Time-Driven Activity-Based Costing to Identify Opportunities for Cost Reduction in Pediatric Appendectomy

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 minutes), operating room availability (395 minutes), and post-operative monitoring (1128 minutes). 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.