Time-driven activity-based costing in fracture care: Is this a more accurate way to prepare for alternative payment models?

Objectives: To use surgical treatment of isolated ankle fractures as a model to compare time-driven activity-based costing (TDABC) and our institution's traditional cost accounting (TCA) method to measure true cost expenditure around a specific episode of care. Methods: Level I trauma center ankle fractures treated between 2012 and 2016 were identified through a registry. Inclusion criteria were age greater than 18 years and same-day ankle fracture operation. Exclusion criteria were pilon fractures, vascular injuries, soft-tissue coverage, and external fixation. Time for each phase of care was determined through repeated observations. The TCA method at our institution uses all hospital costs and allocates them to surgeries using a relative value method. Results: A total of 35 patients met the inclusion/exclusion criteria, 18 were men and 17 were women. Age at time of surgery was 47 ± 15 years. Time from injury to surgery was 10 ± 4 days. Operative time was 86 ± 30 minutes, Post-anesthesia care unit (PACU) time was 87 ± 27 minutes, and secondary recovery time was 100 ± 56 minutes. Average cost was significantly lower for the TDABC method ($2792 ± 734) than the TCA method ($5782 ± 1348) (P < 0.001). There was no difference between methods for implant cost ($882 ± 507 for Traditional Accounting (TA) and $957 ± 651 for TDABC, P = 0.593). TCA produced a significantly greater cost (P < 0.01) in every other category. Conclusions: As orthopaedics transitions to alternative payment models, accurate costing will become critical to maintaining a successful practice. TDABC may provide a better estimate of the cost of the resources necessary to treat a patient.