Application of a Cost Calculation Approach in Medical Oncology: Case of Hassan Ii University Hospital in Morocco

doi:10.21203/rs.3.rs-2442116/v1

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Application of a Cost Calculation Approach in Medical Oncology: Case of Hassan Ii University Hospital in Morocco

https://doi.org/10.21203/rs.3.rs-2442116/v1

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published 11 Aug, 2023

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Background: Text for this section. In Morocco, hospitals do not have cost accounting systems that allow them to produce reliable budget forecasts and to know and justify the costs of their operations. Moroccan hospitals are thus among the public organizations that do not know the cost of their services.

Faced with the lack of data on the cost of care for cancer patients, this research aims to implement an approach to calculate the cost of services provided at the level of the medical oncology department of the Hassan II University Hospital in Fez. The objective is to provide data that can be used in the pricing and financing process of the different services provided in medical oncology.

Methods: In this research work, we opted for a qualitative approach through a case study. Two main qualitative data collection tools were used: observation and document analysis. We used mainly Microsoft World for text entry and Excel for data processing to determine costs and related statistics

Results: The result of this study shows the possible application of an approach that follows a traditional approach of cost calculation. Two main methods were mainly used, namely the volume-based allocation method and the RVU method.

Cost calculation

Hospital

RVU method

Medical oncology

The hospital sector has been considered excessively bureaucratic, rigid, costly, non-innovative and with an overly centralized hierarchical structure. Hospital management methods are mainly oriented towards the search for state subsidies. Similarly, the administrative and budgetary procedures in force have not encouraged the actors to take charge of their institutions.

In this respect, the management of hospitals has also been strongly criticized by the New Public Management (NPM) movement. Thus, the hospital reform undertaken during the 1980s in several high-income countries aimed to control hospital expenditure, through the deployment of accounting and financial control tools in these establishments, as well as the accountability of managers and health professionals. The development of management accounting in these countries is older, particularly in the Anglo-Saxon countries, where the academic literature in this field is very rich. Information on the costs of hospital services has been used both by funders to correctly establish fee schedules and funding for health care providers, and by hospital managers to ensure the financial health of their institution by comparing the costs of health care services with the payments received.

Costing in healthcare is currently one of the most important tools for hospital decision-makers in high-income countries, allowing them to efficiently manage health care facilities and their structures. The main objectives of the hospital cost accounting system:

- To identify the costs and revenues of the various functions involved in the production of care, whether they are clinical, medico-technical or administrative functions;

- To provide management control with forecasting information based on the results of cost accounting;

- To provide management with the information necessary to make management and organizational decisions.

The financial difficulties and limited resources allocated to the health system in low- and middle-income countries are an obstacle to the implementation of hospital financing reforms. It is true that cost accounting has become an established management tool, particularly with the introduction of activity-based financing, which promotes efficiency and hospital production.

Moreover, the implementation of a costing system requires significant human and technical resources, in particular an information system gathering complete clinical data by patient. However, the cost of acquiring and appropriating information systems is one of the obstacles to the introduction of hospital cost accounting in low- and middle-income countries.

In the absence of a hospital cost accounting system in Morocco, data from the billing system cannot be used to determine the real cost of the care provided. However, measuring the cost requires taking into consideration all the resources used to care for patients.

The question of how to calculate the cost of medical procedures is an innovative one in middle and low-income countries where there are no formal costing systems. Indeed, the information obtained from studies that focus on the costing of medical services can partially fill the data gap related to the absence of hospital cost accounting.

In this respect, this research aims to explore an approach to calculate the costs of the services provided in the medical oncology department of the Hassan II University Hospital of Fez.

The services object of cost calculation is presented in the following table:

Table 1 services provided in object of cost calculation

Day Hospital Unit (U-HDJ)

Hospitalization Unit (U-HOSP)

Chemotherapy act

Blood transfusion

Ascites puncture

injection of the drug

Inpatient day

The allocation of direct expenses does not pose a problem insofar as the UHC billing system allows direct tracking of patient consumption of drugs and ancillary products. The proposed calculation approach is limited to the presentation of the method of allocation of indirect costs.

In this research work, we opted for a qualitative approach through a case study. The interest that a qualitative study can have for our research is justified by the gaps in current knowledge on the phenomenon investigated. Certainly, there is research in the literature on the knowledge of the costs of health care services, but in Morocco few studies have focused on the implementation of a method for calculating the costs of services provided in medical oncology at a university hospital.

The choice of the medical oncology service is justified by the following elements:

The processes of care at the level of the medical oncology service of Fez are well structured;
The adhesion of the staff of the oncology service and their agreement to use different data (statistics, activities and financial), necessary to conduct this study. Thus, we carried out a one-month internship in the medical oncology department;
Medical information and statistical data are well maintained by the department's staff.

Two main qualitative data collection tools were used: observation and document analysis. Through participant observation, we freely asked questions of the study participants in order to elicit the desired information. This observation allowed us to identify the activities, actors and resources that play a role in the care process of cancer patients in the medical oncology department of the Hassan II University Hospital in Fez.

The visit of the premises was carried out several times. We were able to see all the rooms of the day hospital and the hospitalization unit, the materials available, the staff (medical and paramedical) and the agents involved in the different activities of the oncology service.

The use of data from the different documents is often relevant in the case study. We used mainly activity data (statistics) and financial data from the oncology department. These data are mainly contained in computerized databases (Word and Excel files), but also in paper media (registers and records). The reference year used for data processing is 2021.

We used mainly Microsoft World for text entry and Excel for data processing to determine costs and related statistics.

It was possible to apply a costing approach for medical oncology through an analysis process consisting of three steps.

First step: Identification and allocation of indirect costs in the "medical oncology" analysis section

In the first step, we identified and allocated all the indirect costs (incorporable and supplementary) to the medical oncology analysis section (ONCO SA), which is the object of the cost analysis, by using the cost drivers of this step.

We have tried to keep the current titles of the expenses as they are presented in the accounting plan of the University Hospital. The expenses of the subcontracting agents concern the cleaning of buildings, stretchering, guarding and the outsourcing of medical secretarial services. The following table shows the basis for charging indirect costs and the total costs charged to the ONCO SA.

Table 2 Total costs charged to the " ONCO SA "

Title of expenses	Basis of allocation for the first step	Amount
Subcontractor expenses	Day worked	905 174,40
Laundry and linen costs	Kg of treated linen	13 150.90
Purchase of supplies	Total value of supplies delivered	63 069.04
Food costs for patients and medical staff	Total on-call (staff) Sick Day	361 294,90
Disinfection of premises	Liter of disinfectant	17 497.23
Treatment of hospital waste	Kg of treated waste	48 172.80
depreciation of tangible capital assets	Annual allocation to departments	540 564,85
Purchase of medical gases	Number of departments	67 677.33
Postage and telecommunications	Number of departments	19 423.61
Purchases of non-stackable supplies	Number of departments	260 185,00
Personnel costs	Total annual salary	5 381 675,06
Insurance and Worker's Compensation	Number of staff	11 404.02
Salary processing for staff	Number of staff	2 640,00
		7 691 929,14

Step 2: Allocation of indirect costs charged to the oncology department (SA ONCO) between the Day Hospital Unit (U-HDJ) and the Hospitalization Unit (U-HOSP)

In the second step, we allocated the various indirect expenses retained in the first step to the functional units making up the ONCO SA (U-HDJ and U-HOSP), using the allocation bases from the second step.

The following table presents the allocation bases used in this second step and the total costs charged to the two units (HDJ and HOSP) constituting the SA ONCO:

Table 3 Total costs charged to U-HDJ and U-HOSP

Nature of expenses	Basis of allocation for the second step	Amount charged U-HDJ	Amount charged U-HOSP
Overheads (water, electricity, telecommunications, etc.)	Total number of shifts worked	235 533,35	111 752,59
Expenses of subcontractors	Number of officers assigned	684 248,76	220 925,64
Laundry and linen costs	Number of inpatient beds	4 934,96	8 224,94
Purchase of supplies (logistics store)	Total number of shifts worked	32 671,35	30 397,69
Patient feeding and staff costs	Total number of shifts worked	74 520,00	94 872,50
Disinfection of premises	Liter of disinfectant	10 510,29	6 986,94
Treatment of hospital waste	Total number of shifts worked	32 671,35	30 397,69
Depreciation of tangible capital assets	Annual allocation (unit specified)	271 370,71	269 194,14
Total other operating expenses (a)		1 346 460,77	772 752,13
Personnel costs (salaries and allowances)	Total number of shifts worked	3 842 138,75	2 502 187,92
Insurance and Worker's Compensation	Total number of shifts worked	7 734,34	3 669,68
Salary processing for staff	Total number of shifts worked	1 952,22	567,78
Total staff costs (b)		3 851 825,31	2 506 425,38
Total cost (a) + (b)		5 198 286,08	3 279 177,51

The distribution of total costs charged to the "HDJ" and "HOSP" units according to the nature of the expenses (personnel or other operating expenses) is presented in the following graph:

Step 2: Third step: Calculation of the costs of medical oncology services

Calculation of the cost per day of hospitalization (hospitalization unit)

The cost of a day in the inpatient unit of the oncology department is calculated as the total cost charged to this unit based on the total number of inpatient days in 2019.

Table 4 Cost per day of hospitalization

Total cost charged to the HOSP unit (a)	Number of Inpatient day (b)	cost per day (a)/(b)
3 279 177,51	9125	359,36

Calculation of the cost of medical procedures performed in the HDJ unit

In addition to chemotherapy, which is the main activity of the HDJ unit, other medical acts are also carried out: transfusion, ascites puncture and administration of medication (mainly morphine infiltrations).

In this context, the method of relative value units is better adapted to the context of the study, because it allows us to differentiate and position the chemotherapy act in relation to the other medical acts performed at the HDJ level.

To do this, we first tried to measure and compare the complexity of the other medical acts in relation to the chemotherapy act by using weighting units. Thus, the total number of relative units produced by the HDJ unit is the result of this first step.

In a second step, we divided the total costs previously allocated to the HDJ unit (personnel and other operating expenses) over the total number of relative units produced by that unit to obtain the cost per relative unit.

In a final step, the cost of the different medical procedures (excluding direct expenses: medical consumables and drugs) was obtained by multiplying the relative value attributed to each procedure by the cost of the relative unit. We will present these different phases in turn:

Referring to some works (S.Finkler, 1999 and B.J.Yun , 2015) , we implemented a methodology in order to determine the relative values of medical procedures used at the HDJ level. The complexity of the medical procedure and the time required to perform it are the variables included to assign relative weights to the different procedures.

Determination of time spent performing medical procedures

The time spent by a health professional to perform a procedure is undoubtedly an important determinant of its value. The following table presents the average time spent performing medical acts determined from empirical observations made at the HDJ.

Table 5 Time spent performing medical acts

Procedure	Number of observations	Average time in minutes
Chemotherapy act	20	147 mn
Blood transfusion	10	95 mn
Ascites puncture	5	103 mn
injection of the drug	10	16 mn

The table shows that the average time required to perform a chemotherapy procedure at the HDJ level exceeds that for each of the other medical procedures.

Measurement of the complexity of the different procedures

the time required to perform a medical act does not fully describe the professional effort required. While in some cases the time taken to perform the procedures is almost equal, the degree of intensity and effort required per unit of time varies considerably from one procedure to another. The value of a procedure will thus have to take into account the differences in complexity. This includes mainly two elements:

* The intensity of the physical and mental effort involved;

* The diagnostic skills and clinical judgments required.

To take into account the degree of complexity of the different procedures, we asked 5 physicians in the medical oncology department to rank on a 10-point scale the complexity of the different procedures performed in the HDJ unit. The following table presents the average scale obtained, using the medical evaluation of the complexity of the different acts.

Table 6 Complexity attributed to the medical acts performed at the HDJ level

Procedure	Complexity factor (Scale from 1 to 10)
Chemotherapy act	7,5
Blood transfusion	6
Ascites puncture	5
injection of the drug	3

Analysis of the table shows that medical staff rank the complexity attributed to the chemotherapy procedure as the most important. However, the complexity per unit of time of a medical procedure thus takes into account both the time spent and the complexity factor assigned to the procedure.

Determining the relative value assigned to each procedure

To determine the value of each medical act, we assigned a value of 1 to the chemotherapy act, which corresponds to the main product of the HDJ. The value of the other procedures is determined by evaluating the complexity per unit of time of each of them in relation to the chemotherapy procedure. The following table presents the method for determining the relative values of the other procedures.

Table 7 Relative value attributed to medical acts performed at the HDJ level

Procedure	Average time in mn (t)	Complexity factor (c)	Complexity per unit of time (t*c)	Relative value (with chemotherapy act as standard reference =1.0)
Chemotherapy act	147	7,5	1102,5	1
Blood transfusion	95	6	570	0,52
Ascites puncture	103	5	515	0,47
injection of the drug	17	3	51	0,05

Determination of the total number of relative value units

The total number of relative value units attributed to each medical procedure is determined by multiplying the number of procedures by the relative value attributed to the procedure:

Table 8 Total number of RVUs attributed to medical acts performed at the HDJ level

Procedure (act)	Number of acts (a)	Relative value attributed to the act (b)	Total number of RVUs (a)*(b)
Chemotherapy act	15 476	1	15 476,00
Blood transfusion	788	0,52	409,76
Ascites puncture	306	0,47	143,82
injection of the drug	540	0,05	27,00
			16 056,58

Calculation of cost per relative unit of value

To obtain the cost per unit of relative value of the various medical acts carried out at the HDJ level, we divided the total cost of the charges (personnel and other expenses) charged to the HDJ on the total number of relative units produced:

Table 9 Calculation of the cost per unit of relative value

Total cost (personnel and other expenses)	Total number of RVUs	cost per RVUs
5 198 286,08	16 056,58	323,75

Calculation of the cost of medical procedures performed in HDJ

Finally, the cost of the various medical acts is determined by multiplying the cost per relative unit by the relative value attributed to the act.

Table N°10 Calculation of the cost of medical procedures performed in HDJ

Nature of the acts	cost per RVUs	Value attributed	Cost of the acts
Chemotherapy act	323,75	1	323,75
Blood transfusion	323,75	0,52	168,35
Ascites puncture	323,75	0,47	152,16
injection of the drug	323,75	0,05	16,19

The cost of a chemotherapy procedure is equal to the cost per relative unit since the procedure has been assigned a value of 1.

We have proposed an approach for calculating the costs of medical oncology services. The choice of a traditional costing approach instead of an activity-based approach is explained by the following reasons:

Traditional costing methods (volume-based allocation, RCC, RVU) are widely used in the international hospital context compared to activity-based methods (ABC and TDABC)

The objective of activity-based methods is to obtain more relevant costs through a better allocation of indirect costs. Studies on the application of the ABC or TDABC method are mainly based on a comparative vision with traditional costing methods in order to highlight the shortcomings and advantages obtained following the implementation of an activity-based approach.

On a practical level, we found difficulties in allocating operating expenses to activities. Medical oncology is characterized by the presence of many activities. The use of several cost drivers will make the model more cumbersome and complex.

The following figure 1 presents the conceptual model necessary to apply the two costing approaches in the hospital context: traditional and activity-based:

In view of the theoretical and practical obstacles to the implementation of the activity-based costing approach presented above. We have opted to use a traditional approach based on simple and accessible allocation and costing methods, offering the possibility of modeling according to the field of study.

The following figure 2 shows the model used to calculate costs in an oncology department. It should be noted that modeling is necessary to take into account the organizational specificities and management modes of each oncology department:

The objective evaluation of each of the steps presented above allows the following comments to be made:

The proposed cost calculation approach is considered simple to implement insofar as it is based on a top-down approach that consists of distributing indirect costs over the SA ONCO (oncology department) and then over the HDJ and HOSP unit as well as over the object of the cost (chemotherapy act, JH...) using volume distribution bases.

Concerning the capacity of the model to produce precise costs, we can admit that the methodology developed is constituted by several stages in each of which different modalities of allocation of indirect charges are used. The allocation of indirect costs in our study context was very delicate and is also marked by a significant degree of subjectivity.

Of course, the cost calculation process developed is the combination of several calculation methods and accounting treatment. The determination of the cost per service, per unit, and then per medical act will be able to produce data helping the management of the oncology service. In other words, the methodology developed invites stakeholders to question their organization, their information system and their management method.

Hospital reforms are directed towards rationalization and better use of resources in health care services in order to reduce costs while maintaining or improving the quality of care provided to patients.

The analysis of the Moroccan hospital context allows us to identify a number of recommendations for the success of a hospital cost accounting project:

The hospital organization in Morocco still suffers from the ills of professional bureaucracy. It is therefore necessary to promote decentralized management practices by granting significant management leeway to the players and anchoring a culture of accountability;
The revision of the nomenclature of professional acts and the coding of diagnoses of hospital interventions is essential in order to follow the evolution of medical practices and improve the quality of care and the efficient use of resources;
The implementation of an integrated information system is a priority. This system must be oriented towards the description of medical activity (classification and pricing system), and integrated in terms of secure internal control practices.
The development of hospital financing methods. In Morocco, the current financing of public hospitals by line budget does not encourage actors to be more efficient and does not promote hospital efficiency. Foreign experiences have shown that the method of financing used has a significant influence on hospital management. Furthermore, it is essential that the reimbursements obtained are correlated to the volume and nature of hospital - activity (as in the case of DRG-based budgeting and activity-based financing).
The general accounting which will become more and more an obligation allowing to guarantee the transparency of the hospital economic operations. General accounting should be the primary source of data for hospital management. Efforts must be made to ensure harmonization and combination of budgetary accounting practices with general accounting with the aim of integrating general accounting into the daily practice of managing the economic operations of hospitals.

In the absence of a hospital cost accounting system, we tried to propose an approach to calculate the costs of a chemotherapy act performed at the level of the medical oncology department of the university hospital of Fez. For this purpose, it was necessary to understand the organization and the course of the activities of the medical oncology service and to measure the resources mobilized to provide the various care services.

One of the main results of the study is the possible application of the costing approach for medical procedures performed in the medical oncology department. This approach is mainly based on a traditional costing approach.

Two main methods of allocation and calculation of costs have been used. One is the volume-based allocation method and the other is the RVU method.

The data on the costs of medical oncology services will be used to develop new national tariffs and to feed hospital management tools, in particular planning, budgeting and hospital management charts.

Authors’ contributions

Both authors contributed equally to the conception and design of the study.

Funding

This study received no specific financial support.

Availability of data and materials

Not applicable.

Ethics approval and consent to participate

Not applicable.

Competing interests

The authors declare that they have no competing interests.

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Diagram 1 is available in the Supplementary Files section.

No competing interests reported.

daigram1.png
Diagram 1 Distribution of total costs between the HDJ and HOSP units

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You are reading this latest preprint version

Application of a Cost Calculation Approach in Medical Oncology: Case of Hassan Ii University Hospital in Morocco

Status:

Journal Publication

Version 1

Abstract

Figures

Introduction

Methods

Result: Summary Of The Proposed Costing Approach

First step: Identification and allocation of indirect costs in the "medical oncology" analysis section

Step 2: Allocation of indirect costs charged to the oncology department (SA ONCO) between the Day Hospital Unit (U-HDJ) and the Hospitalization Unit (U-HOSP)

Step 2: Third step: Calculation of the costs of medical oncology services

Discussion

Conclusion

Declarations

References

Diagram

Additional Declarations

Supplementary Files

Status:

Journal Publication

Version 1