paradigm on clinical productivity.


METHODS
Forty-seven key departmental activities were defined and distributed among the teaching, research, and clinical businesses. Individual radiologists determined the time spent in each of these activities by completing a detailed log of every activity performed during 2 weeks. All departmental revenue and costs were assigned to each activity in each of the three businesses.


RESULTS
The methodology provided a successful understanding of the relative costs of each of the businesses of teaching, research, and clinical activity. It also provided the departmental costs of performing the separate activities typical of each business. Key findings included the following: Faculty spends 72% of time in clinical activities, research is the most expensive service per direct activity hour, and clinical reads (23%) are the single largest departmental cost element.


CONCLUSIONS
ABC analysis can separate academic radiology into three businesses-teaching, research, and clinical-and provide a detailed understanding of the cost structure of each. This analysis identifies opportunities for improved quality of service, productivity, and cost within each business.
Cohen
M D
MD
Department of Radiology, Indiana University Hospital, Indianapolis, USA. mecohen@iupui.edu
Hawes
D R
DR
Hutchins
G D
GD
McPhee
W D
WD
LaMasters
M B
MB
Fallon
R P
RP
D003361:Cost Allocation / Q000379:methods / Q000706:statistics & numerical data; D003365:Costs and Cost Analysis / Q000379:methods / Q000706:statistics & numerical data; D017598:Efficiency, Organizational / Q000191:economics / Q000706:statistics & numerical data; D017721:Hospital Costs / Q000706:statistics & numerical data; D006785:Hospitals, University / Q000191:economics* / Q000458:organization & administration / Q000706:statistics & numerical data; D006801:Humans; D015146:Midwestern United States; D011871:Radiology / Q000191:economics / Q000193:education / Q000706:statistics & numerical data; D011872:Radiology Department, Hospital / Q000191:economics* / Q000458:organization & administration / Q000706:statistics & numerical data; D013647:Task Performance and Analysis; D000078329:Workforce