The procedure is not simple. It all boils down to the exact calculation of costs for each individual activity and the calculation of the average time needed to carry out each activity. At the same time, through the time equation, you can create the cost of a larger series of activities or variations and additional services. Probably Time Driven Activity-based costing would be more appropriate and easier to use in hospital billing. Maybe look into TDABC.
1.What is the total cost of pediatric patients` department (I am considering outpatients only). I.e. Salaries, wages, depreciation, supplies, janitorial services etc.
2. Determine the number of activities. i.e. a) Meeting the patients, taking their blood pressures, checking their temperature, weighing, checking their background on the computer. b) Seeing the doctor. c) Activities after seeing the doctor, till the patient leaves the department. Assume that these are the 3 major activities in the department. Let`s ignore overheads like the janitors, depreciation and supplies for the moment.
4. Measure how much time each activity takes and measure how much time available for doctors and nurses for dealing with the patients.
5. Measure cost of activity per minute.
6. Observe and measure how much time a patient consumes in average from each of these activities.
7. Calculate the cost of visiting patient. Add a bit of the overhead to this direct cost. I.e. total annual overhead/number of patients per year.
Time-Driven Activity-Based Costing (TDABC) is a modern cost management method that provides precise tracking and analysis of costs in the healthcare sector, including the hospitalization of pediatric patients. This approach relies on detailed mapping of activities and the estimation of time required for their execution. Here's how TDABC can be used to reduce hospitalization costs for pediatric patients:
1. Identify Key Activities in the Hospitalization Process
The first step involves mapping all activities related to pediatric patient hospitalization. These activities may include:
- Patient admission.
- Diagnostic tests (laboratory tests, imaging).
- Treatment (therapy, medical interventions).
- Patient care (nurse tasks, hygiene maintenance).
- Administrative tasks.
- Discharge process and follow-up recommendations.
2. Measure Time Required for Each Activity
The average time required to perform each activity is estimated. This includes:
- Time spent by medical staff with the patient.
- Time allocated to administrative procedures.
- Equipment and device usage time.
Example:
- Patient admission takes 30 minutes.
- Conducting laboratory tests takes 1 hour.
3. Determine the Unit Cost of Resources per Time Unit
Each resource (staff, equipment, facilities) is assigned a unit cost per time unit (e.g., hourly wage of nurses, doctors, or equipment usage costs).
Example:
- Nurse's hourly rate is $50.
- Doctor's hourly rate is $100.
- CT scanner usage cost per hour is $500.
4. Calculate Activity Costs
The cost of each activity is calculated by multiplying the time required by the unit cost of the resources.
Example for patient admission:
- Nurse: 30 minutes x $50/hour = $25.
- Administrative staff: 30 minutes x $30/hour = $15. Total cost of patient admission: $40.
5. Identify Inefficiencies and Potential Optimization Areas
Using TDABC, hospitals can pinpoint high-cost activities and analyze the causes:
- Delegate tasks to less specialized staff to reduce the costs of highly qualified resources.
- Improve equipment utilization (minimize underuse or overuse).
Example of Cost Reduction:
If it's determined that nurses spend excessive time on administrative tasks, these tasks can be reassigned to administrative staff with a lower hourly rate. This reduces overall hospitalization costs.
By applying TDABC, hospitals can gain a clear understanding of the cost structure of pediatric patient hospitalization and identify areas for optimization. This approach leads to cost reductions without compromising the quality of care, ensuring efficient resource management in healthcare settings.