Time-Driven Activity-Based Costing in Healthcare: Should We Adjust for Inflation or Reapply the Method?
Author(s)
Simon Lafrance, PT, PhD1, Simon Berthelot, MSc, MD1, Rose Gagnon, MSc1, Tania Marx, MD, PhD2, Jason Robert Guertin, PhD1.
1Université Laval, Quebec, QC, Canada, 2Université de Franche-Comté, Besançon, France.
1Université Laval, Quebec, QC, Canada, 2Université de Franche-Comté, Besançon, France.
OBJECTIVES: Time-Driven Activity-Based Costing (TDABC) is a robust, but time-consuming method to estimate healthcare costs by using time as the primary cost driver. Cost rates, derived from financial data, represent the cost per minute of resources, while care process costs are calculated by combining these cost rates with time measurements. The necessity of repeating financial data extraction versus adjusting older financial data for inflation remains unclear. This study compares costs from previous TDABC studies in emergency departments by analyzing older financial data adjusted for inflation versus reapplying the method to extract updated financial data.
METHODS: Economic data from three TDABC studies, all sourced from a single hospital database and conducted by our team, were analyzed. The reference study, which includes financial data from 2018-2019, was compared to two older studies with financial data from 2015-2017, adjusted for inflation. Costs are presented in CAD 2019. Cost rates (CAD/minute) for human resources, imaging equipment and consumables, as well as the costs of common care processes (e.g., registration and triage) were included. The relative differences between the reference study and inflation-adjusted costs were assessed and mean bias was calculated.
RESULTS: Thirteen cost rates and six care processes were compared between inflation-adjusted and newly acquired costs. Human resources showed absolute differences of 0 to 5%, while imaging equipment and consumables varied more widely, with absolute differences of 20% to 121% and 6% to 40%, respectively. Care process costs demonstrated an absolute difference of 1 to 15%. The mean bias for inflation-adjusted methods was 11% higher, dropping to 1% when imaging costs were excluded.
CONCLUSIONS: Inflation-adjusted methods yield similar cost estimates to newly acquired costs over a 3-year gap, except for imaging-related costs. These findings suggest researchers may consider the inflation-adjusted method for short intervals. Further research over longer timeframes is warranted.
METHODS: Economic data from three TDABC studies, all sourced from a single hospital database and conducted by our team, were analyzed. The reference study, which includes financial data from 2018-2019, was compared to two older studies with financial data from 2015-2017, adjusted for inflation. Costs are presented in CAD 2019. Cost rates (CAD/minute) for human resources, imaging equipment and consumables, as well as the costs of common care processes (e.g., registration and triage) were included. The relative differences between the reference study and inflation-adjusted costs were assessed and mean bias was calculated.
RESULTS: Thirteen cost rates and six care processes were compared between inflation-adjusted and newly acquired costs. Human resources showed absolute differences of 0 to 5%, while imaging equipment and consumables varied more widely, with absolute differences of 20% to 121% and 6% to 40%, respectively. Care process costs demonstrated an absolute difference of 1 to 15%. The mean bias for inflation-adjusted methods was 11% higher, dropping to 1% when imaging costs were excluded.
CONCLUSIONS: Inflation-adjusted methods yield similar cost estimates to newly acquired costs over a 3-year gap, except for imaging-related costs. These findings suggest researchers may consider the inflation-adjusted method for short intervals. Further research over longer timeframes is warranted.
Conference/Value in Health Info
2025-05, ISPOR 2025, Montréal, Quebec, CA
Value in Health, Volume 28, Issue S1
Code
PT8
Topic
Economic Evaluation
Topic Subcategory
Cost/Cost of Illness/Resource Use Studies
Disease
SDC: Injury & Trauma, SDC: Musculoskeletal Disorders (Arthritis, Bone Disorders, Osteoporosis, Other Musculoskeletal), SDC: Respiratory-Related Disorders (Allergy, Asthma, Smoking, Other Respiratory), STA: Multiple/Other Specialized Treatments