Dissecting Costs of CT Study: Application of TDABC (Time-driven Activity-based Costing) in a Tertiary Academic Center

Abstract

Rationale and Objectives: The lack of understanding of the real costs (not charge) of delivering healthcare services poses tremendous challenges in the containment of healthcare costs. In this study, we applied an established cost accounting method, the timedriven activity-based costing (TDABC), to assess the costs of performing an abdomen and pelvis computed tomography (AP CT) in an academic radiology department and identified opportunities for improved efficiency in the delivery of this service. Materials and Methods: The study was exempt from an institutional review board approval. TDABC utilizes process mapping tools from industrial engineering and activity-based costing. The process map outlines every step of discrete activity and duration of use of clinical resources, personnel, and equipment. By multiplying the cost per unit of capacity by the required task time for each step, and summing each component cost, the overall costs of AP CT is determined for patients in three settings, inpatient (IP), outpatient (OP), and emergency departments (ED). Results: The component costs to deliver an AP CT study were as follows: radiologist interpretation: 40.1%; other personnel (scheduler, technologist, nurse, pharmacist, and transporter): 39.6%; materials: 13.9%; and space and equipment: 6.4%. The cost of performing CT was 13% higher for ED patients and 31% higher for inpatients (IP), as compared to that for OP. The difference in cost was mostly due to non-radiologist personnel costs. Conclusions: Approximately 80% of the direct costs of AP CT to the academic medical center are related to labor. Potential opportunities to reduce the costs include increasing the efficiency of utilization of CT, substituting lower cost resources when appropriate, and streamlining the ordering system to clarify medical necessity and clinical indications.

Applying Time Driven Activity-Based Costing to Calculate Cost of Computed Tomography Scan in a Teaching Hospital

“…TDABC estimates the costs and time required for all activities and provides valuable information for process improvement and also cost containment. [15,22] Cost drivers are important, because they reveal the scope for improvement. This model can be updated easily and if any changes in capacity or costs may be adjusted to calculate a new capacity cost rate.…”

“…It can be applied to various services in the hospital and hence proven to be a reliable method to estimate real costs. [15,16] …”

“…It identifies opportunities for improvement of services in a hospital. [13][14][15] CT scanning is one of the most common diagnostic procedures performed in hospitals and it is an important cost centre. The objectives of this study are-1.…”

Enhancing Value of MRI: A Call for Action

“…While there are different approaches to cost‐accounting, we applied time‐driven activity‐based costing (TD‐ABC) to measure the costs of performing CT of the abdomen/pelvis. The analysis combines traditional process maps with a financial cost accounting system, where every process required to complete imaging services is mapped, and the sum of all the costs of each step is the total cost of the procedure or imaging service. For abdomen/pelvis CT imaging, we found personnel costs comprised 80% of all direct costs, the highest being the cost related to the radiologist .…”

“…The analysis combines traditional process maps with a financial cost accounting system, where every process required to complete imaging services is mapped, and the sum of all the costs of each step is the total cost of the procedure or imaging service. For abdomen/pelvis CT imaging, we found personnel costs comprised 80% of all direct costs, the highest being the cost related to the radiologist . Helping radiologists avoid extra calls clarifying study indications and more quickly and accurately interpreting imaging studies reduces the costs of care significantly, more so than shortening the scan time with CT.…”