Time-Driven Activity-based Costing for Anterior Cruciate Ligament Reconstruction: A Comparison to Traditional Accounting Methods

Abstract

Purpose The primary purpose of this study was to compare the cost of care of one of the most common sports medicine surgical procedures, anterior cruciate ligament reconstruction (ACLR), using the time-driven activity-based costing (TDABC) method to traditional accounting methods such as activity-based costing (ABC). Our secondary purpose was to identify the main drivers of the cost of ACLR using both of these techniques. Methods A process map of ACLR was constructed through direct observation in the clinical setting according to established techniques to identify drivers of fixed, direct variable, and indirect costs. An episode of care consisted of each step in the surgical process from admission to discharge. Personnel costs were combined with the process map to determine the cost drivers and overall cost of the procedure. The cost generated from the TDABC method was compared with the cost from our institution’s internal accounting system, which used an ABC method. Results The total cost of ACLR was $5,242.25 when using TDABC versus $10,318 when using the traditional ABC method. The largest difference between the 2 methods was within the domain of direct variable costs. Conclusions When compared with TDABC, the hospital’s traditional cost-accounting estimate for ACLR is nearly twice as costly. These findings highlight the variability of cost calculation for the same clinical episode between the 2 accounting methods. For the traditional accounting method, the direct variable cost was the main cost driver, whereas for the TDABC method, the direct fixed cost was the main cost driver. Clinical Relevance This study is important because it elucidates important cost drivers for one of the most common sports medicine orthopaedic surgical procedures and attempts to identify the true overall cost of the procedure.

Cost and Cost Driver Analysis of Anterior Cruciate Ligament Reconstruction Using Time-Driven Activity-Based Costing

“…In contrast, the present TDABC analysis revealed a significantly lower mean cost per BTB autograft ACLR ($2,865.01) versus hamstring autograft ACLR ($3,377.44). The present analysis also demonstrated TDABC-derived ACLR costs that were notably lower than those reported by studies using traditional accounting systems, consistent with the findings of Koolmees et al 29 .…”

“…It has been employed in multiple orthopaedic subspecialties such as trauma 21 , hand 24 , pediatrics 25 , and arthroplasty 20,[26][27][28] . TDABC was also recently employed in the setting of ACLR, revealing significantly different costs compared with those estimated by traditional accounting methods 29 .…”

Elective caesarean section cost efficiency with time-driven activity-based costing

“…Usually, the depreciation cost in the operating room is higher than the other room's depreciation costs. Research conducted by Koolmess et al determined indirect costs based on a fixed ratio set by the Hospital [31]. In this study, the calculation for the cost of the anesthesiologist, operating room nurse, and anesthesiologist charges based on the cost of arrival every time there is an elective cesarean section because the staff has not become hospital jobholders and there are no working hours determined by the hospital.…”

Using Time Driven-Activity Based Costing TD-ABC approach for controlling

“…An approach TD-ABC calculates cost by concentricity on two elements:(1) the cost of each unit of time (2) the quantity of time required for each stage or process to be completed [15].…”