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Surgical Innovation
January 2017

Time-Driven Activity-Based Costing for Surgical Episodes

Author Affiliations
  • 1Center for Surgery and Public Health, Departments of Surgery and of Quality and Safety, Brigham and Women’s Hospital, Harvard Medical School, Boston, Massachusetts
  • 2Harvard Business School, Boston, Massachusetts
  • 3Division of General Surgery, Department of Surgery, University of Toronto, Toronto, Ontario, Canada
JAMA Surg. 2017;152(1):96-97. doi:10.1001/jamasurg.2016.3356

Health care costs related to surgical care account for 40% of all hospital and physician spending.1 Payers attempting to contain costs are replacing fee-for-service with value-based payment schemes that can encompass entire episodes of care, including physician services and postacute costs. Bundled payments, for example, will provide strong incentives for physicians to lower the total episode-based costs of treating patients.2 Unfortunately, traditional top-down hospital accounting systems, using ratios of costs to charges and relative value units (RVUs), are often inaccurate and offer little insight to surgeons and clinical staff on how and where to optimally reduce costs.3

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