The Achham district where Bayalpata Hospital is located is historically one of the most remote and impoverished districts with some of the lowest-performing health indices in the country.(12,13) Nyaya Health Nepal manages the government-owned Bayalpata Hospital in Achham through a public-private partnership with the Ministry of Health and Population. Bayalpata Hospital is a 50 + bed community hospital, and provides approximately 100,000 inpatient, outpatient, and emergency patient visits per year, while also managing community health care programs throughout its catchment area. In 2017, Bayalpata Hospital became one of the first PPP hospitals empaneled in HIP. HIP enrollment in the catchment area was limited to less than 10% during the first year due to limited mobilization, awareness of insurance, and poor service availability.(14) However, more recently, enrollment is improving as the district health insurance team is expanding its efforts.(15)
Our objective was to project unit annual operating costs of Bayalpata Hospital and to compare potential reimbursement rates per HIP guidelines. Unit costs were calculated for the final cost centers including: average per visit cost of outpatient care; average per bed day and per discharge cost of inpatient care; and, average per visit cost of emergency department care. Actual costs during a full fiscal year period were used to ensure inclusion of any seasonal cyclic variation. Calculation of potential health insurance reimbursements were based on the latest schedule approved by HIP.(16)
We performed retrospective costing analysis for all costs at Bayalapata Hospital for the period between July 16, 2017, and July 15, 2018. We collected service delivery data from the NepalEHR electronic health record platform used at Bayalpata Hospital(17,18) (numbers of visits, bed days, surgical time, average length of inpatient stay, diagnostic tests, medication prescriptions, and other procedures). We collected cost data from organizational financial records, fixed asset registers, and employee records, including direct costs (personnel, medicines, medical consumables, and depreciation of medical equipment) and indirect costs (staff benefits, utilities, facility and office supplies, patient food and reimbursements, and building and equipment depreciation).
We utilized a “top-down” step-down costing methodology described by the Joint Learning Network.(19) This approach ensures that all costs - recurrent or capital in nature - were fully captured over the measurement period. Initially, intermediate cost centers were defined in three categories, including:
Administrative services – including general administration, staff management, financial management, procurement & logistics, waste management, security and maintenance, information technology, medical records, patient navigation, and ambulance services;
Clinical support services – including pharmacy, laboratory, imaging (x-ray, ultrasound), major surgeries (cesarean section, hernia repair, hydrocele repair, laparotomy, trauma and wound debridement, open reduction and internal fixation, tibial intramedullary nailing, and other orthopedic plating and fixation), and minor procedures (wound care, incision and drainage, dressing, foreign body removal, suturing, reduction and casting/splinting, contraceptive implant); and
Clinical services and programs – including outpatient services (general, maternal health, pediatric, dental, and mental health), inpatient services (internal medicine, obstetric, general surgical, orthopedic trauma, isolation, tuberculosis), and emergency services.
The costing analysis consisted of the following four steps. First, all direct costs were attributed to intermediate cost centers based on utilization of resources (e.g. personnel or consumable utilization). Personnel costs include salary and other regular benefits constituting monthly employee payroll. Where employees worked in more than one cost center, the apportionment was done as per duty roster assignments. For supervisory functions that do not have a fixed duty roster assignment, apportionment was done based on services data. To calculate the cost of surgical procedures, timestamp data from the operating theater register was used. Medicines and consumables usage data was collected from the hospital’s inventory management system. For medicines dispensed from the pharmacy, service utilization data was used to allocate medicine and consumables costs to intermediate cost centers. Medical equipment depreciation was calculated based on market replacement costs and assumed useful life of 5–8 years based on a straight-line depreciation schedule with zero salvage value.
Second, all indirect costs were attributed to intermediate cost centers based on relative use (e.g., staff benefits were distributed based on number of employees in each department). All indirect costs including staff benefits, utility expenses, repairs and maintenance, and patient food and reimbursements, were based on actual expenses incurred during the period of analysis. These costs were allocated to cost centers using programmatic allocation statistics such as number of patient visits, number of bed days, number of employees, and floor space occupation. Both building and non-medical equipment depreciation were based on number of years of useful life recommended by the Accounting Standards Board of Nepal(20) and a straight-line depreciation schedule with zero salvage value. The direct and indirect costs attributed in the first two steps include both ‘unshared’ costs applicable to a specific cost center, as well as ‘shared’ costs of resources used by more than one cost center.
Third, administrative service intermediate costs were allocated downstream to either clinical support services or clinical services and programs. For example, waste management costs were allocated based on floor space, whereas financial and procurement management costs were allocated based on the proportion of direct costs already allocated to clinical support services or clinical services and programs.
Fourth, all clinical support service costs (including direct, indirect, and allocated administrative service costs) were distributed to clinical services and programs (e.g. laboratory costs were distributed based on number of orders made by a clinical service unit). Hence, the final cost centers consist of only clinical services and programs for which the unit costs are calculated. The total final cost center costs in outpatient, inpatient, and emergency categories were used as the numerator in calculating unit costs. Final unit costs included cost per outpatient visit, cost per inpatient discharge, cost per inpatient bed day, and cost per emergency visit. Unit costs of clinical support services - cost of major surgeries, lab tests, radiology, and pharmacy - were obtained after step three, but prior to allocation of clinical support costs to final cost centers in the last step.
HIP rates utilized were as per national guidelines(6) and the HIP payment schedule.(16) Bundled reimbursements are constituted as a single payment intended to be inclusive of all consultation, medications, and diagnostics for a given diagnosis – e.g. inpatient treatment of pneumonia. Fee-for-service payments are paid individually for specific consultations, diagnostics, or other treatments. Unit costs calculated for Bayalpata Hospital were compared to comparable line items included in the HIP payment schedule.
Finally, given the compulsory nature of the HIP per the National Health Insurance Act,(21) we projected the potential coverage of overall hospital expenses by HIP assuming all patients were enrolled in HIP during the period of analysis, and full reimbursement was received from HIP for all services delivered. To do so, we used the HIP payment schedule and compared these to known services delivered at Bayalpata Hospital during the period of analysis to map both bundled and fee-for-service payments to final cost centers. Bundled payments were applicable for surgical and medical management of inpatients, whereas fee-for-service payments were applicable to all outpatient, remaining inpatient and emergency care categories.
All costs were initially measured in Nepalese rupees (NPR) and then converted to US dollars using a conversion rate of NPR104.4 to $1.00 USD, the average exchange rate for the measurement period.(22)