Costing Health Services in Lacor Hospital

Abstract

Health institutions all over the world are troubled by the intractable problems of shrinking resources and increasing demands for good quality services. Private-Not-For-Profit (PNFP) health units face even more serious problems. The financial support coming to them from donations has significantly decreased in the last 20 years. Raising user fees is not a viable option as fees high in relation with families’ income exclude the poor from using the services. Yet, the mission of PNFP health units rotates around the idea of serving the poor and the disadvantaged. This leads to the need to reconcile the apparently irreconcilable: financial accessibility of services and their sustainability (Flessa 1998). Health managers at all levels (regional, district, sub-district, hospital, lower level health units) are ignorant about the actual cost of the services they produce and deliver. The very notion of “cost” is not clear to the great majority of them. In most cases the terms “cost” and “price” are used as if they meant the same. In the best cases, only direct costs are thought of when trying to assign a monetary value to services produced: expenditures are mistakenly taken to equal “actual costs”. So-called “hidden costs” are rarely considered or thought of. Yet, the knowledge of actual costs incurred in producing health services, can be of great use to health managers at all levels to make more informed decisions and to assess efficiency and effectiveness (Shepard et al. 2000, Green et al. 2001). In addition, a more detailed knowledge of actual costs of producing services can be useful for “political” reasons. All too often, lay people as well as technicians, seem to equate “fees” with “profit”. Sound information on actual costs of producing services, obtained with a clear and acceptable methodology, can help in clarifying the above mentioned misunderstanding. The authors of this study used cost finding and cost analysis techniques to calculate the actual cost of producing final units of outputs in Lacor Hospital, Gulu District, Northern Uganda.