Time-driven activity based costing of total knee replacement surgery at a London teaching hospital

• Time-driven activity based costing (TDABC) is a novel micro-costing method.
• We report on the first TDABC analysis for total knee replacement surgery in the UK.
• The institutional profitability of treatment is described in detail.
• The major cost drivers in the treatment pathway are identified and evaluated.
• Recommendations on achieving cost efficiency savings are made.

IntroductionThe aim of this study was to conduct a time-driven activity based costing (TDABC) analysis of the clinical pathway for total knee replacement (TKR) and to determine where the major cost drivers lay.MethodsThe in-patient pathway was prospectively mapped utilising a TDABC model, following 20 TKRs. The mean age for these patients was 73.4 years. All patients were ASA grade I or II and their mean BMI was 30.4. The 14 varus knees had a mean deformity of 5.32° and the six valgus knee had a mean deformity of 10.83°. Timings were prospectively collected as each patient was followed through the TKR pathway.ResultsPre-operative costs including pre-assessment and joint school were £163. Total staff costs for admission and the operating theatre were £658. Consumables cost for the operating theatre were £1862. The average length of stay was 5.25 days at a total cost of £910. Trust overheads contributed £1651. The overall institutional cost of a ‘noncomplex’ TKR in patients without substantial medical co-morbidities was estimated to be £5422, representing a profit of £ 1065 based on a best practice tariff of £ 6487.ConclusionsThe major cost drivers in the TKR pathway were determined to be theatre consumables, corporate overheads, overall ward cost and operating theatre staffing costs. Appropriate discounting of implant costs, reduction in length of stay by adopting an enhanced recovery programme and control of corporate overheads through the use of elective orthopaedic treatment centres are proposed approaches for reducing the overall cost of treatment.