Bozic Value-Based Health Care in Orthopaedics

Chapter 16: Orthopaedics as a Service Line

administrator service line director are both required to comprehensively under stand both the clinical and business aspects. The service line should be further subdivided into subspecialities to address the needs of subspeciality surgeons to further optimize and streamline patient care. The subspeciality leaders should have direct communication with operating room personnel along with staff mem bers involved in postoperative care including floor leadership, physical therapy, and case management ( Figure 3 ). COSTS AND CONTRIBUTION MARGIN When implementing a new program, hospitals often track revenue from services provided with associated expenditures to determine profits or loss. In orthopaedic service lines, financial leaders evaluate and monitor hospital surgical caseloads, discharge volume, and discharge dispositions, which represents most “sales” attributed to orthopaedic procedures. 4 Financial leaders often compare ortho paedic “sales” relative to all direct and indirect expenses, which helps outline the overall financial effect of an orthopaedic service line to the hospital ( Table 2 ). Contribution margins are the primary markers that are tracked to determine profitability. 4,18 If direct costs and/or expenses are unable to be covered, clinical and non clinical leaders have to investigate areas of inefficiencies and consider efforts for improvement without affecting patient quality of care. 4,18 Financial metrics that assess time-driven and activity-driven costs are necessary in identifying factors contributing to resource wastage and money loss. The challenge for most service line administrators and directors during financial loss, however, is often managing physician practices that drive the use of resources during patient care. Physicians may be accustomed to using more expensive modalities, instruments, and technol ogies that lead to improved patient outcomes. It is important for health systems to

Time-driven activity-based costing Concept

Example: Knee injection


Directly estimates resource demand for each product, service, customer via: 1. Cost per time unit of capacity-supplying resources

Activities: check-in, counseling, prep/administering injection


Total productive capacity per clinical FTE (MD, PA)


Cost per minute for MD, PA


E Copyright © 20 Wolters Kluwer, Inc. Unauthorized reproduction of the content is prohibited. 23 Time consumption by activity (minutes of MD, PA time) Indirect costs for knee injection 2. Unit time consumption of each resource *FTE=full-time equivalent, MD=surgeon, PA=physician assistant FIGURE 3 Ideal leadership structure of an orthopaedic service line. FTE = full-time equivalent


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Value-Based Health Care in Orthopaedics

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