title: Time-driven Activity-based Costing More Accurately Reflects Costs in Arthroplasty Surgery.
abstract: BACKGROUND
  Cost estimates derived from traditional hospital cost accounting systems have inherent limitations that restrict their usefulness for measuring process and quality improvement. Newer approaches such as time-driven activity-based costing (TDABC) may offer more precise estimates of true cost, but to our knowledge, the differences between this TDABC and more traditional approaches have not been explored systematically in arthroplasty surgery.
  
  
  OBJECTIVE
  The purposes of this study were to compare the costs associated with (1) primary total hip arthroplasty (THA); (2) primary total knee arthroplasty (TKA); and (3) three surgeons performing these total joint arthroplasties (TJAs) as measured using TDABC versus traditional hospital accounting (TA).
  
  
  METHODS
  Process maps were developed for each phase of care (preoperative, intraoperative, and postoperative) for patients undergoing primary TJA performed by one of three surgeons at a tertiary care medical center. Personnel costs for each phase of care were measured using TDABC based on fully loaded labor rates, including physician compensation. Costs associated with consumables (including implants) were calculated based on direct purchase price. Total costs for 677 primary TJAs were aggregated over 17 months (January 2012 to May 2013) and organized into cost categories (room and board, implant, operating room services, drugs, supplies, other services). Costs derived using TDABC, based on actual time and intensity of resources used, were compared with costs derived using TA techniques based on activity-based costing and indirect costs calculated as a percentage of direct costs from the hospital decision support system.
  
  
  RESULTS
  Substantial differences between cost estimates using TDABC and TA were found for primary THA (USD 12,982 TDABC versus USD 23,915 TA), primary TKA (USD 13,661 TDABC versus USD 24,796 TA), and individually across all three surgeons for both (THA: TDABC = 49%-55% of TA total cost; TKA: TDABC = 53%-55% of TA total cost). Cost categories with the most variability between TA and TDABC estimates were operating room services and room and board.
  
  
  CONCLUSIONS
  Traditional hospital cost accounting systems overestimate the costs associated with many surgical procedures, including primary TJA. TDABC provides a more accurate measure of true resource use associated with TJAs and can be used to identify high-cost/high-variability processes that can be targeted for process/quality improvement.
  
  
  METHODS
  Level III, therapeutic study.
authors.affiliation: University of California, San Francisco, School of Medicine, San Francisco, CA, USA.
authors.forename: Sina
authors.initials: S
authors.lastname: Akhavan
authors.affiliation: Performance Excellence Department, University of California San Francisco Medical Center, San Francisco, CA, USA.
authors.forename: Lorrayne
authors.initials: L
authors.lastname: Ward
authors.affiliation: Department of Orthopaedic Surgery, University of California, San Francisco, 500 Parnassus Avenue MUW317, San Francisco, CA, 94143-0728, USA. bozick@orthosurg.ucsf.edu.|Philip R. Lee Institute for Health Policy Studies, University of California, San Francisco, San Francisco, CA, USA. bozick@orthosurg.ucsf.edu.
authors.forename: Kevin J
authors.initials: KJ
authors.lastname: Bozic
mesh_terms: D019644:Arthroplasty, Replacement, Hip / Q000191:economics*; D019645:Arthroplasty, Replacement, Knee / Q000191:economics*; D003362:Cost-Benefit Analysis; D006295:Health Resources / Q000191:economics; D017722:Hospital Charges; D017721:Hospital Costs; D006801:Humans; D007902:Length of Stay / Q000191:economics; D018803:Models, Economic; D009873:Operating Rooms / Q000191:economics; D010561:Personnel Staffing and Scheduling / Q000191:economics; D017064:Process Assessment, Health Care / Q000191:economics*; D066231:Surgeons / Q000191:economics; D062606:Tertiary Care Centers / Q000191:economics; D013997:Time Factors; D013996:Time and Motion Studies; D016896:Treatment Outcome; D057188:Workflow