HLTH 5033 Module 3 Public Health Service Cost Analysis Example

What a Restaurant Inspection Really Costs: A Time-Driven Cost Analysis of a County Food Safety Program and the Fees That Are Meant to Pay for It

Student Name

American College of Education

HLTH5033: Financial Management in Public Health

Module 3 Assignment

Instructor Name

October 19, 2026

Why Cost This Service

The first module in this course found that the composite county health department had not reviewed its food establishment permit fees in six years, while inspection costs had risen with salaries and fuel. The board of health has asked a simple question: do the fees cover the cost of the service? Answering it requires knowing what each activity of the food safety program actually costs, not only the program's total budget.

The program licenses and inspects about 3,100 food establishments, from school cafeterias to food trucks. Its work includes routine inspections, re-inspections after serious violations, complaint investigations, plan reviews for new or remodeled establishments, inspections at temporary events such as fairs, investigations of suspected foodborne illness, and education for operators. Each activity takes a different amount of inspector time, so a single average cost would hide the real differences.

Method: Time-Driven Activity-Based Costing

The analysis uses time-driven activity-based costing, which estimates the cost of each activity by multiplying the time it takes by the cost per hour of the resources performing it. In their systematic review of the method in health settings, Keel et al. (2017) concluded that it can cost clinical processes efficiently and overcome a known problem with older costing approaches, which tend to spread shared costs evenly instead of following the work. The method has three steps here: total the program's costs, including indirect costs; estimate the practical capacity of the inspection staff in hours; and measure how many hours each activity consumes.

Step One: Total Program Cost

The program employs nine registered environmental health specialists at an average salary of $66,000, a supervisor at $84,000 and one and a half clerical positions at $42,000 each, for salaries of $741,000. Fringe benefits at 34% add $251,940, for personnel costs of $992,940. Vehicles and fuel cost $58,000, the inspection software license $22,000, required continuing education and credentials $14,000, and field supplies such as thermometers and sanitizer test strips $6,000, bringing direct costs to $1,092,940. Indirect costs for the department's shared services, at 15% of direct costs, add $163,941. The total annual cost of the food safety program is $1,256,881.

Step Two: Practical Capacity and the Cost per Hour

Each inspector's full-time salary covers 2,080 hours, but vacation, holidays, sick leave, training and staff meetings take about 280 of those hours. Practical capacity is therefore about 1,800 hours per inspector, or 16,200 hours for the nine inspectors. Dividing the program's total cost by those hours gives a capacity cost rate of about $77.59 per inspector hour. The rate includes the supervisor, clerical support and overhead, because each inspection depends on them.

Using practical rather than paid hours matters. If the calculation used 2,080 hours per inspector, the rate would fall to about $67, understating the true cost of each activity by roughly 14%. Fees set on that basis would fall short even if every other assumption were right.

Step Three: Cost per Activity

Inspectors recorded their time by activity for eight weeks, including travel and report writing, and the averages were applied to a year's volume. A routine inspection takes about 2.2 hours, so it costs about $171. The program performs about 5,400 a year, roughly 1.7 per establishment, reflecting more frequent inspections of higher-risk kitchens. A re-inspection after a serious violation takes about 1.2 hours and costs about $93; there are about 900. A complaint investigation takes 1.8 hours and costs about $140; there are about 600. A plan review for a new or remodeled kitchen takes about 5.0 hours and costs about $388; there are about 180. A temporary event inspection takes about 0.8 hours and costs about $62; there are about 700. Foodborne illness investigations used about 400 hours and operator education about 300. Together these activities account for all 16,200 hours of capacity.

The breakdown shows where the time goes. Routine inspections use about 73% of inspector time; the remaining quarter is spread across activities that are harder to predict.

Comparing Costs With Fees

Fee revenue totals about $945,500: annual permits averaging $285 for 3,100 establishments, plan review fees of $150, and temporary event fees of $50, with no charge for re-inspections. That covers about 75% of the program's cost. The gaps are specific. The average permit of $285 roughly matches the cost of routine inspections per establishment, about $297, but nothing pays for re-inspections, which cost about $84,000 a year. Plan reviews cost $388 but bring in $150. Temporary events cost $62 but bring in $50. Complaint and foodborne illness investigations, which protect the public generally rather than serving a particular establishment, are appropriately funded by the county levy rather than fees. The fee schedule is not too low across the board; it is too low in exactly the places where one business's choices create extra work.

Limits of the Time Data

The cost of each activity rests on eight weeks of time records, and those records have limits that the board should know. Eight weeks in late winter may not represent a full year; summer brings more temporary events and outdoor food vendors, and the holiday season brings more complaints. Inspectors recorded their own time, which can drift toward round numbers or toward what staff think a task should take. Travel time varies widely between the county's dense town center and its rural townships, so the average routine inspection cost hides a range from roughly $140 for a downtown restaurant to more than $220 for a remote roadside stand. And the analysis assumes current practice is the right practice. If inspections were redesigned, as the next section suggests, the time per activity and therefore the cost would change. To address these limits, the program will repeat the time study for two weeks in each season over the next year and report the range, not just the average, when fees are next reviewed.

Using the Analysis Well

Cost is not the only consideration. Jones et al. (2004), analyzing 167,574 restaurant inspections in one state, found that mean inspection scores of restaurants that experienced foodborne disease outbreaks did not differ from those without outbreaks, and that the most commonly cited violations were not critical food safety hazards. A later Minnesota study found that particular violations, mostly involving contamination in the facility and food handling, were significantly more common at restaurants with outbreaks (Petran et al., 2012). Together the findings argue for spending inspector time where risk is greatest, through risk-based inspection frequency and focus on critical violations, rather than simply charging more for the current pattern of inspections.

The analysis supports four recommendations to the board: introduce a re-inspection fee of about $95, so that establishments with serious violations bear the extra cost; raise the plan review fee toward $390 for large projects, with a lower tier for small remodels; adjust temporary event fees to about $60; and review inspection frequency by risk category, so that inspector hours saved at low-risk establishments can be redirected to high-risk ones. Together, the fee changes would raise cost recovery to about 85%, with the levy continuing to fund complaints, outbreak investigations and education.

References

Jones, T. F., Pavlin, B. I., LaFleur, B. J., Ingram, L. A., & Schaffner, W. (2004). Restaurant inspection scores and foodborne disease. Emerging Infectious Diseases, 10(4), 688-692. https://doi.org/10.3201/eid1004.030343

Keel, G., Savage, C., Rafiq, M., & Mazzocato, P. (2017). Time-driven activity-based costing in health care: A systematic review of the literature. Health Policy, 121(7), 755-763. https://doi.org/10.1016/j.healthpol.2017.04.013

Petran, R. L., White, B. W., & Hedberg, C. W. (2012). Health department inspection criteria more likely to be associated with outbreak restaurants in Minnesota. Journal of Food Protection, 75(11), 2007-2015. https://doi.org/10.4315/0362-028X.JFP-12-148