Development of a Method to Analyze Orthopaedic Practice Expenses

Abstract

The purpose of the current investigation was to present a standard method by which an orthopaedic practice can analyze its practice expenses. To accomplish this, a five-step process was developed to analyze practice expenses using a modified version of activity-based costing. In this method, general ledger expenses were assigned to 17 activities that encompass all the tasks and processes typically performed in an orthopaedic practice. These 17 activities were identified in a practice expense study conducted for the American Academy of Orthopaedic Surgeons. To calculate the cost of each activity, financial data were used from a group of 19 orthopaedic surgeons in Houston, Texas. The activities that consumed the largest portion of the employee work force (person hours) were service patients in office (25.0% of all person hours), maintain medical records (13.6% of all person hours), and resolve collection disputes and rebill charges (12.3% of all person hours). The activities that comprised the largest portion of the total expenses were maintain facility (21.4%), service patients in office (16.0%), and sustain business by managing and coordinating practice (13.8%). The five-step process of analyzing practice expenses was relatively easy to perform and it may be used reliably by most orthopaedic practices.