Elsevier

Journal of Pediatric Surgery

Volume 51, Issue 12, December 2016, Pages 1962-1966
Journal of Pediatric Surgery

PAPS Paper
Time-driven activity-based costing to identify opportunities for cost reduction in pediatric appendectomy,☆☆

https://doi.org/10.1016/j.jpedsurg.2016.09.019Get rights and content

Abstract

Purpose

As reimbursement programs shift to value-based payment models emphasizing quality and efficient healthcare delivery, there exists a need to better understand process management to unearth true costs of patient care. We sought to identify cost-reduction opportunities in simple appendicitis management by applying a time-driven activity-based costing (TDABC) methodology to this high-volume surgical condition.

Methods

Process maps were created using medical record time stamps. Labor capacity cost rates were calculated using national median physician salaries, weighted nurse–patient ratios, and hospital cost data. Consumable costs for supplies, pharmacy, laboratory, and food were derived from the hospital general ledger.

Results

Time-driven activity-based costing resulted in precise per-minute calculation of personnel costs. Highest costs were in the operating room ($747.07), hospital floor ($388.20), and emergency department ($296.21). Major contributors to length of stay were emergency department evaluation (270 min), operating room availability (395 min), and post-operative monitoring (1128 min). The TDABC model led to $1712.16 in personnel costs and $1041.23 in consumable costs for a total appendicitis cost of $2753.39.

Conclusion

Inefficiencies in healthcare delivery can be identified through TDABC. Triage-based standing delegation orders, advanced practice providers, and same day discharge protocols are proposed cost-reducing interventions to optimize value-based care for simple appendicitis.

Level of evidence

II.

Section snippets

Material and methods

The study protocol was reviewed and approved by the institutional review board (H-37947). We performed a retrospective review of all simple appendicitis patients who underwent an appendectomy at our institution during a 6-month period in 2013. We first identified the phases of care for a simple appendicitis hospital episode. To create a preliminary process map, we held process mapping sessions with personnel involved in each phase of care to understand the clinical workflows. The goal of these

Phases of care for simple appendicitis

We identified seven phases of care for a complete simple appendicitis cycle of care. The phases in order from admission to discharge were waiting room, ED, pre-operative floor, holding, OR, PACU, and hospital floor. Time stamp data for 149 simple appendicitis patients were included in this analysis and total duration of each phase of care is shown in Table 1. Monitoring on the hospital floor before and after surgery (24 h and 51 min) and evaluation in the emergency department (4 h and 30 min)

Discussion

Time-driven activity-based costing provides detailed information on resource utilization and cost and can be used to identify areas of inefficiency. These then can be targeted by patient-centered healthcare management initiatives. Additionally, the determination of individual resource capacity cost rates allowed us to understand the impact reallocating resources have on cost.

We found the operating room phase of care to be the highest contributor to costs. The high cost of this phase of care is

Conclusions

We report our experience with applying TDABC to the management of a large volume pediatric surgical condition such as simple appendicitis. We found that critical appraisal of resource utilization during process mapping sessions can successfully engage providers in process assessment. In addition, TDABC can be used to identify inefficiencies in healthcare delivery by highlighting processes that currently are redundant or lead to unnecessary wait times. The interventions we propose: triage-based

Acknowledgement

We acknowledge Professor Robert S. Kaplan and Professor Michael Porter along with their staff at the Harvard Business School Institute for Strategy and Competitiveness, in particular Mahek Shah and Derek Haas, for their support and guidance of our work.

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    Disclosures: The authors report no conflict of interest concerning the materials or methods used in this study or the findings specified in this paper.

    ☆☆

    Type of study: Economic analysis.

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