The study presents the procedural cost of surgeries in Indian hospitals from the provider perspective. In India, some cost estimates are available for cataract surgery,12
but no information has been available about the cost of several other surgeries—LSCS, appendectomy, hernia repair and traumatic amputation—which, if performed at the right time, can save many lives. This study provides such cost estimates. Except for hernia repair, external fixation and CABG, the major direct cost component is labour cost, which varies from 7% (for LSCS at the charitable hospital) to as high as 81% (for lap cholecystectomy at the tertiary care hospital). In several other studies, labour cost dominated, for example, in Pakistan, 40% of the total cost of conducting LSCS was spent on staff salaries.21
The labour cost is lower at the charitable hospital than in other hospitals because the salary structure at this hospital is lower than the prevailing market rate.
Calculated from a representative sample, surgery-specific costs can be a basis for developing a fee structure or provider payment rate for both private and public hospitals in India. The cost information from this study can help hospital administrators understand the efficiency of their system and set charges (especially at private hospitals, which charge specific amounts for different medical services). The study also helps policymakers in setting or revising provider payment rates. When we compare our cost estimates with the RSBY rates, we find that the latter are roughly comparable with our estimates. However, it should be mentioned in this context that the RSBY rates include the cost of hospital stay, drugs and medical supplies, and diagnostic tests, whereas our estimates consider only the procedural cost; thus, the rates are not strictly comparable. Nevertheless, policymakers can use the results to set and revise the provider payment rate. Assuming that the payment rate might not include the capital cost, we did a recalculation excluding the capital cost from the operational cost of the operating theatre and from the procedural cost. We found that the costs of surgical procedures at the charitable hospital decline significantly excluding capital cost (LSCS from rupees 41 087 to 8838; hysterectomy from rupees 57 622 to 12 608). For other hospitals, the decline in procedural costs ranges from 9% to 46%. Therefore, this type of costing study helps policymakers to decide whether the reimbursement rate should include capital cost and/or indirect costs (overhead).
The study demonstrates that a detailed costing of hospital operations in India is feasible and this study helps hospital administrators to run their business more efficiently. The average costs of procedures at different operating theatres of the study hospitals can be used to monitor the efficiency of the hospitals and operational cost can help in better resource utilisation. For example, even though the operational costs of the surgical units of the charitable hospital and the private teaching hospital were not significantly different, there were huge differences in the average cost per procedure (rupees 41 607 at the charitable hospital vs rupees 5958 at the private teaching hospital). One of the reasons was the number of surgeries performed by these two hospitals during our study period. While there were only 319 procedures performed at the charitable hospital, the number was 2055 at the private teaching hospital. Therefore, the charitable hospital administrator should examine the reasons for the low caseloads at the operating theatre.
Even though it is feasible to conduct this detailed costing study in India, the biggest challenge lies in collecting data from the hospitals. Although accounts data can be accessed relatively easily, obtaining accurate activity statistics, stock-related data and price information is difficult. The operating theatres of the study hospitals (especially government hospitals) maintained statistics for the total number of surgeries performed every month but did not keep records of the types of surgeries performed; researchers had to go through the operating theatre registers and count the surgeries by type for the study period. Moreover, some hospitals did not have proper stock registers of equipment, furniture or instruments. Hence, improvements in the hospital recordkeeping could help researchers conduct cost studies in Indian hospitals, which in turn will help hospitals to run their system more efficiently.
Although very time-consuming because of the level of detail required, we used the micro-costing method because it provides a valid, reliable estimate of final costs.22
However, some limitations of the present study should be mentioned. First, the cost calculation was based on the average time taken for each procedure. Average time can differ from the actual time, especially in critical cases, but because it was not possible to track every case, average time was the best alternative. Second, we focused only on procedural cost, not on presurgery and postsurgery costs, because following up on patients was not possible, given our time and budget constraints and the hospitals’ recordkeeping systems. For the same reason, we chose only the most frequently performed procedures from the operating theatres of the study hospitals; we did not seek to calculate the cost of all procedures. Finally, donated items have not been considered in the cost calculation. Shepard et al16
have argued for the inclusion of donated items in cost analyses, since hospitals or wards with more donated items may appear more efficient than their peers, even though their actual efficiency may be the same. Because the study hospitals did not keep any record of donated items, we excluded them from our calculation, but the cost estimates of the study hospitals would have been different had they been included.