International Journal of Mechanical Engineering and Technology (IJMET)
Volume 10, Issue 01, January 2019, pp. 968–977, Article ID: IJMET_10_01_099
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=10&IType=01
ISSN Print: 0976-6340 and ISSN Online: 0976-6359
© IAEME Publication
Scopus Indexed
COST ANALYSIS OF ENDOSCOPIC
PROCEDURES IN A TERTIARY CARE
HOSPITAL IN SOUTH INDIA
Umesha P
Trainee, Master in hospital administration program, Prasanna School of Public health, Manipal
academy of higher education, Manipal, Karnataka-576104
Dr.Somu G*
Professor, Manipal Academy of Higher education, Karnataka, - 576104.
Dr.Arun Mavaji,
Hospital Administrator, M S Ramaiah Memorial Hospital, Bangalore, Karnataka.
Dr.Rajesh Kamath
Assistant Professor, Prasanna School of Public Health, Manipal academy of higher education,
Manipal, Karnataka – 576104
Ms.Brayal D’Souza
Assistant Professor, Prasanna School of Public Health, Manipal academy of higher education,
Manipal, Karnataka – 576104
Dr.Sagarika Kamath
Assistant Professor, School of Management, Manipal academy of higher education, Manipal,
Karnataka – 576104
ABSTRACT
Endoscopy is a non-surgical procedure used to examine a human digestive tract.An
endoscope is a long,thin,flexible tube with a camera attached at the end with which a
doctor can see the images of digestive tract on the monitor.It is used both for diagnostic
and therapeutic purposes and needs trained professionals.
Keywords: Endoscopy, cost analysis, endoscopic procedures
Cite this Article: Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal
D’Souza and Dr.Sagarika Kamath, Cost Analysis of Endoscopic Procedures in a Tertiary
Care Hospital in South India, International Journal of Mechanical Engineering and
Technology, 10(01), 2019, pp.968–977
http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=10&Type=01
http://www.iaeme.com/IJMET/index.asp
968
editor@iaeme.com
Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal D’Souza and Dr.Sagarika
Kamath
1. INTRODUCTION
Endoscopy is a non-surgical procedure used to examine a human digestive tract. An endoscope
is a long,thin,flexible tube with a camera attached at the end with which a doctor can see the
images of digestive tract on the monitor. It is used both for diagnostic and therapeutic purposes
and needs trained professionals.
Endoscopic Retrograde Cholangiopancreatography(ERCP) is a common procedure that uses
a side-viewing duodenoscope(long, slender and flexible tube) to pass from the mouth to the
duodenum(the initial curved section of the small intestine) in which instruments are passed down
the tube to the ampulla of Vater(where the common bile duct empties into the
duodenum).Contrast material is injected into the biliary tree and pancreatic ducts so they can be
viewed by the physician and x-rays are taken.ERCP is used primarily in the diagnosis and
management of bile duct stones, and other conditions such as strictures (narrowing due to
scars),leaks and cancers.
As endoscopic procedures have increased for both diagnostic and therapeutic purposes, it has
become important on the part of hospital setups to make it more effective and efficient in terms
of cost. The importance of accounting in managerial decisions has long been recognized in the
literature particularly in the field of management accounting, actual cost data, cost estimates and
cost analysis. Cost data and analysis helps managers in making decisions in such areas as pricing,
profit planning, setting standard cost, capital investment decisions, marketing decisions, cost
management decisions and others.
Cost analysis is defined as the allocation of costs to provide estimates of program costs and
benefits that are likely to be there before it is implemented. It is vital for managerial decision
making in various profit-oriented and non-profit organizations. In profit-oriented organizations,
cost and cost analysis reports are useful in management decision-making areas like product
costing and pricing, cost management, special (tactical) decisions, profit planning, capital
investment decisions, standard setting, product/customer profitability, and the like. In non-profit
organizations, cost analysis provides useful input for cost-sharing decisions, cost management
(containment), cost-recovery pricing decisions etc. In such organizations, cost analysis is a part
of program budgeting and accounting practices which allow managers to determine an accurate
cost of providing a given unit of services.
Activity based costing (ABC) is a costing methodology that identifies activities in an
organization and assigns the cost of each activity with resources to all products and services
according to the actual consumption by each.
Activity Based Costing Steps: Step1: Identify the products that are the chosen cost objects.
Step2: Identify the direct costs of the products. Step3: Select the activities and cost allocation
bases to use for allocating indirect costs to the products. Step4: Identify the indirect costs
associated with each cost allocation based on activity. Step5: Compute the rate per unit of each
cost allocation based on activity used to allocate indirect costs to the products. Step 6: Compute
the indirect costs allocated to the products. Step 7: Compute the total costs of the products by
adding all direct and indirect costs assigned to the products.
Advantages of Activity Based Costing (ABC):
ABC is easy to understand and provides for more accurate costing of products/services,
customers and distribution channels. There is better understanding of overheads.ABC utilizes
unit cost rather than just total cost. ABC integrates well with Six Sigma and other continuous
improvement programs. It makes visible waste and non-value-added costs. It supports
performance management and scorecards. It enables costing of processes, supply chains and
value streams. It mirrors the way work is done. It facilitates benchmarking.
http://www.iaeme.com/IJMET/index.asp
969
editor@iaeme.com
Cost Analysis of Endoscopic Procedures in a Tertiary Care Hospital in South India
Need for the study:ABC provides more accuracy in the product/service costing, leading to
reliable pricing decisions. It increases the understanding of overheads and cost drivers by making
it more visible so as to reduce or eliminate it.Determining the utilization of endoscopic equipment
followed by the ABC analysis will help to identify ways to improve the utilization as well as to
control the cost.
Aim: To analyze the cost of Endoscopic procedures in a Tertiary Care Teaching Hospital.
Objectives: To understand the workflow of endoscopic procedure in Gastroenterology
Department. To determine the cost associated with the endoscopic procedure using ABC method.
Study Design: The prospective study involved observing the workflow, identifying the cost
heads.
Study Area: Gastroenterology Department
Study Period: 6 months data for the Prospective study (November 2015 to April 2016)
2. METHODOLOGY
Calculations:
According to Category of equipment:
Table No: 1
Replaced
ERCP scope
Processor
Light source
Electrical cautery machine
Cardiac monitor
Computer and printer
Depreciated
Anesthesia machine
Fluoroscopy
As we are calculating the cost of the procedure per minute,we need to find out the cost
required for every minute of the procedure;hence we need to do the following steps:
Cost of equipment per year = Total cost of equipment Life of equipment (in years)
Cost of equipment per day = Cost of equipment per year Total working days in a year
Per hour cost of the equipment = Cost of equipment per day Number of hours the equipment
can be used
Cost of equipment per minute = per hour cost of the equipment Number of minutes in an hour
The equipment gets depreciated over time.
The formula for calculating the depreciation rate of the equipment is:
Net value of equipment = Cost of equipment ÷ year (number of Years it has been used) – total
cost of Equipment
Cost per procedure = Net value of equipment Total number of procedures done on the
machine
To calculate the cost of accessories per procedure, the formulas are:
Cost of accessory per procedure = Accessory cost Number of times it can be reused
To calculate per minute cost per procedure per employee:
Salary of employee per day = Total salary of the employee Working days in a month
Salary of employee per hour = Salary of employee per day Working hours per day
Salary of employee per minute = Salary of employee per hour Number of minutes in an hour
http://www.iaeme.com/IJMET/index.asp
970
editor@iaeme.com
Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal D’Souza and Dr.Sagarika
Kamath
To calculate the cost of the building.
Total rental cost of the building =Total area of the endoscopy room in square feet × Rental
cost per month per square feet.
Per day rental cost of the building = Total rental cost of the building Days in a month
Per procedure rental cost of the building = per day cost of the building Total procedures in a
day
To calculate the cost of water.Total cost of the water is 22 rupees per 1000 litres. Per litres,
water cost is 0.022 paise × 30 litres for per scope cleaning. The total cost of water is 0.66 paisa.
To calculate the cost of electricity. Kilowatts of the equipment × hour’s × cost per units
3. ACTIVITY ANALYSIS:
It identifies resources used for each activity that is necessary for an endoscopic procedure and
assists in determining the cost pools used for each resource.
Table No: 2
Equipment’s
(life in years)
ERCP Scope (8)
Processor (8)
Light source (8)
Accessories
(reusability)
Guide Wires (5)
Cannula (5)
Pre-cut needle knife
(10)
Fluoroscopy (8)
Sphincter tomes (5)
Cautery machine (8)
Anesthesia machine (15)
Cardiac monitor (8)
Endo wash machine (8)
Basket (10)
Dilator (10)
Biliary Stents (0)
Stent Pusher (10)
Channel cleaning
brush (10)
Stone Extraction
Balloons (5)
Computer & Printer (4)
Consumables
Human Resources &
other Resources
Nasal Cannula
Iv cannula
Receptionist
Doctors
ECG leads
Staff Nurse
Dialdehyde
solution (Cidex
Solution)
Enzymatic Solution
Technician
Building (1596sq ft.)
Water (litre)
Electricity (Units)
4. ASSIGNING COST CATEGORIES:
Once the resource utilized has been identified, then each resource is assigned to a cost category.
Example: labor, materials, or general overhead. These categories will then be assigned further to
either direct or indirect cost categories. The direct costs are those that are directly related to the
performance of the service (nursing) as opposed to indirect costs (accounting) which have to be
allocated to multiple services.
http://www.iaeme.com/IJMET/index.asp
971
editor@iaeme.com
Cost Analysis of Endoscopic Procedures in a Tertiary Care Hospital in South India
Table No: 3
Component Activity
Pre-procedure
Registration
ECG Monitoring
Nasal cannula
IV cannula
Processing
Receptionist
Doctor
Staff Nurse
Technician
Scope
Processor + light source
C-Arm
Cautery Machine
Anesthesia machine
Drugs
Procedure
Guide Wires
Sphincterectomies
Stone Extraction Balloons
Biliary Stents
Pre-cut needle knife
Stent Pusher
Cannula
Dilator
Basket
Recovery
Cardiac Monitoring
Scope Cleaning
Endo wash machine
Dialdehyde Solution (Cidex solution)
Enzymatic Solution
Channel cleaning brush
Housekeeping Staff
Building Cost
Water
Electricity
http://www.iaeme.com/IJMET/index.asp
Categories
Indirect Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Direct Cost
Indirect Cost
Indirect Cost
Indirect Cost
Indirect Cost
Indirect Cost
Indirect Cost
Indirect Cost
Indirect Cost
972
editor@iaeme.com
Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal D’Souza and Dr.Sagarika
Kamath
5. ANALYSIS AND RESULTS
5.1. COST DRIVERS:
Cost drivers for each resource and the number of resources utilized need to be determined. In
ERCP two type of the procedure will be taken.
Table No: 4
Name of the Procedure
1. ERCP + Sphincterotomy + Stenting.
Total Cost of The Procedure
2. ERCP + Sphincterotomy + Basket Stone Removal.
14221.91
10803.71
5.2. COST DRIVERS FOR ERCP+SPHINCTEROTOMY+STENTING
Table No: 5
Process
Sub-Process
Cost Driver
Human
Resource
Category
Equipment
Total Cost
in
Rupees.
Registration
Minutes
used
Receptionist
Direct cost
Computer
8.93
Units cost
Staff Nurse
Direct cost
ECG Leads
45
Units Cost
Staff Nurse
Direct cost
Units cost
Staff Nurse
Direct cost
Units cost
Minutes
used
Minutes
used
Minutes
used
Minutes
used
Minutes
used
Minutes
used
Minutes
used
No of
patients
Doctor
Direct cost
1982.5
Staff Nurse
Direct cost
85
Technician
Direct cost
24.51
Doctor
Direct cost
143.22
Doctor
Direct cost
229.65
Technician
Direct cost
341.82
Technician
Direct cost
13.2
Direct cost
15.32
Direct cost
144
PreProcedure
ECG
Monitoring
Nasal
cannula
IV cannula
Nasal
Cannula
IV cannula
63
90
Processing
Labour
Labour
Labour
Scope
Processor +
light source
Fluoroscopy
Cautery
Machine
Anesthesia
machine
Drugs
Anesthesiolo
gist
Anesthesiolo
gist
Procedure
http://www.iaeme.com/IJMET/index.asp
973
editor@iaeme.com
Cost Analysis of Endoscopic Procedures in a Tertiary Care Hospital in South India
Guide Wires
Cannula
sphincter
tomes
Stone
Extraction
Balloons
Biliary Stents
Stent Pusher
Reusable 5
times
5 times
Technician
Direct cost
1384
Technician
Direct cost
552
5 times
Technician
Direct cost
2168.6
5 times
Technician
Direct cost
1784.4
Single use
10 times
Technician
Technician
Direct cost
Direct cost
493.50
263.75
Minutes
used
Staff Nurse
Direct cost
Cardiac
Monitor
54.13
22 minutes
Staff Nurse
Direct cost
Endo Wash
113.02
12
litres/14days
Staff Nurse
Indirect
material
13.53
5
litres/20days
Staff Nurse
Indirect
material
21.93
10 times
Staff Nurse
Indirect
material
518.7
Recovery
Cardiac
Monitoring
Scope
Cleaning
Endo wash
machine
Dialdehyde
Solution
(Cidex
solution)
Enzymatic
Solution
Channel
cleaning
brush
Indirect
Cost
Water
Building Cost
Electricity
30
litres/scope
1596sq ft.
area
Units per
minutes
Staff Nurse
Variable
Cost
Fixed Cost
Total cost
for per
procedure
http://www.iaeme.com/IJMET/index.asp
Indirect
cost
Indirect
cost
Indirect
cost
0.66
125
124.34
7667.41
3136.3
10803.71
974
editor@iaeme.com
Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal D’Souza and Dr.Sagarika
Kamath
5.3. COST DRIVERS FOR ERCP+SPHINCTEROTOMY+BASKET STONE
REMOVAL
Table No: 6
Process
Sub-Process
Cost Driver
Human
Resource
Category
Equipmen
t
Total Cost in
Rupees.
Registration
ECG
Monitoring
Minutes used
Receptionist
Direct cost
Computer
8.93
Units cost
Staff Nurse
Direct cost
ECG Leads
45
Nasal cannula
Units Cost
Staff Nurse
Direct cost
IV cannula
Units cost
Staff Nurse
Direct cost
Labour
Labour
Units cost
Minutes used
Doctor
Staff Nurse
Direct cost
Direct cost
3200
85
Labour
Scope
Minutes used
Minutes used
Technician
Doctor
Direct cost
Direct cost
24.51
143.22
Processor +
light source
Minutes used
Doctor
Direct cost
229.65
Minutes used
Technician
Direct cost
341.82
Minutes used
Technician
Direct cost
13.2
Anesthesia
machine
Minutes used
Anesthesiologis
t
Direct cost
15.32
Drugs
No. of patients
Anesthesiologis
t
Direct cost
144
Guide Wires
Reusable 5 times
Technician
Direct cost
1384
Cannula
Pre-cut
needle knife
5 times
Technician
Direct cost
552
10 times
Technician
Direct cost
1375.6
Sphincter
tomes
5 times
Technician
Direct cost
2168.6
Basket
Dilator
10 times
10 times
Technician
Technician
Direct cost
Direct cost
2223.5
386
Biliary Stents
Stent Pusher
Single use
10 times
Technician
Technician
Direct cost
Direct cost
493.50
263.75
Cardiac
Monitoring
Minutes used
Staff Nurse
Direct cost
Endo wash
machine
22 minutes
Staff Nurse
Indirect cost
113.02
Dialdehyde
Solution
(Cidex
solution)
10 litres/14dyas
Staff Nurse
Indirect cost
13.53
Enzymatic
Solution
5 litres/20days
Staff Nurse
Indirect cost
21.93
Pre-Procedure
Nasal
Cannula
IV cannula
63
90
Processing
Fluoroscopy
Cautery
Machine
Procedure
Recovery
Cardiac
Monitor
54.13
Scope
Cleaning
http://www.iaeme.com/IJMET/index.asp
975
editor@iaeme.com
Cost Analysis of Endoscopic Procedures in a Tertiary Care Hospital in South India
Indirect Cost
Channel
cleaning
brush
10 times
Water
Building Cost
Electricity
30 litres/scope
1596sq ft. area
Units per minutes
Staff Nurse
Indirect cost
518.7
Indirect cost
Indirect cost
0.66
125
124.34
Variable Cost
Fixed Cost
9868.68
4353.8
Total cost for
per procedure
14221.91
As per as total cost of the procedure and selling prices of these two procedures.
Table No: 7
Procedure
Total Cost of the Procedure
Selling Price
10803.71
14211
14221.91
15661
1. ERCP + Sphincterotomy + Stenting
2. ERCP + Sphincterotomy + Basket Stone
Removal
In ABC, Costs are ascertained as the direct cost and indirect cost. However, to calculate the
contribution, margin costs have to be classified into fixed cost and variable cost accordingly.
Therefore, Contribution cost margin = Selling Price – Variable Cost ×100 Selling Price
1. ERCP + Sphincterotomy + Stenting
= 14211–7667.41
= 6553.59 ×100
14211
Contribution Cost Margin = 46.11%
2. ERCP + Sphincterotomy + Basket stone removal
=15661–9868.68
=5792.32×100
15661
Contribution Cost Margin = 36.98%
6. DISCUSSION
As the study was conducted with two objectives 1st one to understand the workflow of endoscopic
procedure in gastroenterology department and the 2nd one is to determine the cost associated with
the endoscopic procedure.The study revealed that the actual cost incurred by the hospital to
provide 1st service ERCP + Sphincterotomy + Stenting was Rs. 10,803.71 and 2nd one ERCP +
Sphincterotomy + Basket Stone Removal Rs. 14,221.91 respectively. However, in the hospital
patients are charged Rs. 14,211 for the 1st procedure and Rs. 15,661 for the 2nd one respectively
thereby making contribution cost margins as 46.11% and 36.98% respectively.
Hence from this study, it is clear that the pricing done in the hospital covers up the operating
cost more than sufficient as the selling price is more than cost price which is ideal for the
organization. ABC analysis can be used to determine the cost of other endoscopy services as well
to check their profitability and by providing adequate training to the staff, the damage to the staff
http://www.iaeme.com/IJMET/index.asp
976
editor@iaeme.com
Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal D’Souza and Dr.Sagarika
Kamath
can be minimized thereby achieving cost containment e.g.- Guidewire.Every hospital needs to
have health administrators who can work on cost containment in healthcare without
compromising the effectiveness of services. The ABC gives true costs and provides more accurate
information on product cost than conventional accounting system. By using this method, we can
find unit costs of the selected parameter and conclude that the prices set for the studied procedures
are appropriate for recovering the equipment cost. It further helps in increasing revenue of the
organization.
REFERENCES:
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
http://www.myvmc.com/investigations/an-introduction-to-endoscopy/#ERCP
https://webcache.googleusercontent.com/search?q=cache:6G_uGIlnPesJ:https://ohiocea.file
s.wordpress.com/2011/04/medical-equipment-life-expectancylist.pdf+&cd=6&hl=en&ct=clnk&gl=in
http://www.valuecreationgroup.com/activity_based_costing_advantage_disadvantage.htm
http://www.csus.edu/indiv/p/pforsichh/accountinginfo/121/documents/ch05inclassproblems
horngren13emycopyx2.pdf
Clinical Gastroenterology and Hepatology at www.cghjournal.org, and at
doi:10.1016/j.cgh.2011.08.010.
www.ccsenet.org/gjhs Global Journal of Health Science; Vol. 8, No. 1; 2016
Indian Journal of Nuclear Medicine: IJNM : The Official Journal of the Society of Nuclear
Medicine
Saikumar Tenepalli, SS. Asadi and K. Sai Kala, a Model Study on Comparative Cost Analysis
of Equipment Management in Construction Companies in Tirupati Region. International
Journal of Civil Engineering and Technology, 8(1), 2017, pp. 72–81.
Zahraa Tawfiq Naeem, Mohammed F. Abbas and Ahmed R AlAdhadh, Life Cycle Cost
Analysis for Use of Precast Prestressed Concrete Slabs in Repair of Concrete Pavement,
International Journal of Civil Engineering and Technology, 9(11), 2018, pp. 1479–1490
http://www.iaeme.com/IJMET/index.asp
977
editor@iaeme.com