The Cost of Hip and Knee Revision Arthroplasty by Diagnosis-Related Groups: Comparing Time-Driven Activity-Based Costing and Traditional Accounting

Abstract Background Traditional hospital cost accounting (TA) has innate disadvantages that limits the ability to meaningfully measure care pathways and quality improvement. Time-driven activity-based costing (TDABC) allows a meticulous account of costs in primary total joint arthroplasty (TJA). However, differences between TA and TDABC have not been examined in revision hip and knee TJA (rTJA). We aimed to compare total costs of rTJA by diagnosis-related group (DRG), measured by TDABC versus TA. Methods Overall costs were calculated for rTJA care cycles by DRG for 2 years of financial data (2018-2019) at our single-specialty orthopaedic institution using TA and TDABC. Costs derived from TDABC, based on time and resources used, were compared to costs derived from TA based on historical costs. Proportions of implant and non-implant costs were measured to total TA costs. Results 793 rTJA’s were included in this study, with TA methodology resulting in higher cost estimates. The total cost per DRG 468, rTJA with no comorbidities or complications (CC), DRG 467, rTJA with CC, and DRG 466, rTJA with major CC, estimated by TDABC was 69%, 67% and 49% of the estimation by TA, respectively. Implant and non-implant costs represented different proportions between methodologies. Conclusion Considerable differences exist, as TA estimations were 31-51% higher than TDABC. The true cost is likely a value between the estimations, but TDABC presents granular and patient-specific cost data. TDABC for rTJA provides valuable bottom-up information on cost centers in the care pathway and with targeted interventions, may lead to a more optimal delivery of value-based health care.