A Framework for Time-Driven Activity-Based Costing for Orthopedic Procedure

Abstract

This study used method of Time-Driven Activity-Based costing (TDABC) approach to examined cost reduction in healthcare sector, Knee Arthroplasty Department in Al-Emadi Hospital as case-study for delivering a primary knee arthroplasty consultation. The purpose of the study is to propose an optimization model that tends to determine significant and insignificant resources and cost uncertainties in a particular healthcare service. Then compare results of optimization model with current costing methods used in healthcare. Eight-steps of TDABC method are applied to obtain Capacity Cost Rate (CCR) of each human resource involved in care-delivery cycle. Data was collected from interviewing staff and patients, financial reports, and human resource reports. Multiple linear regression (MLR) model is used to test strength of relationship between time and cost variable. Optimization model applied to decrease uncertainties by using Least Square method. Optimized model showed that human resources are not fully utilized which leads to error in costing model. Seven human resources out of eight are significant to model. Accuracy of optimized model is equal to 3%, with RMSE equal to 6. Total cost of the optimized model equal $177,492.45 which is better simulate actual cost $180,048. The research value is about building a new statistical model using MLR analysis to predict behavior and data trend of main healthcare segmentation: Human Resource. Also, propose a generic optimization model that can be used for specific healthcare service costing.