Methods for cost analysis, cost recovery, and cost control for a public hospital in a developing country: Victoria Hospital, St. Lucia

Abstract

AbstractInternational attention has focused in recent years on methods for analysing costs of public hospitals in developing countries, with the goal of reducing the financial burden on governments by enabling improved resource allocation, by identifying areas for cost recovery and cost control, and by developing management systems to facilitate these efforts. A range of methods for cost analysis, cost recovery, and cost control are reviewed in this article, with illustrations of applications of the methods at Victoria Hospital, the national hospital in St. Lucia. Comparisons are made to similar studies in Belize, Lesotho, and the Dominican Republic.Cost‐analysis methods focus on a detailed cost accounting effort which identifies the full financial costs of hospital operations and the unit costs of individual hospital services. Cost‐recovery methods include an analysis of cost‐related and other issues involved in setting fee levels for hospital services, determination of exemptions for certain population groups, and management of fee collection systems. Cost‐control methods include analysing the degree of managerial authority exercised by hospital managers in relation to the central Ministry of Health and other government departments, identifying opportunities and incentives for cost control by individual departments within the hospital, and evaluating methods for involving physicians and other clinical decision‐makers in cost control efforts. A diagnosis‐independent method for utilization review of clinical decisions, the Appropriateness Evaluation Protocol, is pilot‐tested and alternatives, including Diagnosis Related Groups, are discussed. Implementation issues related to long‐term systems development efforts are reviewed.