Determining the True Cost to Deliver Total Hip and Knee Arthroplasty Over the Full Cycle of Care: Preparing for Bundling and Reference-Based Pricing

Direct Variable Cost Comparison of Endoscopic Versus Open Carpal Tunnel Release: A Time-Driven Activity-Based Costing Analysis

INTRODUCTION

To improve the delivery of value-based health care, a deeper understanding of the cost drivers in hand surgery is warranted. Time-driven activity-based costing (TDABC) offers a more accurate estimation of resource utilization compared with top-down accounting methods. This study used TDABC to compare the facility costs of open carpal tunnel release (OCTR) and endoscopic carpal tunnel release (ECTR).

METHODS

We identified 845 consecutive, unilateral carpal tunnel release (516 open, 329 endoscopic) surgeries performed at an orthopaedic specialty hospital between 2015 and 2021. Itemized facility costs were calculated using a TDABC algorithm. Patient demographics, comorbidities, surgical characteristics, and itemized costs were compared between OCTR and ECTR. Multivariate regression was used to determine the independent effect of endoscopic surgery on true facility costs.

RESULTS

Total facility costs were $352 higher in ECTR compared with OCTR ($882 versus $530). ECTR cases had higher personnel costs ($499 versus $420), likely because of longer surgical time (15 versus 11 minutes) and total operating room time (35 versus 27 minutes). ECTR cases also had higher supply costs ($383 versus $110). Controlling for demographics and comorbidities, ECTR was associated with an increase in personnel costs of $35.74 (95% CI, $26.32 to $45.15), supply costs of $230.28 (95% CI, $205.17 to $255.39), and total facility costs of $265.99 (95% CI, $237.01 to $294.97) per case.

DISCUSSION

Using TDABC, ECTR was 66% more costly to the facility compared with OCTR. To reduce the costs related to endoscopic surgery, efforts to decrease surgical time and negotiate lower ECTR-specific supply costs are warranted.

LEVEL OF EVIDENCE

Economic and Decision Analysis Level II.

Implementation of value-based healthcare in ophthalmology: a scoping review

OBJECTIVE

This review aimed to identify and summarise how value-based healthcare (VBHC) is implemented in the field of ophthalmology.

METHODS

A scoping review was conducted by searching empirical and non-empirical articles from from electronic databases (PubMed, Science Direct, ProQuest and Scopus) and other methods starting January 2006 (the year Porter and Teisberg introduced VBHC) up to 31 December 2023.

RESULTS

1.081 records were screened, and 12 articles (8 empirical studies and 4 non-empirical articles) were used for data extraction. Most articles were published in the UK. Most articles described the implementation of VBHC agenda by measuring outcomes and costs. All the included empirical studies reported implementation effect; otherwise, non-empirical articles were only described proposed implementation.

CONCLUSION

The implementation of VBHC in ophthalmology has shown a positive impact on enhancing patient value and reducing healthcare costs. Nevertheless, the study highlighted that no provider or healthcare system has fully embraced and implemented VBHC, comprehensively addressing the entire value agenda.

A Model for Evaluating Total Costs of Care and Cost Savings of Specialty Condition-Based Care for Hip and Knee Osteoarthritis in an Integrated Practice Unit

OBJECTIVES

The viability of specialty condition-based care via integrated practice units (IPUs) requires a comprehensive understanding of total costs of care. Our primary objective was to introduce a model to evaluate costs and potential costs savings using time-driven activity-based costing comparing IPU-based nonoperative management with traditional nonoperative management and IPU-based operative management with traditional operative management for hip and knee osteoarthritis (OA). Secondarily, we assess drivers of incremental cost differences between IPU-based care and traditional care. Finally, we model potential cost savings through diverting patients from traditional operative management to IPU-based nonoperative management.

METHODS

We developed a model to evaluate costs using time-driven activity-based costing for hip and knee OA care pathways within a musculoskeletal IPU compared with traditional care. We identified differences in costs and drivers of cost differences and developed a model to demonstrate potential cost savings through diverting patients from operative intervention.

RESULTS

Weighted average costs of IPU-based nonoperative management were lower than traditional nonoperative management and lower in IPU-based operative management than traditional operative management. Key drivers of incremental cost savings included care led by surgeons in partnership with associate providers, modified physical therapy programs with self-management, and judicious use of intra-articular injections. Substantial savings were modeled by diverting patients toward IPU-based nonoperative management.

CONCLUSIONS

Costing models involving musculoskeletal IPUs demonstrate favorable costs and cost savings compared with traditional management of hip or knee OA. More effective team-based care and utilization of evidence-based nonoperative strategies can drive the financial viability of these innovative care models.

What Is the Inpatient Cost of Hip Replacement? A Time-Driven Activity Based Costing Pilot Study in an Italian Public Hospital

The emphasis on value-based payment models for primary total hip replacement (THA) results in a greater need for orthopaedic surgeons and hospitals to better understand actual costs and resource use. Time-Driven Activity-Based Costing (TDABC) is an innovative approach to measure expenses more accurately and address cost challenges. It estimates the quantity of time and the cost per unit of time of each resource (e.g., equipment and personnel) used across an episode of care. Our goal is to understand the true cost of a THA using the TDABC in an Italian public hospital and to comprehend how the adoption of this method might enhance the process of providing healthcare from an organizational and financial standpoint. During 2019, the main activities required for total hip replacement surgery, the operators involved, and the intraoperative consumables were identified. A process map was produced to identify the patient's concrete path during hospitalization and the length of stay was also recorded. The total inpatient cost of THA, net of all indirect costs normally included in a DRG-based reimbursement, was about EUR 6000. The observation of a total of 90 patients identified 2 main expense items: the prosthetic device alone represents 50.4% of the total cost, followed by the hospitalization, which constitutes 41.5%. TDABC has proven to be a precise method for determining the cost of the healthcare delivery process for THA, considering facilities, equipment, and staff employed. The process map made it possible to identify waste and redundancies. Surgeons should be aware that the choice of prosthetic device and that a lack of pre-planning for discharge can exponentially alter the hospital expenditure for a patient undergoing primary THA.

Comparing Dermabond PRINEO versus Dermabond or staples for wound closure: a randomized control trial following total shoulder arthroplasty

BACKGROUND

The method of surgical incision closure after total shoulder arthroplasty is an important factor to consider, as it affects operating room time, procedure cost, cosmetic outcomes, and patient satisfaction. The optimal method of wound management is unknown, but should be cost-effective, reproducible, and provide a reliable clinical result. This study aimed to compare the following wound closure methods after total shoulder arthroplasty: staples, Dermabond, and Dermabond PRINEO. We hypothesized that wound closure time for Dermabond PRINEO would be faster than Dermabond and comparable to that of staples, and Dermabond PRINEO would be more cost-effective than Dermabond and staples, and provide equal or superior closure outcomes to Dermabond and staples.

METHODS

A randomized, prospective clinical trial comparing wound closure time and cost for 2 surgeons' traditional technique with that of Dermabond PRINEO was conducted. This study included at least 18 subjects in each group. Surgeon 1's patients were randomized to traditional Dermabond or Dermabond PRINEO, whereas surgeon 2's patients were randomized to staples or Dermabond PRINEO. Cosmetic outcomes and satisfaction scores were collected at 6 weeks and 3 months, postoperatively. Incisions were photographed, at both the 6-week and 3-month visits, and subsequently evaluated by a plastic surgeon blinded to the treatment method.

RESULTS

The wound closure time for surgeon 1 was significantly faster for Dermabond PRINEO vs. Dermabond, and surgeon 2 closed significantly faster with staples vs. Dermabond PRINEO. The mean cost of closure was significantly less with Dermabond PRINEO compared with Dermabond, whereas the mean cost of staples was significantly less than Dermabond PRINEO. For both surgeons 1 and 2, there were no significant differences in patient satisfaction at 6 weeks or 3 months. In addition, the wound closure methods did not produce differing cosmetic outcomes.

CONCLUSIONS

Although significant, the closing time for each method did not differ by a clinically relevant amount. Staples were the most cost-effective closing method, followed by Dermabond PRINEO. As neither method was superior over the other in terms of patient satisfaction, adverse events, and cosmetic outcomes, cost-effectiveness may be the greatest differentiator between the 3 methods.

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

PURPOSE

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.

METHODS

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.

RESULTS

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%.

CONCLUSION

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.

LEVEL OF EVIDENCE

IV, therapeutic case series.

Healthcare Providers’ Knowledge of Value-Based Care in Germany: An Adapted, Mixed-Methods Approach

Background: Value-Based Care (VBC) is being discussed to provide better outcomes to patients, with an aim to reimburse healthcare providers (HCPs) based on the quality of care they deliver. Little is known about German HCPs’ knowledge of VBC. This study aims to investigate the knowledge of HCPs of VBC and to identify potential needs for further education toward implementation of VBC in Germany. Methods: For evidence generation, we performed a literature search and conducted an online survey among HCPs at 89 hospitals across Germany. The questionnaire was based on published evidence and co-developed with an expert panel using a mixed methods approach. Results: We found HCPs to believe that VBC is more applicable in surgery than internal medicine and that well-defined cycles of care are essential for its application. HCPs believe that VBC can reduce health care costs significantly. However, they also assume that implementing VBC will be challenging. Conclusions: The concept in general is well perceived, however, HCPs do not want to participate in any financial risk sharing. Installing an authority/independent agency that measures achieved value, digital transformation, and that improves the transition between the inpatient and the outpatient sectors are top interests of HCPs.

Compliance and Variability of Hospital Price Transparency in Total Knee and Hip Arthroplasty in the United States

INTRODUCTION

On January 1, 2019, in an effort to improve price transparency, the Centers for Medicare and Medicaid Services (CMS) mandated that hospitals display chargemasters and pricing for diagnosis-related groups (DRGs) online. We examined the compliance of the 50 top orthopaedic hospitals, ranked by US News, with CMS's mandate and compared pricing.

METHODS

The chargemaster and pricing of DRG codes related to total knee arthroplasty (TKA) and total hip arthroplasty (THA) (469, 470, 461, 462, 466, 467, and 468) were evaluated in the top 50 orthopaedic hospitals in the United States. Spearman rank correlation coefficients (ρ) were used to evaluate the association between DRG 469, 470, and 467 prices with geographic practice cost index (GPCI) work and practice expense values.

RESULTS

Thirty-six of the 50 hospitals reported DRG pricing for THA and TKA. Of these hospitals, 15 had prices for all seven DRGs of interest; only 467, 469, and 470 were reported across all the 36 hospitals. Of the 14 hospitals without DRG information, 12 had nothing and two had unsatisfactory reporting. Prices for DRGs 469, 470, and 467 were moderately or weakly correlated with both GPCI work and GPCI practice expense. All correlation analyses were statistically significant (P < 0.05).

DISCUSSION

In summary, compliance with CMS's 2019 rule was poor overall. Fourteen of the 50 hospitals did not adequately report any DRG pricing, and only 15 of the hospitals were fully compliant with the mandate. In addition to poor compliance, the reported costs had variation not strongly accounted for by established geographic differences.

Micro-Costing of a Remotely Operated Referral Management System to Secondary Care in the Unified Health System in Brazil

Referral of cases from primary to secondary care in the Brazilian public healthcare system is one of the most important issues to be tackled. Telehealth strategies have been shown effective in avoiding unnecessary referrals. The objective of this study was to estimate cost per referred case by a remotely operated referral management system to further inform the decision making on the topic. Analysis of cost by applying time-driven activity-based costing. Cost analyses included comparisons between medical specialties, localities for which referrals were being conducted, and periods of time. Cost per referred case across localities ranged from R$ 5.70 to R$ 8.29. Cost per referred case across medical specialties ranged from R$ 1.85 to R$ 8.56. Strategies to optimize the management of referral cases to specialized care in public healthcare systems are still needed. Telehealth strategies may be advantageous, with cost estimates across localities ranging from R$ 5.70 to R$ 8.29, with additional observed variability related to the type of medical specialty.

Utilizing Lean Methodology and Time-Driven Activity-Based Costing Together: An Observational Pilot Study of Hip Replacement Surgery Utilizing a New Method to Study Value-Based Health Care

BACKGROUND

Time-driven activity-based costing (TDABC) has been suggested as the cost-accounting arm of value-based care organizations seeking to address costing challenges from the bottom up by studying the actual processes used in patient care. Lean methodology is a system in which the care pathway is understood at a granular level. In the current study, we attempt to combine these 2 methodologies, providing a robust mechanism to detect meaningful variation. First, we used data from a single surgeon and examined differences in time and cost for patients released on postoperative days 1 or 2. Next, we compared the data from patients discharged on postoperative day 1 with those of patients who underwent an operation by a different surgeon and were also discharged on postoperative day 1.

METHODS

Consecutive patients who underwent an anterior hip arthroplasty performed by 1 of 2 surgeons and who had degenerative pathology of the hip, an inpatient stay of 1 or 2 days, discharge to home, and no readmission within 30 days of the surgical procedure were identified. We obtained data on patient demographic characteristics and time spent on activities for each personnel role in 15-minute increments occurring during 4 time points of a surgical episode of care (preoperative bay, surgical procedure, post-anesthesia care unit, and inpatient). Personnel costs were set as a ratio relative to the cost of a registered nurse (RN).

RESULTS

Consistent with our hypotheses, both RNs and nursing assistants-certified (NA-Cs) spent more time with patients released on postoperative day 2 compared with those released on postoperative day 1. Also consistent with our hypotheses, we only found significant differences for the time that personnel spent in the surgical procedures.

CONCLUSIONS

For patients undergoing total hip arthroplasty for degenerative conditions, we demonstrate that, in the setting of lean methodology, TDABC can detect variability in a meaningful and predictable way. This combination may further enable clinicians and administrators to improve processes, to allocate appropriate resources to specific process steps, and to optimize various treatments across episodes of care.

LEVEL OF EVIDENCE

Economic and Decision Analysis Level IV . See Instructions for Authors for a complete description of levels of evidence.

The Cost of Hip and Knee Revision Arthroplasty by Diagnosis-Related Groups: Comparing Time-Driven Activity-Based Costing and Traditional Accounting

BACKGROUND

Traditional hospital cost accounting (TA) has innate disadvantages that limit the ability to meaningfully measure care pathways and quality improvement. Time-driven activity-based costing (TDABC) allows a meticulous account of costs in primary total joint arthroplasty (TJA). However, differences between TA and TDABC have not been examined in revision hip and knee TJA (rTJA). We aimed to compare total costs of rTJA by the diagnosis-related group (DRG), measured by TDABC vs TA.

METHODS

Overall costs were calculated for rTJA care cycles by DRG for 2 years of financial data (2018-2019) at our single-specialty orthopedic institution using TA and TDABC. Costs derived from TDABC, based on time and resources used, were compared with costs derived from TA based on historical costs. Proportions of implant and nonimplant costs were measured to total TA costs.

RESULTS

Seven hundred ninety-three rTJAs were included in this study, with TA methodology resulting in higher cost estimates. The total cost per DRG 468, rTJA with no comorbidities or complications (CC), DRG 467, rTJA with CC, and DRG 466, rTJA with major CC, estimated by TDABC was 69%, 67%, and 49% of the estimation by TA, respectively. Implant and nonimplant costs represented different proportions between methodologies.

CONCLUSION

Considerable differences exist, as TA estimations were 31%-51% higher than TDABC. The true cost is likely a value between the estimations, but TDABC presents granular and patient-specific cost data. TDABC for rTJA provides valuable bottom-up information on cost centers in the care pathway and, with targeted interventions, may lead to a more optimal delivery of value-based health care.

Activity-based cost analysis of laboratory tests in clinical chemistry

OJECTIVES

Since health care budgets are limited and must be allocated efficiently, there is an economic pressure to reduce the costs of health care interventions. This study aims to investigate the cost of testing within a Clinical Chemistry laboratory.

METHODS

This study was conducted in the Clinical Chemistry laboratory of the University Hospital UZ Brussel, Belgium, in which 156 tests were included and an average cost per test was calculated for the year 2018. Activity-based costing (ABC) was applied, using a top-down perspective. Costs were first allocated to different activity centers and subsequently to different tests. Number of tests, parameters, analyzers and time estimates were used as activity cost drivers.

RESULTS

The blood glucose test on the point-of-care testing (POCT) analyzer Accu Chek Inform II had the lowest unit cost (€0.92). The determination of methanol, ethanol and isopropanol on the GC-FID (7820A) is the test with the highest unit cost (€129.42). In terms of average cost per test per activity center, core laboratory (€3.37) scored lowest, followed consecutively by POCT (€3.49), diabetes (€22.09), toxicology (€31.52), metabolic disorder (€41.53) and cystic fibrosis (€86.02). The cost per test was mainly determined by staff (57%), costs of support services (23%) and reagents (14%).

CONCLUSIONS

High-volume and automated tests have lower unit costs, as is the case with the core laboratory. ABC provides the ability to identify high average cost tests that can benefit from optimizations, such as focusing on automation or outsourcing low-volume tests that can benefit from economies of scale.

Influence of team composition on turnover and efficiency of total hip and knee arthroplasty

AIMS

Surgical costs are a major component of healthcare expenditures in the USA. Intraoperative communication is a key factor contributing to patient outcomes. However, the effectiveness of communication is only partially determined by the surgeon, and understanding how non-surgeon personnel affect intraoperative communication is critical for the development of safe and cost-effective staffing guidelines. Operative efficiency is also dependent on high-functioning teams and can offer a proxy for effective communication in highly standardized procedures like primary total hip and knee arthroplasty. We aimed to evaluate how the composition and dynamics of surgical teams impact operative efficiency during arthroplasty.

METHODS

We performed a retrospective review of staff characteristics and operating times for 112 surgeries (70 primary total hip arthroplasties (THAs) and 42 primary total knee arthroplasties (TKAs)) conducted by a single surgeon over a one-year period. Each surgery was evaluated in terms of operative duration, presence of surgeon-preferred staff, and turnover of trainees, nurses, and other non-surgical personnel, controlling cases for body mass index, presence of osteoarthritis, and American Society of Anesthesiologists (ASA) score.

RESULTS

Turnover among specific types of operating room staff, including the anaesthesiologist (p = 0.011), circulating nurse (p = 0.027), and scrub nurse (p = 0.006), was significantly associated with increased operative duration. Furthermore, the presence of medical students and nursing students were associated with improved intraoperative efficiency in TKA (p = 0.048) and THA (p = 0.015), respectively. The presence of surgical fellows (p > 0.05), vendor representatives (p > 0.05), and physician assistants (p > 0.05) had no effect on intraoperative efficiency. Finally, the presence of the surgeon's 'preferred' staff did not significantly shorten operative duration, except in the case of residents (p = 0.043).

CONCLUSION

Our findings suggest that active management of surgical team turnover and composition may provide a means of improving intraoperative efficiency during THA and TKA. Cite this article: Bone Joint J 2021;103-B(2):347-352.

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.

Economic Recovery After the COVID-19 Pandemic: Resuming Elective Orthopedic Surgery and Total Joint Arthroplasty

BACKGROUND

The economic effects of the COVID-19 crisis are not like anything the U.S. health care system has ever experienced.

METHODS

As we begin to emerge from the peak of the COVID-19 pandemic, we need to plan the sustainable resumption of elective procedures. We must first ensure the safety of our patients and surgical staff. It must be a priority to monitor the availability of supplies for the continued care of patients suffering from COVID-19. As we resume elective orthopedic surgery and total joint arthroplasty, we must begin to reduce expenses by renegotiating vendor contracts, use ambulatory surgery centers and hospital outpatient departments in a safe and effective manner, adhere to strict evidence-based and COVID-19-adjusted practices, and incorporate telemedicine and other technology platforms when feasible for health care systems and orthopedic groups to survive economically.

RESULTS

The return to normalcy will be slow and may be different than what we are accustomed to, but we must work together to plan a transition to a more sustainable health care reality which accommodates a COVID-19 world.

CONCLUSION

Our goal should be using these lessons to achieve a healthy and successful 2021 fiscal year.

Variation in the Cost of Care for Different Types of Joint Arthroplasty

BACKGROUND

Lower-extremity arthroplasty constitutes the largest burden on health-care spending of any Medicare diagnosis group. Demand for upper extremity arthroplasty also continues to rise. It is necessary to better understand costs as health care shifts toward a bundled-payment accounting approach. We aimed (1) to identify whether variation exists in total cost for different types of joint arthroplasty, and, if so, (2) to determine which cost parameters drive this variation.

METHODS

The cost of the episode of inpatient care for 22,215 total joint arthroplasties was calculated by implementing time-driven activity-based costing (TDABC) at a single orthopaedic specialty hospital from 2015 to 2018. Implant price, supply costs, personnel costs, and length of stay for total knee, total hip, anatomic total shoulder, reverse total shoulder, total elbow, and total ankle arthroplasty were analyzed. Individual cost parameters were compared with total cost and volume.

RESULTS

Higher implant cost appeared to correlate with higher total costs and represented 53.8% of the total cost for an inpatient care cycle. Total knee arthroplasty was the least-expensive and highest-volume procedure, whereas total elbow arthroplasty had the lowest volume and highest cost (1.65 times more than that of total knee arthroplasty). Length of stay was correlated with increased personnel cost but did not have a significant effect on total cost.

CONCLUSIONS

Total inpatient cost at our orthopaedic specialty hospital varied by up to a factor of 1.65 between different fields of arthroplasty. The highest-volume procedures-total knee and hip arthroplasty-were the least expensive, driven predominantly by lower implant purchase prices.

CLINICAL RELEVANCE

We are not aware of any previous studies that have accurately compared cost structures across upper and lower-extremity arthroplasty with a uniform methodology. The present study, because of its uniform accounting process, provides reliable data that will allow clinicians to better understand cost relationships between different procedures.

Successful Implementation of an Accelerated Recovery and Outpatient Total Joint Arthroplasty Program at a County Hospital

Outpatient and accelerated recovery total joint arthroplasty (TJA) programs have become standard for private and academic practices. County hospitals traditionally serve patients with limited access to TJA and psychosocial factors which create challenges for accelerated recovery. The effectiveness of such programs at a county hospital has not been reported.

Methods

In 2017, our county hospital implemented an accelerated recovery protocol for all TJA patients. This protocol consisted of standardized, preoperative medical and psychosocial optimization, perioperative spinal anesthesia, tranexamic acid and local infiltration analgesia use, postoperative emphasis on non-narcotic analgesia, and early mobilization. LOS, complications, disposition, and cost were compared between patients treated before and after protocol implementation.

Results

In 15 months, 108 primary TJA patients were treated. Compared with the previous 108 TJA patients, LOS dropped from 3.4 to 1.6 days (P < 0.001), more patients discharged home (92% versus 72%, P < 0.001), average hospitalization and procedure-specific costs decreased 24.7% and 22.1%, respectively, and were significantly fewer complications (7% versus 21%, P = 0.007).

Conclusions

Implementation of an accelerated recovery TJA program at a County Hospital is novel. This implementation requires careful patient selection and a coordinated multidisciplinary approach and is a safe and cost-effective method of delivering high-quality care to an underserved cohort.

What Are the Uses and Limitations of Time-driven Activity-based Costing in Total Joint Replacement?

BACKGROUND

With increasing emphasis on value-based payment models for primary total joint arthroplasty (TJA), there is greater need for orthopaedic surgeons and hospitals to better understand the actual costs and resource use of TJA. Time-driven activity-based costing (TDABC) is a methodology for accurate cost estimation, but its application in the TJA care pathway across institutions/regions has not yet been analyzed.

QUESTIONS/PURPOSES

In this systematic review of studies applying TDABC to primary TJA, we investigated the following: (1) Is there variation in TDABC methodology and cost estimates across institutions? (2) Is a standard set of direct and indirect costs included across studies? (3) Is there a difference in cost estimates derived from TDABC and traditional hospital cost-accounting approaches? and (4) How are institutions using TDABC (process and outputs) with respect to the TJA care pathway?

METHODS

A comprehensive search strategy was developed that included the keywords "TDABC," "time-driven activity-based cost," "THA," "TKA," "THR," "TKR," and "TJR" in the PubMed/MEDLINE, EMBASE, Web of Science, Ovid SP, Scopus, and ScienceDirect databases for articles published between 2004 and 2018 as well as extensive hand searching and citation mining. Relevant studies (n = 15) were screened to include THA or TKA as the focus of the TDABC model, full-text articles, TDABC-based cost estimates for TJA, and studies written in English (n = 8). Due to the heterogeneity of outcomes/methodology in TDABC studies involving TJA, quality assessment was based on each study's adherence to the seven steps delineated by Kaplan et al. in their original publication introducing TDABC in health care.

RESULTS

There was substantial variation in TDABC methodology (especially in scope), adherence to the seven steps of TDABC, and data collection. Only five of eight studies incorporated indirect costs into their TDABC calculation, with notable differences in which direct and indirect expenses were included. TDABC-based cost estimates for TJA ranged from USD 7081 to USD 29,557, with variation driven by the TJA timeframe and whether implant costs were included in the costing calculation. TDABC was most frequently used to compare against traditional hospital accounting methods (n = 4), to increase operational efficiency (n = 4), to reduce wasted resources (n = 3), and to mitigate risk (n = 3).

CONCLUSIONS

TDABC-based cost estimates are more granular and useful in practice than those calculated via traditional hospital accounting; however, there is a lack of standardized principles to guide TDABC implementation (especially for indirect costs) due to institutional and regional differences in TDABC application. Although TDABC methodology will likely continue to vary somewhat between studies, standardized principles are needed to guide the definition, estimation, and reporting of costs to enable detailed examination of study methodology and inputs by readers.

LEVEL OF EVIDENCE

Level III, economic and decision analysis.

Logistical and Economic Advantages of Sterile-Packed, Single-Use Instruments for Total Knee Arthroplasty

BACKGROUND

Total knee arthroplasty (TKA) is well established as a clinically successful and cost-effective procedure. The transition of the US healthcare system from a fee-for-service model to a value-based care model requires careful examination of patient care to ensure both quality and efficiency. Sterile-packed, single-use instruments have been introduced as a tool to help streamline the operating room (OR) logistics while reducing sterilization requirements. The aim of this study was to examine the potential logistic and economic benefits of single-use instruments compared to traditional, reusable instruments for TKA.

METHODS

Four variables related to TKA costs and logistics were modeled in this study: OR turnover time tray sterilization, tray management time, and 90-day infection rates. Model input data for traditional instruments and single-use instruments were based on peer-reviewed literature. A total of 200 sites and 500 cases per site were simulated using the Monte-Carlo-Technique.

RESULTS

The median total cost savings with single-use instruments was $994 per case. The largest driver for cost savings was tray sterilization. Sites with higher staff wages and sterilization costs had a larger probability of realizing greater cost savings with adoption of single-use instruments. In cases using single-use instruments, up to 51% of operating days could have accommodated an additional procedure due to the time savings in OR turnover.

CONCLUSION

This cost modeling study observed significant potential for logistical and economic improvements in TKA with single-use vs reusable instruments. Although few studies have been conducted to measure the impact of single-use instruments in practice, the results of these simulations motivate further investigation.

Impact of Bundled Care on Outcomes Following Elective Primary Total Hip or Total Knee Arthroplasty

BACKGROUND

Standardized approaches to care and care pathways for patients with joint replacement have been shown to decrease length of stay (LOS), improve patient participation in education, decrease patient anxiety while improving perception of care, and lead to overall efficiency and improved care and outcomes.

PURPOSE

The purpose of this study was to determine whether implementation of a standardized bundle approach to care influenced the outcomes after total hip or total knee arthroplasty (THA or TKA).

METHODS

A retrospective, quasi-experimental before- and after-design study was used to evaluate the impact of the intervention. Two hospitals implemented a standardized bundle of care for patients undergoing THA or TKA that included preoperative patient education, day of surgery mobilization, and a total joint group physical therapy session (Full Bundle). Data analyses were completed on a convenience sample of 2,200 patients who underwent THA or TKA. Outcomes data measured were LOS, discharge disposition, costs, and readmission rate.

RESULTS

Patients receiving the Full Bundle had significant reduction in LOS of roughly 1 day (OR = 1.687, 95% CI [1.578, 1.797]) versus group not receiving all elements (OR = 2.706; 95% CI [2.623, 2.789]). Full Bundle patients were 6 times more likely to be discharged home compared with the Partial Bundle group (OR = 6.01, 95% CI [4.01, 9.03]). Full Bundle group had significantly lower total direct costs, F(1) = 4.06, p = .046, partial η = 0.003. There were no differences in readmission rates between the 2 groups.

CONCLUSION

Patients who had all elements of the THA/TKA bundle had the best outcomes. By improving efficiencies of care through the use of the bundle, the 2 hospitals positively impacted the care and outcomes of THA and TKA patients.

Value-based healthcare analysis of joint replacement surgery for patients with primary hip osteoarthritis

Background

A quarter of the population present at least once a year with a musculoskeletal disorder. Primary hip osteoarthritis is a high-volume condition with significant clinical need and population-level costs. There remains much variation in patient outcomes and care delivery costs for this condition.

Aims

The study aimed to gauge if pathway redesign based on the principles of value-based healthcare (VBHC) could increase value. The aim was to calculate the value of treatment for primary hip osteoarthritis through measuring outcomes that matter to patients, as well as the costs of delivering them. Additionally it aimed to compare two care pathways to identify which elements may better promote the delivery of high-value clinical care.

Methods

Two care models were evaluated: the first being a traditional model with multiple entry points and without pathway standardisation, and the second an intentionally designed standardised multidisciplinary pathway. Mandated National Health Service patient-reported outcomes were assessed but were restructured into a patient-centred format to assess the impact on pain, function and psychological outcomes. Patient-level pathway economic evaluation was performed. Using these data, outcomes were mapped against cost to calculate value.

Results

There were no significant differences in clinical outcomes between the two models. The intentionally designed model delivered better value care, having lower pathway costs. This model produced a small but inconsistent positive financial margin.

Conclusions

Intentionally designed, integrated elective services offer an opportunity to develop and evaluate VBHC models. Analysis of two care pathways from a VBHC perspective demonstrated that an intentionally designed pathway had higher value. The higher value pathway maximised the benefits of having physiotherapists and orthopaedic surgeons working side by side. Developing and measuring patient-orientated outcomes and performing accurate economic evaluation are the key to understanding and achieving better value care.

Time-Driven Activity-Based Costing to Identify Patients Incurring High Inpatient Cost for Total Shoulder Arthroplasty

BACKGROUND

As payment models shift toward a focus on value, an accurate understanding of surgical costs and preoperative correlates of high-cost patients is important for effective implementation of cost-saving strategies. This study used time-driven activity-based costing (TDABC) to explore inpatient cost of total shoulder arthroplasty (TSA) and to identify preoperative characteristics of high-cost patients.

METHODS

Using TDABC, we calculated the cost of inpatient care for 415 patients undergoing elective primary TSA between 2016 and 2017. Patients in the top decile of cost were defined as high-cost patients. Multivariable logistic regression modeling was employed to determine preoperative characteristics (e.g., demographics, comorbidities, American Society of Anesthesiologists [ASA] score, and American Shoulder and Elbow Surgeons [ASES] score) associated with high-cost patients.

RESULTS

Implant purchase price was the main driver (57%) of total inpatient costs, followed by personnel cost from patient check-in through the time in the operating room (20%). There was a 1.3-fold variation in total cost between patients in the 90th percentile for cost and those in the 10th percentile; the widest cost variation was in personnel cost from the post-anesthesia care unit through discharge (2.5-fold) and in medication cost (2.4-fold). High-cost patients were more likely to be women and chronic opioid users and to have diabetes, depression, an ASA score of ≥3, a higher body mass index (BMI), and a lower preoperative ASES score than non-high-cost patients. After multivariable adjustment, the 3 predictors of high-cost patients were female sex, an ASA score of ≥3, and a lower ASES score. Total inpatient cost correlated strongly with the length of the hospital stay but did not correlate with operative time.

CONCLUSIONS

Our study provides actionable data to contain costs in the perioperative TSA setting. From the hospital's perspective, efforts to reduce implant purchase prices may translate into rapid substantial cost savings. At the patient level, multidisciplinary initiatives aimed at reducing length of stay and controlling medication expenses for patients at risk for high cost (e.g., infirm women with poor preoperative shoulder function) may prove effective in narrowing the existing patient-to-patient variation in costs.

LEVEL OF EVIDENCE

Economic and Decision Analysis Level IV. See Instructions for Authors for a complete description of levels of evidence.

Enhancing Value of MRI: A Call for Action

As national healthcare spending has spiraled out of control, payment reform that moves from volume to value-based payment has been introduced as a practical solution. Under alternative value-based payment models, physicians and clinical teams must deliver the best care possible at a lower cost. Medical imaging has changed the way we diagnose disease, evaluate severity, assess treatment effects, and provide biological insights for the pathophysiology of many diseases. Over the past 50 years, imaging techniques have become increasingly advanced-from X-ray to computed tomography (CT), magnetic resonance imaging (MRI), positron emission tomography (PET), and multi-modal imaging. Advanced imaging such as MRI has given clinicians remarkable insights into medical conditions and saved innumerable lives. Under the value proposition, however, we must ask if each imaging study changes treatment decisions, improves patient outcomes, and is cost-effective. Imaging research has been focused on developing new technologies and clinical applications to assess diagnostic accuracy. What is needed is the higher-level technology assessment. In this article we review why we need to demonstrate the value of MRI, how we define value, what strategies can enhance MR value through partnership with various stakeholders, and how imaging scientists can contribute to healthcare delivery in the future. Level of Evidence: 5 Technical Efficacy: Stage 3 J. Magn. Reson. Imaging 2019;49:e40-e48.

Time-driven activity-based cost of outpatient total hip and knee arthroplasty in different set-ups

Background and purpose - Length of stay (LOS) following total hip and knee arthroplasty (THA and TKA) has been reduced over the years due to fast-track. Short stays of 2 days in fast-track departments in Denmark have resulted in low total costs of around US$2,550. Outpatient THA and TKA is gaining popularity, albeit in a limited and selected group of patients; however, the financial benefit of outpatient arthroplasty remains unknown. We present baseline detailed economic calculations of outpatient THA and TKA in 2 different settings: one from the hospital and another from the ambulatory surgery department. Patients and methods - Data from 6 patients (1 TKA, 1 uncemented THA, 1 cemented THA in each department) were collected prospectively using the Time Driven Activity Based Costing method (TDABC). Time consumed by different staff members involved in patient treatment in the perioperative period of outpatient THA and TKA was calculated in 2 different settings: one in the orthopedic department and one in the ambulatory surgery department. Results - LOS was around 11 h in the orthopedic department and around 7 h in the ambulatory surgery department, respectively. TDABC revealed minor differences in the operative settings between departments and similar expenses occurred during the short stay of US$777 and US$746, respectively. Adding the preoperative preparation and postoperative follow-up resulted in total cost of US$951 and US$942 for the ward and the ambulatory surgery department, respectively. Interpretation - Outpatient THA and TKA in hospital and ambulatory surgery departments results in similar cost using the TDABC method. Compared with the cost associated with 2-day stays, outpatient procedures are around two-thirds cheaper provided no increase occurs in complications or readmissions.

Bundled Payments and Hidden Costs

In a fee-for-service environment, anesthesiologists are paid for the volume of services billed, with little relation to the cost of delivering the services. In bundled payments, anesthesiologists are paid a set fee for an episode of care inclusive of all the anesthesia, pain medicine, and related services for the surgical episode and a period of time after the initial procedure to cover complications and redo procedures. When calculating a bundled payment, all the services typically used by a patient must be counted when calculating both the costs and expected payment.

Understanding Costs of Care in the Operating Room

Importance

Increasing value requires improving quality or decreasing costs. In surgery, estimates for the cost of 1 minute of operating room (OR) time vary widely. No benchmark exists for the cost of OR time, nor has there been a comprehensive assessment of what contributes to OR cost.

Objectives

To calculate the cost of 1 minute of OR time, assess cost by setting and facility characteristics, and ascertain the proportion of costs that are direct and indirect.

Design, Setting, and Participants

This cross-sectional and longitudinal analysis examined annual financial disclosure documents from all comparable short-term general and specialty care hospitals in California from fiscal year (FY) 2005 to FY2014 (N = 3044; FY2014, n = 302). The analysis focused on 2 revenue centers: (1) surgery and recovery and (2) ambulatory surgery.

Main Outcomes and Measures

Mean cost of 1 minute of OR time, stratified by setting (inpatient vs ambulatory), teaching status, and hospital ownership. The proportion of cost attributable to indirect and direct expenses was identified; direct expenses were further divided into salary, benefits, supplies, and other direct expenses.

Results

In FY2014, a total of 175 of 302 facilities (57.9%) were not for profit, 78 (25.8%) were for profit, and 49 (16.2%) were government owned. Thirty facilities (9.9%) were teaching hospitals. The mean (SD) cost for 1 minute of OR time across California hospitals was $37.45 ($16.04) in the inpatient setting and $36.14 ($19.53) in the ambulatory setting (P = .65). There were no differences in mean expenditures when stratifying by ownership or teaching status except that teaching hospitals had lower mean (SD) expenditures than nonteaching hospitals in the inpatient setting ($29.88 [$9.06] vs $38.29 [$16.43]; P = .006). Direct expenses accounted for 54.6% of total expenses ($20.40 of $37.37) in the inpatient setting and 59.1% of total expenses ($20.90 of $35.39) in the ambulatory setting. Wages and benefits accounted for approximately two-thirds of direct expenses (inpatient, $14.00 of $20.40; ambulatory, $14.35 of $20.90), with nonbillable supplies accounting for less than 10% of total expenses (inpatient, $2.55 of $37.37; ambulatory, $3.33 of $35.39). From FY2005 to FY2014, expenses in the OR have increased faster than the consumer price index and medical consumer price index. Teaching hospitals had slower growth in costs than nonteaching hospitals. Over time, the proportion of expenses dedicated to indirect costs has increased, while the proportion attributable to salary and supplies has decreased.

Conclusions and Relevance

The mean cost of OR time is $36 to $37 per minute, using financial data from California's short-term general and specialty hospitals in FY2014. These statewide data provide a generalizable benchmark for the value of OR time. Furthermore, understanding the composition of costs will allow those interested in value improvement to identify high-yield targets.

The Cost of Joint Replacement: Comparing Two Approaches to Evaluating Costs of Total Hip and Knee Arthroplasty

BACKGROUND

In an era of mandatory bundled payments for total joint replacement, accurate analysis of the cost of procedures is essential for orthopaedic surgeons and their institutions to maintain viable practices. The purpose of this study was to compare traditional accounting and time-driven activity-based costing (TDABC) methods for estimating the total costs of total hip and knee arthroplasty care cycles.

METHODS

We calculated the overall costs of elective primary total hip and total knee replacement care cycles at our academic medical center using traditional and TDABC accounting methods. We compared the methods with respect to the overall costs of hip and knee replacement and the costs for each major cost category.

RESULTS

The traditional accounting method resulted in higher cost estimates. The total cost per hip replacement was $22,076 (2014 USD) using traditional accounting and was $12,957 using TDABC. The total cost per knee replacement was $29,488 using traditional accounting and was $16,981 using TDABC. With respect to cost categories, estimates using traditional accounting were greater for hip and knee replacement, respectively, by $3,432 and $5,486 for personnel, by $3,398 and $3,664 for space and equipment, and by $2,289 and $3,357 for indirect costs. Implants and consumables were derived from the actual hospital purchase price; accordingly, both methods produced equivalent results.

CONCLUSIONS

Substantial cost differences exist between accounting methods. The focus of TDABC only on resources used directly by the patient contrasts with the allocation of all operating costs, including all indirect costs and unused capacity, with traditional accounting. We expect that the true costs of hip and knee replacement care cycles are likely somewhere between estimates derived from traditional accounting methods and TDABC. TDABC offers patient-level granular cost information that better serves in the redesign of care pathways and may lead to more strategic resource-allocation decisions to optimize actual operating margins.

Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System

Importance

Administrative costs in the US health care system are an important component of total health care spending, and a substantial proportion of these costs are attributable to billing and insurance-related activities.

Objective

To examine and estimate the administrative costs associated with physician billing activities in a large academic health care system with a certified electronic health record system.

Design, Setting, and Participants

This study used time-driven activity-based costing. Interviews were conducted with 27 health system administrators and 34 physicians in 2016 and 2017 to construct a process map charting the path of an insurance claim through the revenue cycle management process. These data were used to calculate the cost for each major billing and insurance-related activity and were aggregated to estimate the health system's total cost of processing an insurance claim.

Exposures

Estimated time required to perform billing and insurance-related activities, based on interviews with management personnel and physicians.

Main Outcomes and Measures

Estimated billing and insurance-related costs for 5 types of patient encounters: primary care visits, discharged emergency department visits, general medicine inpatient stays, ambulatory surgical procedures, and inpatient surgical procedures.

Results

Estimated processing time and total costs for billing and insurance-related activities were 13 minutes and $20.49 for a primary care visit, 32 minutes and $61.54 for a discharged emergency department visit, 73 minutes and $124.26 for a general inpatient stay, 75 minutes and $170.40 for an ambulatory surgical procedure, and 100 minutes and $215.10 for an inpatient surgical procedure. Of these totals, time and costs for activities carried out by physicians were estimated at a median of 3 minutes or $6.36 for a primary care visit, 3 minutes or $10.97 for an emergency department visit, 5 minutes or $13.29 for a general inpatient stay, 15 minutes or $51.20 for an ambulatory surgical procedure, and 15 minutes or $51.20 for an inpatient surgical procedure. Of professional revenue, professional billing costs were estimated to represent 14.5% for primary care visits, 25.2% for emergency department visits, 8.0% for general medicine inpatient stays, 13.4% for ambulatory surgical procedures, and 3.1% for inpatient surgical procedures.

Conclusions and Relevance

In a time-driven activity-based costing study in a large academic health care system with a certified electronic health record system, the estimated costs of billing and insurance-related activities ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure. Knowledge of how specific billing and insurance-related activities contribute to administrative costs may help inform policy solutions to reduce these expenses.

The Cost of Unnecessary Hospital Days for Medicare Joint Arthroplasty Patients Discharging to Skilled Nursing Facilities

BACKGROUND

The 72-hour Medicare mandate (3-night stay rule) requires a 3-day inpatient stay for patients discharging to skilled nursing facilities (SNFs). Studies show that 48%-64% of Medicare total joint arthroplasty (TJA) patients are safe for discharge to SNFs on postoperative day (POD) #2. The purpose of this study was to extrapolate the financial impact of the 3-night stay rule.

METHODS

The American College of Surgeons National Surgical Quality Improvement Program database was queried for all primary TJAs performed in 2015. Discharge destination was recorded. Institutional cost accounting examined costs for patients discharging on POD #2 vs POD #3.

RESULTS

A total of 42,423 TJAs (14,395 total hip arthroplasties [THAs] and 28,028 total knee arthroplasties [TKAs]) were performed in patients over the age of 65 years. Of these patients, 5252 THAs (36.5%) and 12,022 TKAs (42.9%) were discharged from the hospital on POD #3, with 2404 THAs (16.7%) and 5083 TKAs (18.1%) being discharged to SNFs. Institutional cost accounting revealed hospital costs for THA were $2014 more, whereas hospital costs for TKA were $1814 more for a 3-day length of stay when compared with a 2-day length of stay (P < .001). The mean charge per day for an SNF was $486.

CONCLUSION

The National Surgical Quality Improvement Program database is a representative sample of all surgeries performed in the United States. Extrapolating our findings to all Medicare TJAs nationally gives an estimated $63 million in annual savings. Medicare mandated, but potentially medically unnecessary inpatient days at a higher level of care increase the total cost for TJAs. Policies regarding minimum stay requirements before discharge should be re-evaluated.

Appropriate Use Criteria for Hyaluronic Acid in the Treatment of Knee Osteoarthritis in the United States

OBJECTIVE

A workgroup of clinical experts has developed an Appropriate Use Criteria (AUC) for the use of hyaluronic acid (HA) in the treatment of osteoarthritis (OA) of the knee. The increasingly broad and varied use of HA injections, lack of published clinical guidance, and limited coverage for their use has created the imperative to establish appropriateness criteria.

METHODS

The experts of this workgroup represent rheumatology, orthopedic surgery, physiatry, sports medicine, and nursing clinicians with substantive knowledge of intra-articular HA therapy. This workgroup utilized the results of a systematic review of evidence, expert clinical opinion, and current evidence-based clinical practice guidelines to develop appropriateness criteria for the use of intra-articular HA for knee OA in 17 real-world clinical scenarios.

RESULTS

The workgroup scored the appropriateness of treatment of each patient scenario using a 9-point scale to designate a treatment as appropriate (7-9), uncertain (4-6), or inappropriate (1-3). Six scenarios were scored as appropriate, 10 scenarios were scored as uncertain, and 1 scenario was scored as inappropriate.

CONCLUSION

This article can assist clinicians in shared decision-making by providing best practices in considering HA injections for knee OA treatment. Moreover, this AUC article can aid payers and policy makers in determining reimbursement and preauthorization policies and more appropriately managing health care resources. It is clear that further research is still necessary-particularly in patient populations differentiated by OA severity-that may benefit the greatest from the use of HA injections for the treatment of knee OA.

Time-driven Activity-based Cost of Fast-Track Total Hip and Knee Arthroplasty

BACKGROUND

Fast-track total hip and knee arthroplasty (THA and TKA) has been shown to reduce the perioperative convalescence resulting in less postoperative morbidity, earlier fulfillment of functional milestones, and shorter hospital stay. As organizational optimization is also part of the fast-track methodology, the result could be a more cost-effective pathway altogether. As THA and TKA are potentially costly procedures and the numbers are increasing in an economical limited environment, the aim of this study is to present baseline detailed economical calculations of fast-track THA and TKA and compare this between 2 departments with different logistical set-ups.

METHODS

Prospective data collection was analyzed using the time-driven activity-based costing method (TDABC) on time consumed by different staff members involved in patient treatment in the perioperative period of fast-track THA and TKA in 2 Danish orthopedic departments with standardized fast-track settings, but different logistical set-ups.

RESULTS

Length of stay was median 2 days in both departments. TDABC revealed minor differences in the perioperative settings between departments, but the total cost excluding the prosthesis was similar at USD 2511 and USD 2551, respectively.

CONCLUSION

Fast-track THA and TKA results in similar cost despite differences in the organizational set-up. Compared to cost associated with longer more conventional published pathways, fast-track is cheaper, which on top of the favorable published clinical outcome adds to cost efficiency and the potential for economic savings. Detailed baseline TDABC calculations are provided for comparison and further optimization of cost-benefit effectiveness.

Time-driven activity-based costing in health care: A systematic review of the literature

Health care organizations around the world are investing heavily in value-based health care (VBHC), and time-driven activity-based costing (TDABC) has been suggested as the cost-component of VBHC capable of addressing costing challenges. The aim of this study is to explore why TDABC has been applied in health care, how its application reflects a seven-step method developed specifically for VBHC, and implications for the future use of TDABC. This is a systematic review following the PRISMA statement. Qualitative methods were employed to analyze data through content analyses. TDABC is applicable in health care and can help to efficiently cost processes, and thereby overcome a key challenge associated with current cost-accounting methods The method's ability to inform bundled payment reimbursement systems and to coordinate delivery across the care continuum remains to be demonstrated in the published literature, and the role of TDABC in this cost-accounting landscape is still developing. TDABC should be gradually incorporated into functional systems, while following and building upon the recommendations outlined in this review. In this way, TDABC will be better positioned to accurately capture the cost of care delivery for conditions and to control cost in the effort to create value in health care.

Variation in the cost of care for primary total knee arthroplasties

BACKGROUND

The study examined the cost variation across 29 high-volume US hospitals and their affiliated orthopaedic surgeons for delivering a primary total knee arthroplasty without major complicating conditions. The hospitals had similar patient demographics, and more than 80% of them had statistically-similar Medicare risk-adjusted readmission and complication rates.

METHODS

Hospital and physician personnel costs were calculated using time-driven activity-based costing. Consumable supply costs, such as the prosthetic implant, were calculated using purchase prices, and postacute care costs were measured using either internal costs or external claims as reported by each hospital.

RESULTS

Despite having similar patient demographics and readmission and complication rates, the average cost of care for total knee arthroplasty across the hospitals varied by a factor of about 2 to 1. Even after adjusting for differences in internal labor cost rates, the hospital at the 90th percentile of cost spent about twice as much as the one at the 10th percentile of cost.

CONCLUSIONS

The large variation in costs among sites suggests major and multiple opportunities to transfer knowledge about process and productivity improvements that lower costs while simultaneously maintaining or improving outcomes.

Dissecting Costs of CT Study: Application of TDABC (Time-driven Activity-based Costing) in a Tertiary Academic Center

RATIONALE AND OBJECTIVES

The lack of understanding of the real costs (not charge) of delivering healthcare services poses tremendous challenges in the containment of healthcare costs. In this study, we applied an established cost accounting method, the time-driven activity-based costing (TDABC), to assess the costs of performing an abdomen and pelvis computed tomography (AP CT) in an academic radiology department and identified opportunities for improved efficiency in the delivery of this service.

MATERIALS AND METHODS

The study was exempt from an institutional review board approval. TDABC utilizes process mapping tools from industrial engineering and activity-based costing. The process map outlines every step of discrete activity and duration of use of clinical resources, personnel, and equipment. By multiplying the cost per unit of capacity by the required task time for each step, and summing each component cost, the overall costs of AP CT is determined for patients in three settings, inpatient (IP), outpatient (OP), and emergency departments (ED).

RESULTS

The component costs to deliver an AP CT study were as follows: radiologist interpretation: 40.1%; other personnel (scheduler, technologist, nurse, pharmacist, and transporter): 39.6%; materials: 13.9%; and space and equipment: 6.4%. The cost of performing CT was 13% higher for ED patients and 31% higher for inpatients (IP), as compared to that for OP. The difference in cost was mostly due to non-radiologist personnel costs.

CONCLUSIONS

Approximately 80% of the direct costs of AP CT to the academic medical center are related to labor. Potential opportunities to reduce the costs include increasing the efficiency of utilization of CT, substituting lower cost resources when appropriate, and streamlining the ordering system to clarify medical necessity and clinical indications.