The document discusses healthcare costing and profitability, emphasizing the importance of understanding various cost components such as fixed and variable costs, capital costs, and manpower. It highlights strategies for cost control in areas like operating theaters, laboratories, wards, and ambulance services, and suggests improving efficiency to enhance profitability. Additionally, it recommends avoiding certain practices that lead to increased costs, such as delays in discharge processes and unnecessary retesting.

1. Health Care Costing and
Profitability
S.Manivannan-
Managing Director –
Parama Health Care P Ltd

2. Why costing ?
• Do you know how much you are earning ?
– Accounting profit vs Real Profit
• Pricing and Profitability
• Nature of Healthcare cost at Project level and
operations level

3. Costing & Profitability
• Understanding fixed costs and variable costs
• Break Even Point
• Revenue vs Collections
• Converting fixed costs in to variable costs

4. Costing & Profitability
• Understanding Capacity Utilisation
– Hospital level
– Department level
– Equipment level

5. Costing & Profitability
• Components of costs having impact on
profitability
– Capital Cost- technology, new vs old
– Materials
– Manpower
– Outsourcing or shared services concept

6. Areas where Costs need to be
controlled
• OT
• ICU & Trauma Care
• Lab

7. Role of IT in costs and revenue
• Billing
• Designing Packages
• Pharmacy – revenue and stock control
• Lab- tariff and materials

8. Operation Theaters.
• Utilization of OT-Key factor scheduling of
surgeries and Idle time.
• Manpower Cost.
• OT Materials.
– Directly Billable
– Not Billable.
• Power consumption.
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9. Labs
Material consumption.
Control over lab materials: over stocking and
spoilages
Utilization of Kits where ever applicable
Retests done due to various reasons leading to
higher consumption of material & energy.
Equipment Utilization and Maintenance
Maintenance including reagents and power
consumption.
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10. Wards.
• Ward Stock.
– Medicines
– Consumables.
• Ward Staff Cost.
– This depends on combination of different bed
categories in the same floor.
• Bed Side Procedures.
– Equipment and materials.
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11. Maintenance Department
• Over Stocking of spares
• Control over outsourced jobs
• Stocking of insurance spares
• Diesel consumption.
• Manpower Cost.
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12. Ambulance & other vehicle arrangements
• Cost of maintaining ambulances and other
transportation are always not cost effective.
• The better alternative will be to outsource
them.
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13. Other Activities for cost control
• Consultation packages similar to diabetic
packages.
• Planned discharges for avoiding delay in
discharges
– This helps in higher utilization of beds-Patients
waiting for admission does not arise
– Impact on room rent and food cost
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14. Activities to be avoided for cost control and
better margins
• Patients awaiting bed assignments
• In Patients waiting in Emergency
departments.
• Patients awaiting discharge summary
• Doctors waiting for lab results
• Lab results waiting to be distributed
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15. Activities to be avoided for cost control and
better margins
• More travel required for samples and
analysis
• Dictation ready for transcription.
• Discharge summary waiting for doctors’
approval and signature.
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16. Activities to be avoided for cost control and
better margins
• Patients awaiting discharge summary
• Sharing of equipments if feasible
• Retesting to be avoided
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17. Summing up……
• Tariff assessment
• Performance monitoring
• Usage of materials
• Capacity utilization

18. Summing UP
• Specific product pricing
• Outsourcing decisions –
– conversion of fixed cost to variable
– saving management time
• Long term strategy – expansion and creating
new business models

19. Thank you !
• S.Manivannan
• smv@paramahealthcare.com
• 9840976340