doi:10.1016/S0360-3016(03)00579-0 CLINICAL INVESTIGATION Radiation Oncology Practice ACTIVITY-BASED COSTING: A PRACTICAL MODEL FOR COST CALCULATION IN RADIOTHERAPY YOLANDE LIEVENS,PH.D.,* WALTER VAN DEN BOGAERT,PH.D.,* AND KATRIEN KESTELOOT,PH.D. † *Department of Radiation Oncology, University Hospitals Leuven, Leuven, Belgium; † University Hospitals Leuven and Center for Health Services and Nursing Research, KU Leuven, Belgium Purpose: The activity-based costing method was used to compute radiotherapy costs. This report describes the model developed, the calculated costs, and possible applications for the Leuven radiotherapy department. Methods and Materials: Activity-based costing is an advanced cost calculation technique that allocates resource costs to products based on activity consumption. In the Leuven model, a complex allocation principle with a large diversity of cost drivers was avoided by introducing an extra allocation step between activity groups and activities. A straightforward principle of time consumption, weighed by some factors of treatment complexity, was used. The model was developed in an iterative way, progressively defining the constituting components (costs, activities, products, and cost drivers). Results: Radiotherapy costs are predominantly determined by personnel and equipment cost. Treatment-related activities consume the greatest proportion of the resource costs, with treatment delivery the most important component. This translates into products that have a prolonged total or daily treatment time being the most costly. The model was also used to illustrate the impact of changes in resource costs and in practice patterns. Conclusion: The presented activity-based costing model is a practical tool to evaluate the actual cost structure of a radiotherapy department and to evaluate possible resource or practice changes. © 2003 Elsevier Inc. Radiotherapy, Cost calculation, Activity-based costing. INTRODUCTION Radiotherapy costs Although the importance of accurate cost data has gradually become recognized by the medical profession and more specifically by radiation oncologists, literature data on the cost of radiotherapy (RT) activities and products are scarce and often contradictory (1–3). Al- though part of the literature analyzed the costs of specific aspects of the RT process, most efforts have focused on the cost of RT delivery—the cost per patient visit (or fraction), extrapolated to a global RT treatment cost (2– 8). Because of differences in methods, included cost components and RT activities, and health care systems, these studies yielded considerable variation in computed costs, rendering the comparison of the results unreliable (1, 3). Moreover, most of these approaches calculated the average costs; total treatment costs were obtained by multiplying the average cost per fraction by the number of fractions typically given for each type of treatment. This method may, however, not give a good representa- tion of the consequences of fractionation changes on resource consumption (2), because it implicitly assumes a stable relationship between the cost per fraction and the cost of other activities within the RT process, such as planning or fixation. In practice, this is usually not the case, hence the cost of the different steps should ideally be calculated separately (3). Because they are easy to obtain, charges (i.e., patient bills), whether or not adapted by cost/charge ratios (9, 10), are frequently used as proxies for resource cost. The same goes for reimbursement data of RT. Although it is theoret- ically possible that charges or reimbursement for a given procedure are an accurate measure of its actual resource cost, this is rarely the case in reality because of historical and political factors, government regulations, budget con- straints, and market forces (11). In view of producing more accurate resource cost esti- mates, health care organizations have started to invest in more sophisticated cost-accounting systems capable of pro- ducing activity- or product-specific cost data (12). Activity- based costing (ABC) is a cost-accounting system that allo- cates the resource costs to the products using a multistep allocation procedure on the basis of activity consumption. This article describes the development and application of such an ABC system for the RT department of the Leuven University Hospital. Reprint requests to: Yolande Lievens, Ph.D., Department of Radiotherapy, University Hospitals Leuven, Herestraat 49, Leuven 3000 Belgium. Tel: 0032 16 347600; Fax: 0032 16 347623; E-mail: yolande.lievens@uz.kuleuven.ac.be Received Oct 29, 2002, and in revised form Apr 17, 2003. Accepted for publication Apr 23, 2003. Int. J. Radiation Oncology Biol. Phys., Vol. 57, No. 2, pp. 522–535, 2003 Copyright © 2003 Elsevier Inc. Printed in the USA. All rights reserved 0360-3016/03/$–see front matter 522