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

Variation in the Cost of Hip Arthroscopy for Labral Pathological Conditions: A Time-Driven Activity-Based Costing Analysis

BACKGROUND

Despite growing interest in delivering high-value orthopaedic care, the costs associated with hip arthroscopy remain poorly understood. By employing time-driven activity-based costing (TDABC), we aimed to characterize the cost composition of hip arthroscopy for labral pathological conditions and to identify factors that drive variation in cost.

METHODS

Using TDABC, we measured the costs of 890 outpatient hip arthroscopy procedures for labral pathological conditions across 5 surgeons at 4 surgery centers from 2015 to 2022. All patients were ≥18 years old and were treated by surgeons who each performed ≥20 surgeries during the study period. Costs were normalized to protect the confidentiality of internal hospital cost data. Descriptive analyses and multivariable linear regression were performed to identify factors underlying cost variation.

RESULTS

The study sample consisted of 515 women (57.9%) and 375 men (42.1%), with a mean age (and standard deviation) of 37.1 ± 12.7 years. Most of the procedures were performed in patients who were White (90.6%) or not Hispanic (93.4%). The normalized total cost of hip arthroscopy per procedure ranged from 43.4 to 203.7 (mean, 100 ± 24.2). Of the 3 phases of the care cycle, the intraoperative phase was identified as the largest generator of cost (>90%). On average, supply costs accounted for 48.8% of total costs, whereas labor costs accounted for 51.2%. A 2.5-fold variation between the 10th and 90th percentiles for total cost was attributed to supplies, which was greater than the 1.8-fold variation attributed to labor. Variation in total costs was most effectively explained by the labral management method (partial R2 = 0.332), operating surgeon (partial R2 = 0.326), osteoplasty type (partial R2 = 0.087), and surgery center (partial R2 = 0.086). Male gender (p < 0.001) and younger age (p = 0.032) were also associated with significantly increased costs. Finally, data trends revealed a shift toward labral preservation techniques over debridement during the study period (with the rate of such techniques increasing from 77.8% to 93.2%; Ptrend = 0.0039) and a strong correlation between later operative year and increased supply costs, labor costs, and operative time (p < 0.001 for each).

CONCLUSIONS

By applying TDABC to outpatient hip arthroscopy, we identified wide patient-to-patient cost variation that was most effectively explained by the method of labral management, the operating surgeon, the osteoplasty type, and the surgery center. Given current procedural coding trends, declining reimbursements, and rising health-care costs, these insights may enable stakeholders to design bundled payment structures that better align reimbursements with costs.

LEVEL OF EVIDENCE

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

Improvements in technology and the expanding role of time-driven, activity-based costing to increase value in healthcare provider organizations: a literature review

Objective

This study evaluated the influence of technology on accurately measuring costs using time-driven activity-based costing (TDABC) in healthcare provider organizations by identifying the most recent scientific evidence of how it contributed to increasing the value of surgical care.

Methods

This is a literature-based analysis that mainly used two data sources: first, the most recent systematic reviews that specifically evaluated TDABC studies in the surgical field and, second, all articles that mentioned the use of CareMeasurement (CM) software to implement TDABC, which started to be published after the publication of the systematic review. The articles from the systematic review were grouped as manually performed TDABC, while those using CM were grouped as technology-based studies of TDABC implementations. The analyses focused on evaluating the impact of using technology to apply TDABC. A general description was followed by three levels of information extraction: the number of cases included, the number of articles published per year, and the contributions of TDABC to achieve cost savings and other improvements.

Results

Fourteen studies using real-world patient-level data to evaluate costs comprised the manual group of studies. Thirteen studies that reported the use of CM comprised the technology-based group of articles. In the manual studies, the average number of cases included per study was 160, while in the technology-based studies, the average number of cases included was 4,767. Technology-based studies, on average, have a more comprehensive impact than manual ones in providing accurate cost information from larger samples.

Conclusion

TDABC studies supported by technologies such as CM register more cases, identify cost-saving opportunities, and are frequently used to support reimbursement strategies based on value. The findings suggest that using TDABC with the support of technology can increase healthcare value.

Time-Driven Activity-Based Costing Analysis Identifies Use of Consumables and Operating Room Time as Factors Associated With Increased Cost of Outpatient Primary Hip Arthroscopic Labral Repair

PURPOSE

To use time-driven, activity-based costing (TDABC) methodology to investigate drivers of cost variation and to elucidate preoperative and intraoperative factors associated with increased cost of outpatient arthroscopic hip labral repair.

METHODS

A retrospective analysis of data from January 2020 to October 2021 was performed. Patients undergoing primary hip arthroscopy for labral repair in the outpatient setting were included. Indexed TDABC data from Avant-garde Health's analytics platform were used to represent cost-of-care breakdowns. Patients in the top decile of cost were defined as high cost, and cost category variance was determined as a percent increase between high and low cost. Analyses tested for associations between preoperative and perioperative factors with total cost. Surgical procedures performed concomitantly to labral repair were included in subanalyses.

RESULTS

Data from 151 patients were analyzed. Consumables made up 61% of total outpatient cost with surgical personnel costs (30%) being the second largest category. The average total cost was 19% higher for patients in the top decile of cost compared to the remainder of the cohort. Factors contributing to this difference were implants (36% higher), surgical personnel (20% higher), and operating room (OR) consumables (15% higher). Multivariate linear regression modeling indicated that OR time (Standardized β = 0.504; P < .001) and anchor quantity (standardized β = 0.443; P < .001) were significant predictors of increased cost. Femoroplasty (Unstandardized β = 15.274; P = .010), chondroplasty (Unstandardized β = 8.860; P = .009), excision of os acetabuli (unstandardized β = 13.619; P = .041), and trochanteric bursectomy (Unstandardized β = 21.176; P = .009) were also all independently associated with increasing operating time.

CONCLUSIONS

TDABC analysis showed that OR consumables and implants were the largest drivers of cost for the procedure. OR time was also shown to be a significant predictor of increased costs.

LEVEL OF EVIDENCE

Level IV, economic analysis.

Is it possible to automate the discovery of process maps for the time-driven activity-based costing method? A systematic review

OBJECTIVES

The main objective of this manuscript was to identify the methods used to create process maps for care pathways that utilized the time-driven activity-based costing method.

METHODS

This is a systematic mapping review. Searches were performed in the Embase, PubMed, CINAHL, Scopus, and Web of Science electronic literature databases from 2004 to September 25, 2022. The included studies reported practical cases from healthcare institutions in all medical fields as long as the time-driven activity-based costing method was employed. We used the time-driven activity-based costing method and analyzed the created process maps and a qualitative approach to identify the main fields.

RESULTS

A total of 412 studies were retrieved, and 70 articles were included. Most of the articles are related to the fields of orthopedics and childbirth-related to hospital surgical procedures. We also identified various studies in the field of oncology and telemedicine services. The main methods for creating the process maps were direct observational practices, complemented by the involvement of multidisciplinary teams through surveys and interviews. Only 33% of the studies used hospital documents or healthcare data records to integrate with the process maps, and in 67% of the studies, the created maps were not validated by specialists.

CONCLUSIONS

The application of process mining techniques effectively automates models generated through clinical pathways. They are applied to the time-driven activity-based costing method, making the process more agile and contributing to the visualization of high degrees of variations encountered in processes, thereby making it possible to enhance and achieve continual improvements in processes.

Hospital episode-of-care costs for hip fractures: an activity-based costing analysis

Background

Despite the large impact of hip fracture care on hospital budgets, accurate episode-of-care costs (EOCC) calculations for this injury remains a challenge. The objective of this article was to assess EOCC for geriatric patients with hip fractures using an activity-based costing methodology and identify intraoperative, perioperative, and patient-specific factors associated with higher EOCC.

Material and Methods

This is a retrospective cohort study involving a total of 109 consecutive patients with hip fracture treated surgically at a Canadian level-1 trauma center from April 2018 to February 2019. Clinical and demographic data were extracted through the institution's centralized data warehouse. Data acquisition also included direct and indirect costs per episode of care, adverse events, and precise temporal data.

Results

The median total EOCC was $13,113 (interquartile range 6658), excluding physician fees. Out of the total cost, 75% was attributed to direct costs, which represented a median expenditure of $9941. The median indirect cost of the EOCC was $3322. Based on the multivariate analysis, patients not operated within the 48 hours guidelines had an increased length of stay by 5.7 days (P = 0.003), representing an increase in EOCC of close to 5000$. Higher American Society of Anesthesiology (ASA) scores were associated with elevated EOCC.

Conclusion

The cost of managing a patient with geriatric hip fracture from arrival in the emergency department to discharge from surgical ward represented $13,113. Main factors influencing the EOCC included adherence to the 48-hour benchmark surgical delay and ASA score. High-quality costing data are vital in assessing health care spending, conducting cost effectiveness analyses, and ultimately in guiding policy decisions.

Level of Evidence

Level III (3), retrospective cohort study.

Do Orthopaedic Virtual Clinic Visits Demonstrate Cost and Time Efficiencies Compared With In-person Visits?

BACKGROUND

There are numerous reasons for the increased use of telemedicine in orthopaedic surgery, one of which is the perception that virtual visits are more cost-effective than in-person visits. However, to our knowledge, no studies have compared the cost and time investment of virtual versus in-person visits using the time-driven activity-based costing (TDABC) method. Unlike methods that estimate cost based on charges for services rendered, TDABC provides a more precise measurement of costs, which is essential for assessing cost-effective innovations and moving to value-based healthcare.

QUESTIONS/PURPOSES

(1) Are virtual visits less costly than analogous in-person visits, as measured by TDABC? (2) Does TDABC yield cost estimates that are lower or higher than the ratio of costs to charges (RCC), which is a simple, frequently used costing method? (3) Do the total time commitments of healthcare personnel, and that of the surgeon specifically, vary between the virtual and in-person settings?

METHODS

Patients for this prospective, observational study were recruited from the practices of the highest-volume virtual-visit surgeons of three subspecialties (joints, hand, and sports) in a multihospital, tertiary-care academic institution in a metropolitan area in the Midwestern United States. Each surgeon had at least 10 years of clinical practice. Between June 2021 and September 2021, we analyzed both in-person and virtual return visits with patients who had an established relationship with the surgeon, because this represented the most frequent type of virtual visits and enabled a direct comparison between the two settings. New patients were not included in the study because of the limited availability of new-patient virtual visits; such patients often benefit from in-person physical examinations and on-site imaging. Additionally, patients seen for routine postoperative care were excluded because they were primarily seen in person by a physician assistant. Data were acquired during this period until 90 in-person and 90 virtual visits were collected according to selection criteria; no patients were lost to follow-up. Distinct process maps, which represent the steps involved in a clinic visit used to measure healthcare personnel time invested, were constructed for in-person and virtual clinic visits and used to compare total personnel and surgeon time spent. To calculate TDABC-derived costs, time allocated by personnel to complete each step was measured and used to calculate cost based on each personnel member's yearly salary. From the accounting department of our hospital, we acquired RCC cost data according to the level of service for a return visit.

RESULTS

The total median cost, as measured by TDABC, was USD 127 (IQR USD 111 to 163) for an in-person visit and USD 140 (IQR USD 113 to 205) for a virtual visit (median difference USD 13; p = 0.16). RCC overestimated TDABC-calculated direct variable cost in five of six service levels (in-person levels 3, 4, and 5 and virtual levels 3 and 5) by a range of USD 25 to 88. Additionally, we found that virtual visits consumed 4 minutes less of total personnel time (in-person: 17 minutes [IQR 13.5 to 23.5 minutes], virtual: 13 minutes [IQR 11 to 19 minutes]; p < 0.001); however, this difference in personnel time did not equate to cost savings because surgeons spent 2 minutes longer on virtual visit activities than they did on in-person activities (in-person: 6 minutes [IQR 4.5 to 9.5 minutes], virtual: 8 minutes [IQR 5.5 to 13 minutes]; p = 0.003).

CONCLUSION

Orthopaedic virtual visits did not deliver cost savings compared with in-person visits because surgeons spent more time on virtual visits and participated in virtual visits at the clinical site. Additionally, as anticipated, RCC overestimated costs as calculated by TDABC. These findings suggest that cost is not a primary advantage of transitioning to virtual visits, and that factors such as patient preference and satisfaction should be considered instead.

LEVEL OF EVIDENCE

Level II, economic and decision analysis.

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.

External Fixation Characteristics Drive Cost of Care for High-Energy Tibial Plateau Fractures

OBJECTIVE

To determine the total cost for a 30-day episode of care for high-energy tibial plateau fractures and the aspects of care associated with total cost.

DESIGN

Time-driven activity-based costing analysis.

SETTING

One Level 1 adult trauma center.

PATIENTS

One hundred twenty-one patients with isolated, bicondylar tibial plateau fractures undergoing staged treatment were reviewed.

PRIMARY OUTCOME

Total cost.

RESULTS

A total of 85 patients were included and most sustained Schatzker VI fractures (n = 66, 77%). All patients were treated with biplanar external fixation before definitive fixation. A total of 26 patients (31%) were discharged to skilled nursing facilities, and 37 patients (43%) were not discharged between procedures. Total cost for a 30-day episode of care was $22,113 ± 4056. External fixation components ($5952, 26.9%), length of hospital stay ($5606, 25.4%), discharge to skilled nursing facility (SNF) ($3061, 13.8%), and definitive fixation implants ($2968, 13.4%) contributed to the total cost. The following were associated with total cost: patient discharged to SNFs (P < 0.001), patient remaining inpatient after external fixation (P < 0.001), days of admission for open reduction internal fixation (ORIF) (P = 0.005), days spent with external fixation (P < 0.001), days in a SNF after ORIF (P < 0.001), and external fixation component cost (P < 0.001).

CONCLUSIONS

External fixation component selection is the largest contributor to cost of a 30-day episode of care for high-energy bicondylar tibial plateau fractures. Reduction in cost variability may be possible through thoughtful use of external fixation components and care pathways.

LEVEL OF EVIDENCE

Economic analyses Level IV. See Instructions for Authors for a complete description of levels of evidence.

Current Controversies in Radiology on Cost, Reimbursement, and Price Transparency: AJR Expert Panel Narrative Review

Many believe that fundamental reform of the U.S. healthcare system is overdue and necessary given rising national healthcare expenditures, poor performance on key population health metrics, meaningful health disparities, concerns about potential financial toxicity of care, inadequate price transparency, pending insolvency of Medicare Part A, increasing commercial insurance premiums, and significant uninsured and underinsured populations. The Medicare Payment Advisory Commission (MedPAC), an independent congressional agency, believes that part of this reform includes redistribution of reimbursements away from specialties such as radiology. Thus, despite an increase in the Medicare population and spending, Medicare payments for medical imaging have been decreasing for years. Further, the No Surprises Act, a federal law intended to curb the problem of surprise medical billing, was re-purposed in federal rule-making to reduce reimbursement from commercial payers to certain specialties including radiology. In this article, we examine challenges facing the U.S. healthcare system, focusing on cost, reimbursement, and price transparency, and the role of radiology in addressing such challenges. Medical imaging is a minor contributor to national healthcare expenditures, but provides an outsized impact on patient care. The radiology community should work together to demonstrate the value of medical imaging and reduce inappropriate utilization of low-value care.

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.

Is Time-Driven Activity-Based Costing Coming out on Top? A Comparison with Activity-Based Costing in the Health Field

The cost of health is a recurrent topic that has generated much research, as it affects all of society. Both public and private agents need to know the real cost of treatments, services, and products for decision-making. This article aims to compare the use and research impact of two cost systems widely used in health: ABC and TDABC, which is an evolution of ABC. For doing so, a bibliometric review in Scopus and Medline was carried out encompassing the years 2009-2019. The results show a great increase in publications using TDABC, while publications on ABC stabilized. On the other hand, the TDABC articles presented higher research impacts in traditional and alternative metrics. Articles on TDABC are more frequently cited, published in better journals, and more visible in academic social networks. The findings suggest that scholars and practitioners should focus on TDABC rather than ABC for addressing cost in health for its simplicity, projection, and research opportunities.

Improving healthcare performance through Activity-Based Costing and Time-Driven Activity-Based Costing

Improving healthcare performance has become a need for resource optimisation in a field where they are scarce. Activity-Based Costing (ABC) has been applied for more than 30 years to allocate costs and provide information for decision-making. This paper seeks to review previous literature in the health field that analysed this cost system and its new version, TDABC (Time-Driven Activity-Based Costing). Five hundred ninety articles published from 1989 to 2019 were retrieved from Scopus and Medline. The review includes descriptive, relational and content analyses. Results show that the interest in applying these cost systems is growing, especially in journals focusing on the financial aspects of health, policy and planning, and radiology. However, there is a difference in the application of ABC and TDABC. ABC is more related to efficiency and more used in laboratories. In contrast, TDABC is primarily used in hospitals and addressing the value of health rather than cost-effectiveness. On the other hand, the findings suggest that TDABC present greater opportunities for publication compared with ABC. Its progression is higher and gets more citations. The current article contributes to broadening the field's vision and encourages authors for further research.

A primer on time-driven activity-based costing in brachytherapy

Emphasis on value-based healthcare has led to increasing use of time-driven activity-based costing (TDABC) across medical departments. When applied to brachytherapy, TDABC provides insight into differences in costs across various modes of therapy, the nuances that drive cost including institutional factors and involved personnel, and discrepancies in reimbursement which influence clinical practice. This is especially important with the new alternative payment model (APM) in radiation oncology which offers fixed reimbursement per 90-day episode of care. The TDABC model can thus be utilized to improve efficiency, optimize the role of ancillary staff in treatment planning and care delivery, and implement shorter fraction schedules when clinically appropriate to promote value-based care. Ultimately, application of this methodology could potentiate changes to practice and incentives to improve patient care. In this review, we discuss the utility and limitations of TDABC in the context of existing studies in brachytherapy which have utilized this methodology.

Time-Driven Activity-Based Costing Provides a Lower and More Accurate Assessment of Costs in the Field of Orthopaedic Surgery Compared With Traditional Accounting Methods

PURPOSE

To analyze the implementation and benefits of time-driven activity-based costing (TDABC) in the field of orthopaedic surgery.

METHODS

We performed a search of PubMed, Google Scholar, and Embase in March 2020, using the following terms: "Time-Driven Activity-Based Costing," "TDABC," "Orthopaedic Surgery," and "Cost." Then we selected the studies that used the TDABC methodology to generate costs for a particular aspect of orthopaedic surgery. The included studies were divided into the following 5 main categories for ease of analysis: joint arthroplasty, trauma, hand, electronic medical record (EMR) implementation, and pediatric. We analyzed the overall ability of TDABC in the field of orthopaedic surgery, compared to the standard costing methods.

RESULTS

We included a total of 19 studies that implemented the TDABC methodology to generate a cost, which was compared to traditional accounting methods. The orthopaedic subspecialty with the most amount of TDABC implementation has been the field of joint arthroplasty. In these studies, the authors have noted that TDABC has provided a more granular breakdown of costs and has calculated a lower cost compared with traditional accounting methods.

CONCLUSION

TDABC is a powerful cost analysis method that has demonstrated benefit over the activity-based costing (ABC) approach in determining a lower and more accurate cost of orthopaedic procedures. Furthermore, the TDABC method generates an average cost reduction of $10,000 and $12,000 for total hip arthroplasty and total knee arthroplasty, respectively.

CLINICAL RELEVANCE

TDABC can allow health care administration to better determine and understand the cost drivers of particular orthopaedic procedures at their institutions. With improved estimates on the true cost of an activity, hospital administrators and department chairs can adjust to ensure cost-effective, patient-centered health care.

Editorial Commentary: The Value of Time-Driven, Activity-Based Costing in Health Care Delivery

Time-driven activity-based costing (TDABC) provides a powerful approach to more targeted cost accounting based on resources actually used by patients during a cycle of care. Since its introduction in 2004 by Kaplan and Anderson, TDABC has gained increasing popularity in defining the actual costs of care for various orthopaedic processes and pathways. TDABC may demonstrate lower costs of care compared with traditional cost accounting methods, including ratio of costs to charges and relative value units. Weaknesses of traditional methods include approaching costs through the lens of charges, revenue, processes and procedures, adopting a "top-down" approach, and potentially overestimating costs. In contrast, TDABC builds costs from the individual level, taking a front-line, condition-focused, and patient-centered view. Existing organizational decision-making is oriented around revenue metrics (relative value units and ratio of costs to charges) rather than cost metrics, yet alternative payment models are shifting toward fixed revenues for certain conditions or procedures. The variability, including both financial upside and loss, will primarily be a function of the cost of care-a number that is profoundly opaque in most health care settings. We view TDABC as an approach that sheds light on variation, offers a more granular differentiation of costs compared with traditional approaches, mitigates risk, and sparks opportunities for increasing operational efficiency and waste reduction. The goal is to identify and provide the greatest-value orthopaedic care.

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.

Advances in Value-Based Healthcare by the Application of Time-Driven Activity-Based Costing for Inpatient Management: A Systematic Review

OBJECTIVES

Implementation of value-based initiatives depends on cost-assessment methods that can provide high-quality cost information. Time-driven activity-based costing (TDABC) is increasingly being used to solve the cost-information gap. This study aimed to review the use of the TDABC methodology in real-world settings and to estimate its impact on the value-based healthcare concept for inpatient management.

METHODS

This systematic review was conducted by screening PubMed/MEDLINE and Scopus databases following Preferred Reporting Items for Systematic Reviews and Meta-Analyses guidelines, including all studies up to August 2019. The use of TDABC for inpatient management was the main eligibility criterion. A qualitative approach was used to analyze the different methodological aspects of TDABC and its effective contribution to the implementation of value-based initiatives.

RESULTS

A total of 1066 studies were retrieved, and 26 full-text articles were selected for review. Only studies focused on surgical inpatient conditions were identified. Most of the studies reported the types of activities on a macrolevel. Professional and structural cost variables were usually assessed. Eighteen studies reported that TDABC contributed to value-based initiatives, especially cost-saving findings. TDABC was satisfactorily applied to achieve value-based contributions in all the studies that used the method for this purpose.

CONCLUSIONS

TDABC could be a strategy for increasing cost accuracy in real-world settings, and the method could help in the transition from fee-for-service to value-based systems. The results could provide a clearer idea of the costs, help with resource allocation and waste reduction, and might support clinicians and managers in increasing value in a more accurate and transparent way.