11 Real Examples of Cost Reduction Opportunities Identified by Time-Driven Activity-Based Costing (TDABC) in Surgical and Perioperative Care

Hospitals preparing for programs such as CMS TEAM, CJR, BPCI-A, and commercial bundled contracts are discovering that understanding true internal cost is just as important as mastering claims data. While CMS evaluates savings and penalties based on paid claims, hospitals must also understand where resources are actually consumed inside their walls.

Time-driven activity-based costing (TDABC) gives leaders a clear look at the real hours, minutes, supplies, and staff capacity used throughout surgical and perioperative care. Instead of relying on averages, TDABC measures how long each step takes, who performs it, and what that labor and equipment time truly costs.

Once health systems adopt TDABC, they often find opportunities that would never appear in claims-only analysis. Small inefficiencies scattered across perioperative workflows become visible, quantifiable, and actionable. The result is a detailed roadmap for improving both financial and clinical performance.

Below are 11 real examples of cost reduction opportunities identified when hospitals use TDABC to evaluate surgical and periop processes.

What Is Time Driven Activity Based Costing?

Time Driven Activity Based Costing (TDABC) is a method for calculating cost based on two key inputs:

• How long it takes to perform each step in a care process
• How much it costs per unit of time for the staff or resources performing that step

Instead of using broad averages, TDABC attaches cost directly to real activities. It clarifies who does what, how long each activity takes, and the true financial impact of that time.

This creates a more realistic cost model. It also gives frontline teams clarity on how small process changes affect financial outcomes in a way traditional averaging methods cannot deliver.

Learn more about Time Driven Activity Based Costing (TDABC) and How To Accurately Measure the True Costs of Surgical Pathways

Why TDABC Reveals Opportunities Claims Data Cannot

Claims describe what was billed. They do not describe:

• How much staff time each step requires
• How time varies between clinicians or locations
• Where bottlenecks slow throughput
• Which variations influence outcomes
• How workflows differ across service lines
• How staffing patterns compare to actual need

Hospitals often discover that two procedures with identical claims have completely different internal resource requirements. TDABC exposes these differences and provides the operational detail necessary for improvement.

With that in mind, here are 11 examples of cost reduction opportunities that time based activity costing (TDABC) helped identify that otherwise would often go unnoticed.

1. Reducing Wait Time Between Steps

Many perioperative workflows include long stretches where a patient is waiting rather than moving through the care pathway. Examples include:

• Holding in pre-op longer than necessary because a surgeon is delayed
• Waiting for anesthesia assessments
• Delays in room turnover
• Downtime between imaging and consults

TDABC quantifies these delays in a way everyone can see. Instead of thinking about "a few minutes here and there," leaders see hundreds of paid labor hours tied up in silent downtime. Once measured, teams can finally redesign schedules, room assignments, or communication processes with confidence.

The benefit is not just lower cost. It creates a more predictable day for nurses, techs, and physicians, which reduces stress and supports both staff satisfaction and patient flow.

2. Standardizing Pre-Op Workflows to Reduce Variation

Pre-op is often where variation first appears. Some nurses complete assessments quickly; others take longer because they are more thorough or because documentation requires extra steps. Different teams may order different labs or provide different teaching. Most are trying to do what they believe is safest for the patient, but inconsistent processes lead to uneven time demands.

TDABC gives teams a shared starting point. Once the data is visible, it becomes easier to agree on a common approach. Staff repeatedly say these changes help them feel more supported and less pressured, since the expectations are clearer and more consistent across shifts.

Common improvements may include:

• Standardized pre-op checklists
• Uniform education materials
• Clear criteria for additional testing
• Streamlined documentation templates

These changes lead to smoother flow, a more predictable schedule, and reduced staff time per case.

3. Streamlining PACU Processes and Discharge Criteria

Variation is equally common in the PACU. Some clinicians move patients to Phase II quickly, while others wait longer than necessary.

TDABC highlights:

• Large differences in monitoring time
• Outlier cases where staff spend double the time without clinical justification
• Variation in interpretation of discharge criteria
• Redundant checks before handoff

By addressing these inconsistencies, hospitals reduce PACU length of stay, increase capacity, and lower labor costs without reducing quality.

4. Aligning Intraoperative Staffing Patterns with Actual Need

Many perioperative leaders acknowledge that OR staffing patterns have often been shaped by tradition, surgeon preference, or historical norms. Some rooms have more staff than needed, while others run tight and struggle during high-volume periods.

TDABC quantifies:

• Actual minutes each staff member is required
• Differences between scheduled staff and productive time
• Opportunities for tiered staffing based on severity
• Roles that can be reassigned to match true workload

Once the data is visible, teams can realign staffing in a way that protects safety while better matching resources to case complexity.

These conversations tend to be easier with TDABC because decisions feel evidence-based rather than subjective.

5. Identifying Unnecessary Consults That Add Cost Without Improving Outcomes

In many surgical pathways, some consults occur because they have always been part of the routine. Examples include:

• Routine cardiology consults for low-risk orthopedic cases
• Endocrinology consults for stable diabetic patients
• PT/OT consults that duplicate nurse assessments

Consults are ordered with good intentions: to reduce risk, confirm stability, or support decision-making. But some consults have minimal impact on the care plan and end up consuming hours from specialty teams already stretched thin.

TDABC quantifies this impact by measuring documentation time, coordination time, and indirect tasks. This helps clinicians differentiate between high-value consults and those driven more by habit than necessity.

When criteria are refined, specialty teams often report feeling more available for cases that truly require their expertise.

6. Improving Care Coordination for Post-Acute Transitions

Discharge planning is one of the most variable components of the surgical episode. The complexity of insurance authorization, SNF availability, home health coordination, and caregiver readiness means each patient can require a different level of support.

TDABC identifies where time is being spent and why some transitions take longer than others. Case managers often welcome this insight because it validates the complexity of their work and highlights where additional tools or earlier planning could reduce avoidable SNF use or prolonged hospital stays.

Improved workflows not only reduce costs but also create smoother transitions for patients and families navigating stressful moments.

7. Reducing Variation in Surgeon Preference Cards

Every OR team knows the impact of preference cards. When they are inconsistent, outdated, or overly complex, they slow down room setup and lead to supply waste. But discussing preference cards without data can be sensitive.

TDABC changes the tone of the conversation. It provides a neutral, fact-based way to look at how card variation affects staffing, supply usage, and turnover time. Many surgeons appreciate seeing the data and voluntarily revise their cards to reflect their current practice.

The result is not just lower supply cost but a more efficient and predictable experience for scrub techs and circulating nurses.

8. Improving Room Turnover Through Better Coordination

Turnover affects everything from case volume to staff satisfaction. Team members know when turnover is slow, but they often lack a clear picture of which steps are causing delays.

TDABC pinpoints exactly where time is lost. Sometimes the bottleneck is environmental services. Sometimes it is equipment availability. Other times it is unclear handoff timing between OR teams.

Once these patterns are visible, teams can redesign workflows that improve speed without ever pressuring staff to rush.

Typical improvements might include:

• Cleaner handoff timing between OR staff and environmental services
• Stocking high-demand supplies closer to ORs
• Adding support during peak turnover periods
• Using turnover checklists for consistency

Many hospitals find that even a modest improvement in turnover opens capacity for more cases or reduces overtime.

9. Optimizing Instrument Trays and Sterile Processing Workflows

Instrument trays are another area where variation silently accumulates. Many trays include instruments rarely used but always processed. Each additional instrument adds labor, risk of missing pieces, and potential delays when instruments arrive incomplete.

TDABC calculates the real cost of this work, often revealing that a significant portion of sterile processing labor is tied to items that provide little value. When surgical and processing teams review these findings together, they often identify ways to simplify trays, reduce reprocessing time, and support sterile processing staff who already carry a heavy workload.

10. Reducing Unnecessary Imaging or Lab Testing

Diagnostic testing is essential, but over-testing introduces cost and sometimes unnecessary delays. Many hospitals discover that testing patterns vary by surgeon, clinic, or site rather than by patient need.

TDABC makes these patterns clear. It shows exactly how much staff time, equipment time, and follow-up documentation each test requires. When teams see this data, they often align on updated protocols that prioritize evidence-based testing, reducing both cost and patient burden.

11. Improving Supply Management and Just-in-Time Stocking

Supply management issues are not just about cost, they also affect staff efficiency. Nurses and techs frequently express frustration when items are hard to find, stored inconsistently, or located too far from the point of care.

TDABC shows how these small inefficiencies add up. It illustrates the minutes lost across an entire day or service line and translates them into actual cost. Once teams see the numbers, supply rooms are reorganized, par levels are refined, and stocking responsibilities become more consistent.

The result is less stress for staff and fewer delays for patients.

How These Opportunities Add Up

The most important insight from TDABC is that savings do not come from a single change. They come from a series of improvements across the surgical and perioperative experience.

• A ten-minute reduction in pre-op time saves hundreds of labor hours per month
• Removing unnecessary consults in orthopedic or cardiac surgery yields millions in annual savings
• Faster turnover increases OR throughput
• Smaller instrument trays reduce both sterilization labor and overtime

TDABC gives hospitals the ability to prioritize improvements that protect safety, support staff, and strengthen financial performance at the same time. And with bundled payments and capacity constraints shaping care delivery, hospitals need this level of insight to maintain both quality and margin.

Why TDABC Works So Well for Surgical and Perioperative Care

TDABC is particularly effective in perioperative environments because:

• OR workflows consist of sequenced steps that are easy to measure
• Staff roles and cost rates are clearly defined
• Variation is common and often unrecognized
• High volume amplifies small inefficiencies
• Time and staffing represent major components of total cost

By pairing TDABC with claims-based analysis, hospitals get a complete picture of both internal performance and external competitiveness.

Final Thoughts: Utilize TDABC To Optimize Your Team's Resources

Time-driven activity-based costing offers hospitals a practical, actionable way to see their true costs and understand where variation limits both efficiency and patient flow. It does more than calculate minutes; it brings visibility to the challenges that frontline teams experience every day.

The twelve opportunities outlined here show how TDABC helps hospitals reduce waste, standardize care, and strengthen financial resiliency without compromising outcomes. For organizations preparing for bundled payments or capacity constraints, these insights help create a path forward that respects the realities of clinical work while supporting long-term sustainability.

To learn more about how Avant-garde Health can help with cost reduction in your hospital and support your readiness for bundled payment programs such as TEAM, contact us today!