Asante Teaching Hospital
Challenges
Problems for Asante Hospital
Asante Teaching Hospital is a not-for-profit hospital in an area where
for-profit hospitals thrive. As a not-for-profit hospital, Asante does
not have the opportunity to seek out investors or invest surplus funds
as a means of managing unexpected expenses. Rather, the hospital is
reliant on insurance payouts, patient out of pocket payments, and
financial support from a private foundation. Along with the challenges
associated with bringing in funding, Asante is a premier hospital that
provides a superior level of care. To ensure that level of care can be
maintained, the hospital uses a meticulous billing process that is
challenging for the hospital to compile, problematic for insurance
companies who prefer bundled pricing, and stressful for patients.
Problems with patient billing
People like to have a feeling of control and know what to expect. This
is particularly true when being discharged from a hospital after a
stressful medical procedure, such as giving birth. As such, having to
wait for hours after discharge to get and pay for a lengthy and detailed
hospital bill, while not knowing the whole time what will be contained
on it, is both overwhelming and frustrating. However, that is exactly
what patients of Asante Teaching Hospital experience. Rather than using
a normal costing method, where a patient could both be provided with
anticipated expenses before admission and be discharged quickly, Asante
uses actual costing and creates a thorough bill containing every line
item and expense unique to a particular patient after their stay is
complete. This process is not sustainable or helpful to either patients
or the hospital itself.
Recommendations
Pooling cost drivers
As there are standard expected annual expenses for the maternity ward,
those expenses can be broken up into two main pools: Building-Based
Expenses and Patient-Based Expenses (exhibit 2.1). The Building-Based
expenses will not adjust according to the number of patients using the
space (eg. building insurance is the same month by month), however
Patient-Based Expenses may change depending on how many patients are in
the hospital (eg. more laundry is washed the more patients there are).
In the selected hospital information in Exhibit 1, there are two
potential cost drivers associated with each of those expenses: the
number of patients using the ward and the number of square feet in the
ward.
Regarding the number of patients, we also want to take into account
their stay length, which averages to 3 days for this hospital. From
this, we have two activity rates as shown in exhibit 2.2. The first is
the rate of R1,042.04 per square foot used by the patient (so patients
with larger, private rooms can be billed accordingly). The second is the
base cost per patient per day of their stay, which is R52.28. These
expenses do not change depending on the type of labor and delivery, so
can remain static no matter the medical interventions needed; the only
things needed to calculate these costs are the size of the room/part of
the room used and the number of days a patient stays.
Staff salaries calculated using ABC
Regarding staff salaries, we need to breakdown how many minutes each
staff member is actually available to provide care, which is shown in
exhibit 3.1. This shows the anticipated number of days in their standard
workweek, broken out into the total number of minutes they are paid for
(including personal time, sick time, holiday, and training). We then
remove those expenses to determine a final set of available care minutes
for both residents and all other staff. It is important to note that
personal, sick, holiday, and training time has an addition of 23% to the
time, to account for taxes and benefit expenses.
Using that information, we can compare staff care availability to their
annual salary in exhibit 3.2 to see the cost of each employee's time on
a per-minute basis, based on employee type. With that information, we
can compare employee's minute-by-minute expenses to how many minutes
each employee type spends working on different delivery types (levels
1-3). When totaled, this then provides the anticipated employee expense
for each of the three delivery types. This does not change whether the
patient has more or less space, or stays more or fewer days. As such,
this can be a direct line item depending on the delivery type.
Recommendation summary
With the pooled overhead expenses and ABC costing for employee salaries
per delivery type, billing will be simpler since the accounting
department will only need to determine the delivery type, number of
stays stayed, and square footage used. However, these are all baseline
anticipated expenses and do not account for an employee that needs
additional sick days, hallway and office space, when a delivery requires
more employee time than needed, or other unanticipated expenses. As
such, we recommend using this as a base costing method with an
additional 20% addition to account for these unanticipated expenses in
order to assure the maternity ward remains self-sufficient.
Exhibits
| Statistic |
Level 1 |
Level 2 |
Level 3 |
| Average days in maternity ward |
3 |
3 |
4 |
| Total natural birth patients |
4,160 |
240 |
390 |
| Unit |
Amount |
| Total maternity ward patients |
11,975 |
| Total maternity ward sqft |
30,294 |
| Total hospital sqft |
455,000 |
Exhibit 2.1: Pooled annual maternity ward overhead
| Overhead Item |
Total |
| Building-based Costs |
|
| Equipment Depreciation |
R 363,672 |
| Insurance |
R 233,991 |
| Utilities |
R 7,454,026 |
| Rent |
R 16,195,458 |
| Groundskeeping |
R 898,940 |
| Security |
R 302,076 |
| Information Tech |
R 6,119,349 |
| Subtotal - Building |
R 31,567,512 |
| Patient-based Costs |
|
| Marketing |
R 105,412 |
| General/Admin |
R 314,622 |
| Housekeeping |
R 206,241 |
| Laundry |
R 395,295 |
| Dining Hall |
R 856,684 |
| Subtotal - Patient |
R 1,878,254 |
|
|
| Total |
R 33,445,766 |
Exhibit 2.2: Cost drivers (overhead)
| Cost Driver |
Activity Rate |
Unit |
| Building-Based Costs |
R 1,042.04 |
sqft used |
| Patient-based Costs |
R 52.28 |
patient per day |
Exhibit 3.1: Employee availability (in minutes)
|
Resident |
All others |
| Daily worked time |
960.00 |
504.00 |
| Annual payout of time |
249,600.00 |
131,040.00 |
| Annual personal leave* |
9,446.40 |
4,959.36 |
| Annual sick leave* |
7,084.80 |
3,719.52 |
| Annual holiday time* |
14,169.60 |
7,439.04 |
| Total annual training* |
7,675.20 |
7,675.20 |
| Total available time |
211,224.00 |
107,246.88 |
| with 23% addition for benefits/taxes |
|
|
Exhibit 3.2: Employee annual salaries
| Position |
Salary |
Note |
| OBGYN |
R 35,403,451 |
Total for team of 3 |
| Paediatrician |
R 23,477,139 |
Total for team of 4 |
| Midwife/Nurse |
R 114,557 |
|
| Resident |
R 231,841 |
|
| Registration Clerk |
R 9,092 |
|
| Practical Nurse |
R 7,122 |
|
Exhibit 3.3: Cost drivers (employee salaries)
| Cost Driver |
Activity Rate |
Unit |
| OBGYN |
R 110.04 |
minute worked |
| Paediatrician |
R 54.73 |
minute worked |
| Midwife/Nurse |
R 1.07 |
minute worked |
| Resident |
R 1.10 |
minute worked |
| Registration Clerk |
R 0.08 |
minute worked |
| Practical Nurse |
R 0.07 |
minute worked |
Exhibit 4.1: Maternity staff time per delivery (in minutes)
| Position |
Level 1 |
Level 2 |
Level 3 |
| OBGYN |
30 |
37 |
80 |
| Paediatrician |
43 |
55 |
71 |
| Midwife/Nurse |
1,422 |
1,422 |
1,600 |
| Resident |
225 |
240 |
412 |
| Registration Clerk |
43 |
43 |
60 |
| Practical Nurse |
99 |
99 |
110 |
Exhibit 4.2: Maternity staff costs per delivery
| Position |
Level 1 |
Level 2 |
Level 3 |
| OBGYN |
R 3,301.12 |
R 4,071.38 |
R 8,802.98 |
| Paediatrician |
R 2,353.25 |
R 3,009.98 |
R 3,885.61 |
| Midwife/Nurse |
R 1,518.93 |
R 1,518.93 |
R 1,709.06 |
| Resident |
R 246.96 |
R 263.43 |
R 452.21 |
| Registration Clerk |
R 3.65 |
R 3.65 |
R 5.09 |
| Practical Nurse |
R 6.57 |
R 6.57 |
R 7.30 |
| Total per delivery type |
R 7,430.48 |
R 8,873.93 |
R 14,862.25 |