Challenges in the Era of Globalization - iaabd

Proceedings of the 12th Annual Conference © 2011 IAABD
or to decrease hospital efficiency. Thus, a high proportion of fixed costs suggest some scope for
efficiency improvements in resource allocation and usage.
Under the Ghanaian system of healthcare delivery, by and large, all doctors and nurses in public hospitals
are paid regular recurring monthly salaries. Thus, doctors and nurses costs are essentially fixed over the
short term. In contrast, the majority of doctors in countries like the United States and Canada run their
private consulting offices where they attend to out-patients and are paid fee-for-service. Hence their cost
is variable to third party reimbursers.
Roberts et al. (1999) studied the relative fixed and variable costs of a public teaching hospital and for
each service that the hospital rendered. They estimated that 84% of the hospital’s costs were fixed and
only 16% were variable. They concluded that “…the high fixed costs emphasize the importance of
adjusting fixed costs to patient consumption to maintain efficiency.”
Taheri et al. (2000) analyzed the costs for 696 trauma admissions at a trauma center for fiscal year 1997.
The goal of this study was to determine trauma service cost allocations and how this information can help
physicians to contain costs. They concluded that 35% of costs are variable direct costs and that this
represents the percentage of total cost that is typically under the immediate influence of physicians, in
contrast to the 65% of total cost over which physicians have little control.
Health-care cost analysis studies in the context of Africa are not many. Those that exist include Aboagye
et al. (2010a), Aboagye and Degboe (2010b), Wamukuo and Ntulela (2002) and studies on a number of
Egyptian hospitals.
Aboagye et al. (2010a) use standard cost-finding and cost analysis tools recommended by World Health
Organization (Shepard et al., 2000) to analyze year 2003 hospital data of three hospitals,. Full cost center
costs were computed by taking into account cash and non-cash expenses and allocating overhead costs to
intermediate and final patient-care centers. They concluded that salaries are the major cost component of
the three hospitals; overhead costs constitute an important part of hospital costs and must be noted in
efforts to recover costs; cost structures are different at different types of hospitals; and that unit costs at
service delivery points can be estimated and projected into the future. Aboagye and Degboe (2010b)
estimated the full costs of running 10 sub-district health facilities located in two districts in Ghana.
Wamukuo and Ntulela (2002) combined a top-down method and step-down allocation of overhead costs
to the final health care departments to estimate total costs in five hospitals in South Africa. The study
measured and estimated all costs (personnel, overhead, and the annualized costs of equipments, furniture
and buildings) associated with the treatment of patients on an aggregate as well as a per capita basis (per
visit, per day and per admission). They reported that fixed costs were high and concluded that the “…
high proportion of fixed costs (over 80% in all) in the unit costs implies some scope for efficiency
improvements in resource allocation and usage.”
In Ghana, the Ghana Health Service (2007) reported that “Many challenges in financing the health sector
remain unresolved. These challenges include untimely releases of funds, equity in the distribution of
financial resources, and under-funding in some health interventions including general health system
support.”
More recently, the Ghana Health Service (2009) has expressed concern about “Swelling health sector
wage bill “, “Inequitable distribution of available staff” and “Inadequate resources for in-service training,
fellowship and other management and leadership training” among others.
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