“This hospital is really costly" is the commonest complaint voiced by a patient when he avails the services of a hospital. The expression has been taken quite seriously in various countries including Thailand and efforts are being made to control the cost of healthcare delivery by implementation of cost containment measures or standardisation of price.

The interest of corporate players in the private healthcare delivery model is on the surge and more and more private spend on the healthcare infrastructure has been projected.

The increase in spend has resulted in better hospitals in terms of infrastructure, technology and treatment of tertiary and quaternary ailments in the country. Unfortunately, the private spend has shown regionalisation and this has resulted in rise in competition in the tertiary and quaternary care segment.

Even if the corporate don't look forward to the returns on the investment, they want their hospitals to be financially self-sustainable models.

Due to rapid changes in the technology and pressure to acquire these technologies, hospitals need patients and patients in turn want a very cost-effective hospital.

For a hospital to increase the throughput, it is very important that it provides quality healthcare at a very affordable price and that is possible, only if the cost containment mechanism is in place and the strict compliance with the cost containment protocols is practiced.

Any hospital's cost containment protocol can be evolved in the under mentioned:

Formation of the cost containment team The cost containment team should be very carefully constituted. The chairman of the team should be Chief Executive Officer supported by the head of administration and head of accounts with representatives of each department.

The main role of the team should be critical evaluation of theorganisation and to do a cost-benefit analysis for each activity.

Implementation of strategic service unit

Total productivity management views a hospital as a group of strategic service unit (SSU), each SSU with individual resource input, methods of productivity assessment, measures to enhance productivity in terms of volumetric turnover and control mechanism for quality improvement and maintenance.

If the strategic service unit concept is applied to each department, then it is very easy to track down resource utilization for each department and the cost factor associated with each resource.

Identification of department

Once the hospital is broken down into the SSUs, it is very easy for the finance department to identify the department with maximum utilisation of a particular resource, link it to the departmental productivity and identify the department with a discrepancy in the resource cash inflow and service cash outflow.

Study of the activity chain

A study of the activity chain has to be carried out and the operation research tools and techniques can be applied to diagnose the sequence of the events.

If each department has well documented standard operating procedure (SOP), then it is very easy to analyse the activity chain. The focus should be on identifying the resources and the quantum required to complete each activity in the chain.

Application of business process re-engineering

Business process re-engineering (BPR) is a problem-solving approach that emphasises radical redesign of business process to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service and speed. Application of BPR will help in realignment of the activity chain, thereby helping in the elimination of the wasteful activities and reduction of the cost.

The biggest issue in the use of BPR technique is compromise with the seamless environment, customer convenience and medical operations. Any cost containment exercise should not affect the clinical outcome.

Cost containment measures

1. Human resource interventions

(a) Activity linked recruitment

Hospitals should evaluate the quantum of patient flow to the various departments and adhere to the activity linked recruitment and deployment. The occupancy level of the wards and utilisation pattern of the OT should be critically scrutinised to find the optimum staff levels. It is always advisable to pay more salary to the staff and get the optimum level of work done rather than over staffing the hospital. The ideal bed to staff ratio is 1:4. Organistions with a ratio of less then 1:4 are ideally staffed but hospitals with bed to staff ratio more than 1:4 need to undertake right sizing exercise.

(b) Automation of HR functions

Automation of HR functions may appear to be a costly and time-taking measure, but in the long term it helps tremendously in cutting cost.

For example, if a hospital has a provision of computerised application bank, then huge amount of data can be stored and applications can be retrieved on need basis and money can be saved as number of advertisement released will reduce.

(c) Training & development interventions

Hospital's training programme should be focused around "Train the trainer" concept wherein HR department should identify line managers who can effectively impart training and train them in conducting in-house programme. This helps in cutting the cost of the external training programme and also the effect will be much more as line managers will be using live examples to train the staff.

(d) Multi-tasking of the staff

HR department should carry out through job analysis and write detailed job responsibilities. This will help in eliminating the duplication of job activities and help in cutting the cost of HR. Also opportunities to merge job responsibilities should be identified to implement the concept of multitasking. For example, point Liftman cum security guard cum driver for hospital security. On the job training should be implemented to execute multi-tasking.

(e) Reassessment of the employee benefits

In many hospitals, employees are given certain benefits like free hospitalisation, medicines, subsidized food, free beverages etc. in order to cut cost. Hospitals can set the limits and systems wherein every employee benefit is accounted. For example, free medicine to the employee can be given on hospital doctor's prescription only. Setting up limits, like medicine worth a fixed amount will be given per annum per employee will help tremendously in cost containment.

2. Material management interventions

(a) Collective procurement

Hospitals with a common interest of cost containment can come together to form a collective procurement group. There are many items from medicine to stationary which are required commonly by all hospitals. If such items can be identified and hospitals can define average consumption per item per month then it is quite possible to negotiate with the vendors and get huge quantity discounts. This type of model can be very well utilized with mutual trust, faith and confidence even by the competing hospitals.

(b) Effective inventory control:

Inventory control programme of hospital should be focused on the extent of probable use, storage cost, obsolescence, transport cost, investment cost, cost to purchase, market condition and price trends, time required for delivery, availability of a substitute, cash flow and substitutes available. Every hospital should try and reduce the inventory levels and see that unnecessary inventories are avoided. Probably in case of operation theaters, we can have three day inventory management for planned cases and a week's inventory pattern for emergency cases.

3. Energy saving interventions

Hospital management should publicise the objective of energy conservation in a very aggressive manner. Hospitals can put posters in cafeteria, employee mess, change rooms, clean utility, and dirty utility to educate people on energy conservation. Employees as well as patients should be sensitised to the fact that conserving energy in a small, individual way adds up to significant saving when multiplied with all users. If hospital is under construction or on an expansion drive, then the design should cater for maximum use of sunlight. Light harvesting is a costly option but can be tried to reduce the cost in long term.