Cost Benefit Analysis of Computerization in Hospitals: A Marginal Cost Approach

Dr. Haroon KhanAssociate Professor

Department of PathologyPakistan Institute of Medical Sciences (PIMS)

Islamabad

Laboratory Director Kulsum International Hospital

Blue Area, Islamabad

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Objective

•To conduct a COST BENEFIT ANALYSIS of COMPUTERIZATION in hospitals.

•Study was carried out in Pakistan, Philippines and Afghanistan.

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Observed Hospital• PAKISTAN:• Pakistan Institute of Medical Sciences (PIMS) –

Computerized • Benazir Bhutto Hospital (BBH) – Manual • PHILLIPINES:• Mambusao Hospital – Computerized • Bailan District Hospital – Manual • AFGHANISTAN:• French Medical Institute for Children –

Computerized • Bhamyan Hospital – Manual

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Introduction

•Computerization in Healthcare;An active target of economic feasibility studies.

•In Pakistan, hospitals even in major cities DONOT have this facility.

•Potentiality of higher Inaccuracy rates, Critical Delays, and Recording Errors.

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Previous Contribution

Many people done a great job on this subject;•Mishelevich et al, 1979 – defines Cost Benefit Analysis

•Mannle, 1997 – Reduced Transaction, Improved Retrieval,

Improved Clinical Decision Making •Bates et al, 1999 - Prospective Randomized Controlled Trial

•Bernstam et all, 2000 – CPRs (Com. Patients Records)

•Wang et al, 2003 – Cost Benefit Analysis

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Previous Contribution (Cont’d……)

•Kuperman and Gibson, 2003 – CPOE(Computerized Provider Order Entry)

•Shekelle et al, 2006 – HIT & EHR(Health Information Tech & Elect. Health Records)

•Patil et al, 2008 – EMR System•Himmelstein et al, 2010 – Quality & Cost•Zlabek et al, 2011 – Effects of EHR &

CPOE

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Tests/Procedure - Studied

Four types of Tests at each hospital studied:•Blood Glucose•Urine R/E•Blood Urea•Complete Blood Count (CBC)

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Costing for Study

Costs going into each test:• Salary – Technician’s and

Pathologist

• Consumables – Reagents, Chemicals

• Laboratory Equipment• Stationary – Papers & Printings

• Computerization – – Hardware (Fixed) – Software (Maintenance)

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Methodology

Method used for analysis:Marginal Costing

Technique“Holding other things

constant, it looks at costs that are incurred at margin.”

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Methodology (Cont’d…….)

Cost Apportioning Technique:•To allocate each type of Cost to each type

of Test•Ratio of Total Number of glucose tests to

total tests used to apportion each cost . •Similarly applied to the other three test

types

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Methodology (Cont’d…….)

•Marginal Cost (i): Total of the Apportioned Costs(monthly)

•Average Number of tests in a month.

Where;(i) = (Glucose, Urea,Urine R/E, CBC)

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Results•Computerized solutions for Laboratory

test recording and reporting lower the per unit costs of all tests substantially.

•Economies of Scale.•Additional costs of computerization

(installation and maintenance) do not hamper this cost-saving effect.

•The salaries of additional staff used for manual recording and reporting do not allow for an efficient number of tests to be performed.

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Results (Cont’d……….)

Cost/ 100 Tests (in USD) Comparison b/w PIMS & BBH

PIMS BBH Glucose 15.21 29.96 Urine R/E 27.59 30.65 CBC 24.84 26.70 Blood Urea 13.67 14.74

Glucose Urine R/E CBC Blood Urea0

5

10

15

20

25

30

35

PIMS BBH

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Cost Breakdown of Glucose Test @ BBH (Manual)

Total Cost/100 Tests - 29.96 USD

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Cost Breakdown of Glucose Test @ PIMS (Computerized)

Total Cost/100 Tests – 15.21 USD

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Results (Cont’d……….)

Cost/100 Tests (in USD) Comparison b/w FMIC & Bhamyan

FMIC Bhamyan Glucose 716.17 1613.65 Urine R/E 916.93 1166.23 CBC 804.08 1269.96Blood Urea 798.17 1706.44

Glucose Urine R/E CBC Blood Urea

0

200

400

600

800

1000

1200

1400

1600

1800

FMIC Bhamyan

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Future of Study• This study lays the groundwork for conducting

Marginal Cost Studies in both other hospitals, and other departments.

• A similar approach using CAT analysis can be used to gauge the cost advantage of introducing any type of computerized solutions in the health sector.

• Similar analyses can be carried out in other departments at medical institutions:- Radiology- Clinical Studies- Remote Health Service systems- And others….

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Development of A Cost Analysis Widget

Tool will allow health sector administrators andPolicy developers to plug in their cost figures

andGet immediate and structured results including:

1. Cost per test data2. Graphical/Visual breakdown of results3. Sensitivity Analysis of the results (for variation in the

key cost factors).4. Cost-Benefit Analysis if revenues/utility of improved

services are added to the analysis.

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Development of A Cost Analysis Widgetost Analysis Widget

We intend to develop an electronic applicationbased on our cost calculation template

Total Test Chemistry Microbiology Serology Immunology Haematology Urea Glucose CBC

January 29,998 11,843 1,754 265 0 12,519 464 535 1,444Percentage of Total 39.479% 5.847% 0.883% 0.000% 41.733% 1.547% 1.783% 4.814%

Urea Glucose CBCPercentage of Relevant Test 3.918% 4.517% 11.534%Percentage of Combination of Tests 10.117%

Number of Lab Patients 1,897Total Number of OPD Patients 6,252Percentage Lab Patients out of OPD Patients 30.34%

Nodes used 12Total Nodes 174Percentage 6.90%

Calculation for % of Patients using Lab out of the Total Number of OPD Patients

Calculation for the % of Tests for each deptarment out of the total number of Tests conducted

Calucaltion for the % of Tests for each of the Sub Tests, Urea, Glucose, CBC, Urine RE, from their respectiveTotal Tests.

Calculation for % of Nodes used for the Pathology Departments out of Total Number of Nodes used in the Hospital

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Comparison - PakistanCost Comparison between Computerized and Non-Computerized (Manual) Testing.

Costs (USD) ComputerizedPIMS %age of total cost Manual

BBH %age of total cost

Laboratory reagents, syringes, cotton wool, test tubes $6.50 32.87% $6.50 24.43%

Laboratory Registration Counter costs (Monthly) $0.82 5.38% $1.08 4.08%

Laboratory Staff Salaries (monthly) $2.54 16.68% $12.60 47.34%

Laboratoryequipment $1.10 7.26% $3.80 14.27%

OPD Registration Counter Costs (Monthly) $0.64 4.20% $2.63 9.88%

Cost of Computerization (Monthly) $1.02 6.74% Xx xx

Fixed Costs for Computerization $0.58 3.82% Xx xx

Total Costs $13.20 $26.61

Total Number of Glucose Tests 5,490 2,518

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Comparison - AfghanistanCost Comparison for a Glucose Test (Computerized vs Manual).

Costs (USD) Computerized (FMIC) Manual (Bhamyan)

Laboratory Solutions and Chemicals 181.9 114

Syringe 5.2 26

Monthly Costs Laboratory Registration and Report Counter 27.8 xx

Monthly Staff Salaries Laboratory 207.5 352

(Apportioned) Costs of Laboratory Equipment 2,573.20 1,931

Monthly Costs Out-Patient Registration 9.2 2

Monthly Costs of Computerization 802.6 xx

Fixed Costs of Computerization 23.9 xx

OPD Costs 0.3 27Total Cost 3,832 2,451Number of Glucose Tests 535 193

Cost Per Hundred Tests 716.18 1613.65

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Comparison - PhilippineCost Comparison for a Glucose Test

Costs (USD)

Computerized (Mambusao)

Non Computerized (Bailan)

Laboratory Solutions and Chemicals 14 64.8

Syringe 108 xx

Monthly Costs Laboratory Registration and Report Counter 29 190.09

Monthly Staff Salaries Laboratory 9309 236.44

(Apportioned) Costs of Laboratory Equipment 846 2516.79

Monthly Costs Out-Patient Registration 9.2 xx

Monthly Costs of Computerization 175 xx

Fixed Costs of Computerization 2071 xx

OPD Costs Xx 3

Total Cost 12561.2 3011.12

Number of Glucose Tests 535 429

Cost Per Hundred Tests 2347.89 701.89

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Sensitivity Analysis (Effect of Fixed Costs of Computerization for PIMS)

Sensitivity Analysis (Effect of Fixed Costs of Computerization for PIMS)

Monthly Fixed Comp. Costs Cost per hundred Glucose Tests Variation Size

137341.34

x0.25

274523.92

x0.5

411818.11

x0.75

549015.21

Original Figure

686313.47

x1.25

823512.31

x1.5

960811.48

x1.75

1098010.85

x2.0

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Sensitivity Analysis (Effect of Fixed Costs of Computerization for PIMS)

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Acknowledgement

•IDRC – Int’l Development Research Centre, Canada

•PANACeA – PAN Asian Collaboration for Evidence-based

e-Health Adoption and Application.

•Mr. Asim Ansari for presentation.

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Have a Nice Day……..