The costs of CT procedures in an academic radiology department determined by an activity-based costing (ABC) method

Purpose: The purpose of this work was to determine the costs of computed to mography (CT) procedures in a large academic radiology department, includin g both professional (PC) and technical (TC) components, by analyzing actual resource consumption using an activity-based costing (ABC) method and comp aring them with Medicare payments. Method: Over a 12 month period from July 1, 1996, to June 30, 1997, 1,011 C T procedures, representing 16 Physicians' Current Procedural Terminology (C PT) codes and 98.3% of CT studies performed, were carefully observed by a r esearch assistant trained in ABC methodology. Information collected during these time and motion studies included personnel/machine time and direct ma terials used. Actual resource units used during the different activities in each CT procedure were valued using appropriate cost drivers. Unit values for both direct and overhead costs were calculated; the cost of an individu al procedure equaled the sum of component costs. Costs were compared with P C and TC payments according to the 1997 Medicare Fee Schedule, Results: Total costs of CPT codes 70450 (CT Head unenhanced), 71260 (CT Che st enhanced), and 74160 (CT Abdomen enhanced), which represented 71.2% of C T studies performed, were $189.19, $273.53, and $343.20, respectively. For all 16 nonmodified CPT codes analyzed, Medicare's professional reimbursemen t was less than the professional cost, whereas its technical reimbursement exceeded respective cost in 14 of the 16 codes. Conclusion: In the setting and time period studied, Medicare underreimburse d professional costs while overreimbursing technical costs.