The cost of the district hospital: a case study in Malawi

Abstract

Described in an analysis of the cost to the Ministry of Health of providing district health services in Malawi, with particular emphasis on the district hospital. District resource allocation patterns were assessed by carefully disaggregating district costs by level of care and hospital department. A strikingly low proportion of district recurrent costs was absorbed by salaries and wages (27-39%, depending on the district) and a surprisingly high proportion by medical supplies (24-37%). The most expensive cost centre in the hospital was the pharmacy. A total of 27-39% of total recurrent costs were spent outside the hospital and 61-73% on hospital services. The secondary care services absorbed 40-58% of district recurrent costs. Unit costs by hospital department varied considerably by district, with one hospital being consistently the most expensive and another the cheapest. A total of 3-10 new outpatients could be treated for the average cost of 1 inpatient-day, while 34-55 could be treated for the average cost of 1 inpatient. The efficiency of hospital operations, the scope for redistributing resources districtwide, and the costing methodology are discussed.

PIP: A detailed analysis of costs in district hospitals in Malawi illustrates that estimation is possible, in spite of the lack of separation between rural facility and hospital expenditures, the poor availability of salary and wage information, and the difficulty in obtaining activity statistics. Routine analysis could be performed with some minor adjustments in the current accounting system. The analysis provided meaningful efficiency measures of total unit costs per outpatient, per inpatient, per inpatient day, and cost of food per inpatient day. Results of the examination of allocation of resources showed that resource utilization in staff time and drugs varied widely between different hospitals and between inpatients and outpatients. Resources should not be apportioned based on an assumed ratio of cost per outpatient to cost per inpatient day. This analysis was conducted among a range of types of district hospitals in order to allocate all costs to departments that provided direct patient care. Diagnostic and support departments were separated, since they provide services to direct care departments. An estimation procedure was used to apportion costs between hospital departments and between hospital and rural facilities. The calculation of the costs of drugs and medical supplies was reflective of annual expenditure and hospital order records from the pharmacy and monthly requisitions from health centers. Total cost included the prices charges at the central medical store and the quantities obtained regardless of whether these were donated. Vaccine costs included cost, insurance, and freight. Departmental records and vehicle logbooks provided data on x-rays and vehicle costs. Salaries distinguished between senior and junior staff. The results revealed low recurrent costs for salaries and wages (27-39%) and high costs for buildings and equipment (46-57%). Costs of drugs and medical supplies accounted for 24-37% and vehicle costs accounted for 11-18% of total recurrent costs. By department, the pharmacy was the most expensive (25-38% of total recurrent costs). Rural services absorbed 27-39% of recurrent costs. Hospital costs reflected primary health care services as well as secondary care services, which were 40-58% of district recurrent costs. The study identified areas where improvements could be made in time allocation and redistribution of resources.