Why cant be cost of healthcare services controlled?

07.07.22 03:53 PM Comment(s) By drjithendrakumar

Factors determining the cost

There are many factors to determine cost of the service. It is not possible to standardise the cost of services across the country and hence it is logically not possible to control the price of the service in a hospital

What are the determinants of pricing a service?

Many factors determine the cost of the service and hence the price. It starts from the cost of the land where the hospital is erected to the cost of the resources offering the service.

To list few of the cost line items, contributing to overall cost of the services are

  • Cost of the land
  • Cost of the building
  • Rentals if the hospital is not owned
  • Cost of the consumables
  • Cost of the human resources – doctors, nurses and other staff
  • Cost of medicines
  • Cost of marketing

Reasons Explained

Doctors do ask us what would be the cost of the hospital project, we exclude the land cost for the simple reason that it differs from place to place.

A doctor wanting to come up with a small hospital in a town hardly thinks of hiring a hospital consultant. whereas the team wanting to come up with a big hospital in a city like Bengaluru hires consultants like us to plan, execute and even commission the hospital. All these will be invariably passed across to the end users.

Few doctors will offer services in a rented place and as per the cost-benefit analysis, the cost of service in a rented place is higher than in an owned place.

Consumables vendors will discount if there are more numbers and hence the cost of consumables in a bigger hospital is less when compared to a small hospital, just because of the number of consumables ordered.

Hiring a nurse in a town is more challenging as a nurse will always prefer to work in a good set up where one can master their skills. This is the case in most of the small hospitals. In big hospitals, because of demand, the nurse does not stick to one hospital and have the tendency to change jobs for better pay. This is the same even with Doctors.

When it comes to Medicines, the more the orders the more discounts. Hence in smaller hospitals, it will be costlier sometimes compared to the bigger hospital. But this does not mean that the bigger hospitals will charge less. They will try to cover the overhead expenses that are not the case in small hospitals

Marketing cost is an effort that the hospital makes to pass the information to the public. People will only get to know about the services when they advertise. So, the hospital does spend on marketing and the expenses will have to be covered within the revenue.

Why is the price of the same operation is different in different hospitals?

Logically speaking, it will be different mainly because of the available services. It is because the doctor is not the same, the rentals are not the same, the nurses are not the same and most importantly the type of services that are offered are not the same. The hospitals are right in their own way unless they charge keeping the high margin. That is where the problem arises.

Who is controlling this?

Nobody can control this because of many reasons. But understanding these ambiguities, Insurance companies are categorising hospital based on the type of services they offer. Though the cost differs, patients will be taken care of in the empanelled hospitals. Understanding the economics, insurance companies dictate the hospital and to some extent control the price and empanel them.

Does NABH controls the cost?

No, NABH certification is an indicator that the hospital is accredited and follow some standards while they offer services to patients. It tries to bring uniformity for all the stakeholders of the hospital – hospital management, healthcare professionals and end users – patients.

QCI is an autonomous body, to certify NABH for hospitals based on the type of service provided. They do not involve in defining the price of the service but only contributes and make sure the services are at part with the standards set. Many people asks why Government control the price of hospital services and you can visit this link to get a glimpse of why it is difficult to do so.


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