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

Abstract

PurposeTo analyze the implementation and benefits of time-driven activity-based costing (TDABC) in the field of orthopaedic surgery. MethodsWe 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. ResultsWe 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. ConclusionTDABC 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 RelevanceTDABC 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.