Cost Accounting… Without Borders

03Sep09

This is the last week of our hospital financial improvement project here in Rwanda.  In the process of editing and finishing our written report.  We made our final presentation to all invited hospital staff last week already.

Our focus has been on 1) Issue of inventory supply management within a hospital (reducing stock-out situations) and 2) Issue of how to make capital expenditures (MRI machine, dialysis) more accessible to patients.  Taking a few moments to reflect on the last six weeks:

  • Provision of healthcare for all is a universal problem for all governments (both developed and developing nations)
  • The advancements of technology and innovation does not come at zero cost
  • Healthcare is a public good – moral obligation to provide the best possible service with low consideration on patients’ ability to pay
  • In most countries, healthcare services do not run in the black – most hospitals are operating at a deficit and require government support to cover operating budgets
    • US may serve as a model on how private hospitals can make money, but this is an extreme example and there are millions that suffer without insurance

What is also important to note is the importance of management, leadership and operational knowledge within a hospital.

  • Annual budgetary planning is not a glamorous job – however, it must be done starting with the end users (frontline personnel of doctors and nurses), the procurement department who buys the supplies and the finance department ultimately paying with revenue generated from services
  • Management needs to know a detailed break-down of ALL costs including cost of EACH SERVICE
  • Blanket prices charged for patients may not cover all variable costs leading to operating deficits
  • Deprived of basic costing knowledge, the inputs into decision-making by management is limited
  • Service costing, just like budget planning, takes time and is not sexy – but it must be done!!

We helped a lot on the costing services side in our hospital project.  Obstacles included missing data, limited paper trail of receipts and invoices, high staff turnover and decreased continuity of responsibilities.  Sound familiar? The same challenges can be found anywhere in the world! In a resource-constrained setting, it becomes one step more challenging.  Doctors without borders, engineers without borders – as countries continue on the path of “development” – how about some management help? Cost Accounting… Without Borders?

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