Dealing with Time Estimates in Hospital Cost Accounting: Integrating Fuzzy Logic into Time-Driven Activity-Based Costing

BACKGROUND: Time-driven activity-based costing (TDABC) can support value-based healthcare (VBHC) programs by providing insights into the actual relationships between time spent by the medical staff and the costs associated with specific care cycles. However, the robustness of time estimates (time variation) as well as the effort required to obtain these estimates are major challenges of the TDABC methodology, given the heterogeneity in patients’ needs and the presence of (multi)morbidity. To allow for the variation in time estimates in an efficient manner, this study uses fuzzy logic (FL) to estimate the TDABC model parameters (FL-TDABC). METHODS: A standardized care path was used to calculate the annual costs (per patient) and cost drivers of the Rheumatoid arthritis (RA) care cycle following the FL-TDABC methodology. Cost information (2018) was derived from hospital reports concerning financial, human resource and business intelligence data from a Dutch top clinical research hospital, Maasstad Hospital. Time estimates of procedures were obtained by interviewing the medical staff and relevant care activities were extracted from electronic health records. For analytical and validation purposes, FL-TDABC estimates were compared with TDABC and ABC cost estimates. RESULTS: The RA care cycle annual costs totaled €1497 per patient (2018 prices) based on the FL-TDABC methodology. Maximum RA cycle costs (€1684) were some 22% higher than minimum costs (€1317) observed from FL-TDABC. Cost drivers explaining the cost variation are predominantly the number of consultations with rheumatologists and pharmacy costs related to RA. Based on TDABC and ABC, annual costs per patient were €1609 and €1604, respectively. CONCLUSIONS: The FL-TDABC methodology offers a more precise and efficient estimate of care cycle costs, allowing for the subjective (fuzzy) nature of healthcare time estimates made by the medical staff. As a result, the FL-TDABC provides insight into the practice variation, and hence it can promote the transition from a volume-based system to a VBHC system.