CorporateFeatured ArticleFinance

COVID-19 Costing India

Brief ground level study of Private Hospitals and how private sector can collaborate

Manivannan S – Healthcare Management Consultant (Costing, budgeting, finance and virtual medicine)

Covid-19 has changed and challenged the way the hospitals provide services to patients. These changes have an impact on Covid-19 Costing in India; cost of services to both Covid-19 patients and non-covid-19 patients during the pandemic days as well for some more time post-covid-19 recovery. The insurance companies in India have asked for a standard rate for treatment of Covid-19 patients. Though standardization is a welcome move, there are several cost implications according to the number of beds for Covid-19 patients, the levels of care, the locations and the type of hospitals (whether medical educational or private hospital).

If one analyses the COVID-19 costing, the funding or reimbursement of costs will obviously raise the issue of capturing different costs incurred for Covid-19 patients compared to others. It is also difficult to hold back patients requiring surgeries or treatments other than Covid-19. Hence when the hospitals start treating other patients, the costs do increase.

A quick analysis also reveals that there will be additional costs incurred in treating normal patients post the lock down period or patients who visit hospitals for emergency surgeries and/or illness during lock down period unless there is a reliable rapid test available at a cheaper price to segregate patients.

Before getting into the details of costs, we will have to remember the golden rule that every change in or addition to normal clinical activity results in change in costs. The clinical activity decides the direct costs as well as costs of all other supporting services especially during these times of pandemic where stricter clinical conditions are imposed.

Private hospitals in India have been permitted to treat Covid-19 patients from 26th March 2020. It is important to look at various cost issues faced by hospitals in treating Covid-19 patients and resultant cost implications. The elements of cost of treatment have been captured after wide ranging discussions with the institutions who are treating the patients at various levels with different number of beds being allocated for the same. These are in accordance with the guidelines issued by Government of India.

While the variable costs can be estimated per patient, the fixed costs have to be amortized over certain period of time for which the Covid-19 patients are treated specially to arrive at per day per bed costs.

Present Status of the Hospitals

Since the lockdown in late March this year, in-patient occupancy at hospitals have dropped by as much as 60 – 70 per cent. This has had a cascading effect on revenues, which has dropped by more than 50 per cent for most hospitals. Each hospitals is dealing with this loss in their own way. Some hospitals are cutting back on salaries by asking the staff including nurses to work on alternate days and claiming that they can pay only on “Pay for Work” basis.

Some of the healthcare workers like ward boys and security guards who are typically on contract basis are not being paid or laid off. Protective gear are being re-used, exposing the frontline workers and team to greater risk. Cost of different components of protective gear has gone up more than 30 per cent. The government owes private hospitals large sums of money for treating patients under subsidized schemes till now.

Government has to come up with a funding scheme to support the hospitals with the condition that except the top management, the salaries of all other healthcare workers can be protected. The US government in a recent funding program, has removed the top management and certain categories of medical team from the funding, protecting the frontline workers.

Small Hospital Dilemma

Presently large hospitals and hospitals attached to medical collages are setting up the facilities for Covid-19 patients. Considering the infrastructure requirements and costs, it is nearly impossible for smaller hospitals to provide the services. Under Indian conditions, we can classify hospitals with bed strength up to 100 under small hospitals category. However, these smaller hospitals also face the challenge whenever emergency cases come up for surgeries/treatment for other ailments since it is not possible to ascertain whether the patient is an asymptomatic patient with potency to spread the virus.

This means till such a time the virus is controlled, or a cost effective, dependable test can ascertain with immediate TAT, even smaller hospitals will have to follow the additional protocol with increased costs. These small and medium size hospitals already face a tough situation in maintaining the hospitals with scaled down revenues due to lock down. It is also difficult for them to maintain the medical and para medical team without revenues.

This means till such a time the virus is controlled, or a cost effective, dependable test can ascertain with immediate TAT, even smaller hospitals will have to follow the additional protocol with increased costs.

Cost For Covid-19 Treatment

Presently the Covid-19 costing can be listed as given below. These also include implications for cost of treatment of non-covid patients. The initial assessment at Fever Clinic/Flu Clinic or first level of care at every hospital including Covid 19 hospital involves additional costs since the team involved in maintaining the clinic including doctors, nurses and any other support staff who have to use PPE and disposable diagnostic equipment like stethoscopes, blood pressure cuffs and thermometers. The fever clinic must have separate space away from the regular facility within the premises.

A separate block with separate entrance or suitable partitioned space within existing building so that effectively there is a division of Covid clinic cum hospital and non-Covid hospital. Cost of any temporary structure created for this purpose will have to be recovered over a period of time to be determined say in about 3-4 months. Certain fixed costs like beds, medical equipment and non-medical equipment associated with this infrastructure can be offered by the private hospitals at a lower rate per bed till certain period these are now available unused. These can later be redeployed for regular patients. This will help private sector recover whatever fixed costs possible. The other drugs and consumables need to be maintained and the space has to be sanitized regularly. This involves higher running cost per patient. The hospital can refer patients for tests and after the result and also refer the patients to next level care provider.

Isolation Beds, ICUs with ventilators and other cost considerations

If the hospital is also handling next two levels of care (patients not requiring continuous monitoring are sent back home for quarantine) it will have to consider the following cost implications. The ICUs with ventilators are dedicated and all the consumable & drugs have to be separately maintained. The Air Handling Unit for ICU has to be separate and the airflow cannot be mixed with other units if any in the hospital. The lab space has to be separate along with a dedicated equipment and air handling unit. The hospitals prefer semi-automatic equipment. In addition, radiology equipment must be separate.

Medical Personnel

The team consisting of medical, paramedical, lab & radiology staff and other support staff including cleaning staff is organized in three batches with each batch supposed to get a quarantine break for 14 days. The size and cost of the team depends on the number of beds as well duty hours. While the ratio of doctors and nursing team for isolation beds can be kept at a minimum for covid patients in Isolation Beds, the ICU team is as per regular norms.

Though it is understood that the six hours duty is advised, generally 12 hours duty is followed due to non-availability of staff. This complicates the issue of PPE since for the entire shift, it may be difficult for the staff to work without a break ( for bio-break or for having food) and if a break is taken, PPE is changed leading to costs. Depending upon the number of ventilated patients, we need to provide higher ratio of nursing staff to patients adding to the Covid-19 costing. The phlebotomist who draws samples, the lab technician and radiology technician have to be provided with safety gear.

Though it is understood that the six hours duty is advised, generally 12 hours duty is followed due to non-availability of staff.

Unplanned Surgery

Even for normal patients without Covid history, if any emergency procedure has to be performed or treatment (cardiology, cardio thoracic and gynec to name few examples) has to be given, Covid Safety protocols have to be followed adding incremental costs to the normal costs. This is because presently it’s not possible to test and identify Covid-19 presence immediately. So the entire surgery team has to be provided with PPE and not the normal kits worn by the surgeons during surgery.

If any Covid-19 patient needs surgery or an asymptomatic with Covid-19 identified patient is due for surgery, an operation theatre with negative pressure and exit of air after certain number of cycles is needed. Besides, it is difficult to manage patients post-surgery at step down ICU or post-operative recovery ward until it is clear whether the patient is Covid positive or not. Almost all aspects of treatment will increase cost due to this Covid safety protocols. So the big question is until such a time when things become normal; will insurance companies pay additional cost for these safety protocols? Similarly, transportation of Covid-19 patients /Covid-19 suspect patients is adding an extra layer of costs compared to the normal patients.

Other Treatments

Dialysis for Covid patients/normal patients is another challenge faced by hospitals. It is difficult to treat dialysis patients affected by Covid-19. The dialysis team, along with the equipment, protective gear and separate set of consumables and drugs add to the costs. In fact, the hospitals need to maintain separate ICU for dialysis during this Covid-19 period till such a time an immediate test result can segregate patients. Emergency and Trauma Care during this period will face challenges similar to the dialysis unit cited above.

Unavoidable Costs

Administrative and other support services costs have not yet been estimated, but that is a huge chunk of the pie. While the variable costs can be estimated per patient, the fixed costs have to be amortized over certain period of time for which the Covid-19 patients are treated specially to arrive at per day per bed costs. A final consolidated per day per bed recovery of costs will have to be fixed. The lab test costs which are already a subject matter of big discussions in India, will have to be fixed reasonably in a no-profit and no-loss basis till the pandemic is overcome. Here again the cost of test for a lab chain is different from cost of the test for a large medical collage hospitals unless the equipment is having larger unutilised capacity.

Public Private Partnership and Supply Chain (Common Purchase Units)

The costs, efforts and time needed for the government to set up facilities will be enormous. Hence the government and the private sector can work together to utilise the existing capacity at a lower cost and reimburse the running cost per patient on actuals. The government can work with the suppliers and quickly ramp up the supply chain by managing volumes at national, state and district levels. Most of the state governments have central purchase units.

The way forward

All efforts are focused towards easing Covid-19 costing. As the lockdown is being eased gradually, the hospitals till they reach normal revenues must adopt different technologies to be in touch with the patients for continuous treatment. Crowded consultation clinics are not possible, and they have to adopt virtual medicine as well as alignment with established hospitals with appropriate infrastructure though Virtual Medicine can only assist but not be the solution. Shared Infrastructure especially expensive medical equipment between small and medium size hospitals is the way forward.

Apart from making import duty less or zero on all essential equipment, Indian Manufacturing base must be consciously supported or ramped up. A well though out plan to calibrate between duty free imports and enhancing local manufacturing capability must be executed. The local levies on local manufacturing whether within SEZ or not should be removed.

Everything has to be done like yesterday! We don’t have luxury of time…..

Support us in our endeavor to bring you Advertisement free content.
Choose your options to donate or subscribe.


Related Articles

Leave a Reply

Back to top button