|Year : 2022 | Volume
| Issue : 2 | Page : 168-173
Cost calculation of a tertiary care referral dental center using activity-based costing method: A case study
Vadde Venkata Naga Sunil1, Koneru Mrunalini2, Vedati Prathima2
1 Department of Oral and Maxillofacial Pathology, Army College of Dental Sciences, Secunderabad, KNRUHS, Telangana, India
2 Department of Public Health Dentistry, Army College of Dental Sciences, Secunderabad, KNRUHS, Telangana, India
|Date of Submission||01-Dec-2020|
|Date of Decision||02-Jan-2022|
|Date of Acceptance||14-Mar-2022|
|Date of Web Publication||8-Jun-2022|
Vadde Venkata Naga Sunil
H.No: 1-4-212/71, Greenpark Enclave, Kapra, Sainikpuri, ECIL Post, Secunderabad - 500 062, Telangana
Source of Support: None, Conflict of Interest: None
Background: Economic evaluations in dentistry provide policymakers with information to facilitate efficient resource allocation. Dentistry involves multiple activities for one treatment outcome. This original research aims to calculate direct treatment and indirect costs for dental services provided at tertiary care referral dental center. Materials and Methods: The present original study reporting is done based on using the Consolidated Health Economic Evaluation Reporting Standards statement in dentistry, the basic dental services provided are divided into direct (revenue-generating) and indirect cost centers (nonrevenue generating) using activity-based costing (ABC) method. The total cost generated is calculated by aggregating the sum of direct and indirect cost incurred and unit cost is calculated by dividing total cost obtained by the number of units. Data are analyzed using Microsoft Excel worksheet. Results: Cost calculated using ABC method differed significantly from the tariff method. The major cost components varied are human resources (848,000 INR), capital costs (3,008,500 INR), and material costs (200,000 INR). Conclusion: At a tertiary care dental hospital level, we must provide patient's perspective care that is respectful of and responsive to individual patient preferences, needs, and values and ensuring that patient values guide all clinical decisions. By taking correct economic managerial decisions using ABC and budgeting the resources to dental services, the community can approach with true patient costs at an acceptable level of quality and at the least possible cost.
Keywords: Activity-based costing, dental health care costs, human capital, operating cost, patient's perspective care, unit cost
|How to cite this article:|
Sunil VV, Mrunalini K, Prathima V. Cost calculation of a tertiary care referral dental center using activity-based costing method: A case study. J Indian Assoc Public Health Dent 2022;20:168-73
| Introduction|| |
Economics is concerned with maximizing benefits from the resources available to us and is based on three fundamental principles; scarcity, choice, and opportunity cost., Economic appraisal, such as clinical evaluation, is concerned with the assessment of performance. Resources are insufficient to allow the pursuit of all desirable objectives. Any resource allocation decision involves an opportunity cost and the use of resources in one way entails forgoing the opportunity of using them in some other worthwhile activity. Cost affects utilization, and the high cost of dental care is the primary reason cited by patients for not visiting the dentist. In the Indian scenario, many dental benefits are excluded from health insurance coverage and affordability of dental care to the common man is a daunting task. Many patients opt for cheaper procedures such as tooth removal instead of exhaustive expensive techniques. The economic burden of dental diseases is huge due to disparity between public and private sectors spending for comprehensive dental affordable dental care. Cost containment has emerged as one of the major challenges facing in dental operations. This is in addition to expectations for high-quality results with decreased turnaround times, and increased workloads with a decreased workforce. Cost analysis represents a necessary phase in their scientific progression. The true costs of dental care services must be known to reserve sufficient resources and use them effectively and efficiently. Conducting cost and performance analysis helps to reduce costs and improves work process. Tertiary care dental treatment falls under the service industry. Costs are traced by activities across departments or cost centers. Activity-based costing (ABC) solves this problem by estimating the cost of the work activities that consume resources and by linking these costs to the services that are provided. The purpose of this original study is to assess true costs for services using ABC costing method and set an example for user-friendly charges at community level.
Objectives of a costing system
- Utilization of resources,
- Fixation of doctor's honorarium
- Fixing schedule of charges
- Monitoring of factors affecting pricing
- Budget allocation.
| Materials and Methods|| |
ABC methodology is employed. The unit cost of dental services and operating costs is estimated. The overall costs consist of the monetary value of the materials, labor, and capital assets used to provide the services.,,,,, The study is based on consolidated health economic evaluation reporting Standards (CHEERS).
A tertiary care private referral dental center established in 2001, with the average number of outpatients visiting would be 50 per day was selected. There are about 12 fully equipped dental chairs, one operation theater (OT). The numbers of health care staff employed are 15 doctors, 2 dental technicians, 3 dental hygienists, 1 chair technician, 1 para-medical staff, 1 dental nurse, 1 receptionist, 8 workers, and 1 vehicle driver.
A retrospective database analysis was conducted for 1 year (from April 2019 to March 2020), the main sources of data are from the hospital activity and accounting reports. Comprehensive information about human resources was taken from the hospital payroll, data on outpatient visits, admissions were collected from the medical records section. Operating theater statistics were taken from the theater register. Laboratory activity statistics are recorded from the lab register. Annual recurrent expenditures, which included salaries, drugs and medical supplies, laboratory, radiology materials, fuel and lubricants, office supplies, maintenance and cleaning, communications, water, electricity, telephone, and Internet, were collected from the annual expenditure report of the center. The study is exempted from obtaining the institutional ethical committee clearance.
Services provided by tertiary care dental center for which the tariff method followed are included and even capitation methods such as insurance payments, central and state government reimbursement payment schemes such as Ex-Servicemen Contributory Health Scheme, Employees Health Scheme, Employees State Insurance Corporation Aarogya Badratha, Govt. Employee's Health Card Scheme, and Central Government Health Scheme are included in the study (Recognized referral dental center).
Societal and patient individual costs are excluded from the study.
The term “cost” in this study refers to the economic cost, which is defined as the monetary value of the resources that are consumed to create goods or services.,,
“Unit cost” is the total cost incurred divided by the number of unit production including goods or services.,
The ABC method is considered an excellent method that can provide entirely and accurately informed about the costs incurred to the result of the product. It is a way of accumulating the total cost by tracking the cost activities that affect the outcome. Through the ABC method, it can be known how far the maximization of health service enables health-care providers to minimize the costs and maximize the resources so that efficiency occurred [Figure 1].
Step 1: The steps are:,,,
| Results|| |
During the study, cost recapitulation by usage cost groups in tertiary care dental center is calculated by implying ABC method and tracking the cost activities that affect the outcome.
How many productive hours do we put in?
- Public holidays in a year 24
- Sundays in a year 52
- Conference leaves in a year 15
- Vacation leaves in a year 10
- Total days on average dentist take off in a year = 101
- Working days in a year = 365–101 = 264
- Working days in a month = 22.
Calculation of unit cost pools of dental center, April 2019–March 2020
- Unit-level (workforce cost, cost of dental consumables equipment) 24.06
- Indirect group (pharmaceutical and equipment cost) 46.42
- Batch level (workforce cost) 01.11
- Routine expenditure cost 04.01
- (Workforce cost) – at organization-sustaining level 24. 40.
Average time taken for each procedure is justified depending on the complexity of the treatment, professional competence, and patient cooperativeness. Considering these factors, a dentist can put in each day and can work on average of 9 h per day including holidays.
| Discussion|| |
Dental care presents financial burden and affordability issues in developing economies due to lack of insurance coverage to dental procedures, and almost complete out-of-pocket payments made by citizens. The total expenditure spent on dental care in the public sector is also limited. Due to the upgradation of medical technology and highly advanced treatment procedures, tertiary dental care becomes very difficult to reach the needy and poor.,
By understanding costs of various activities and services provided in dental hospitals at tertiary care level [Table 1],,, clinicians can plan and take responsibility to provide the dental services that the community needs at an acceptable level of quality and at the least possible cost to meet these public needs., Cost analysis is a tool for ensuring economic efficiency.,, The patient's care needs and utilization patterns affected the subsequent cost for care. This will also influence the decisions of pricing the product and cost control.
In the present study, hospital cost information is derived by relating the inputs of resources in monetary terms to the outputs of services provided; we have calculated the operating costs and unit costs of dental services at a tertiary care referral dental center using ABC method. For this foremost, activity centers are divided into patient care cost centers and supportive cost centers. We have allocated resource costs to activities and categorized into cost pools, cost recapitulation of dental service is classified into a unit, batch, and organizing sustaining level. Moreover, the determination of each cost pool depends on the level of activity and direct or indirect cost of dental service [Table 2].,, In the present study, capital costs calculated were 3,008,500 rupees and operating cost as 1,048,000 rupees, in contrast, Febrian et al. showed capital cost as 575,400 rupees and operating cost as 2,251,239 rupees, thus indicating that there is cost-cutting on recurrent expenditures in our present study. The total indirect costs in the present study results to 265,700 rupees in contrast Febrian. got 454,105 rupees.
|Table 2: The basis for allocation of indirect costs to patient care cost centers|
Click here to view
The total full cost incurred in the present study showed 4,322,200 rupees [Table 3] in contrast Febrian. results showed 2,584,944.75 rupees. Thus, indicating that with low operational and overhead costs we could successfully commission the dental center.
In the present study shows operating costs incurred for performing the common procedure are as follows: Rotary randomized controlled trial (RCT) 7,624, Re-RCT 10,336, Extraction 1,706, Scaling 3,132, PFM 7,324, and Fillings 1,756 rupees. In contrast, Molete et al.,, results showed for Fillings 4,932 and Extractions 172 rupees. This indicates that the operating costs are more for Extraction and less for Dental Restoration [Table 4].
In the present study shows at the unit level which includes both cost pools A (24.06%) and B (46.42%) is the highest among other cost pools with 70.48% includes workforce cost and cost of dental consumables. These findings are in contrast to the results of Febrian et al., A (81%) and B (1.48%), Chatterjee et al. the outpatient department (24%), in-patient department (63%), emergency (51%), and major OT (8.6%). In the present study, results showed the percentage distribution of costs for human resources (19.6%), materials (4.6%), equipment (67%), and indirect costs (6.1%); these findings are in contrast relation to the results of Chatterjee et al.,, showed human resources (41%), materials (39%), equipment (3%), and indirect costs (15%).
- Annualized unit cost fluctuates every year based on each activity and inflation rate of the rupee,,,,
- The average cost only concentrated on cost calculation per type of treatment not per case due to the capitation method.
| Conclusion|| |
In summary, a major concern in accessing dental services in India is affordability, which is linked mainly to income adequacy and lack of dental insurance. A large proportion of working poor, low-and middle-income populations face these economic barriers and find themselves forfeiting dental care over basic needs such as housing and food. Through eliminating the cost barrier, a universal costing for services has the potential of improving access to dental care for disadvantaged populations. Costing studies for government-funded dental care services are limited. This study clearly shows that ABC calculates real unit costs by including support and administrative costs in the unit-cost information and workload of dental health services at the cost pool level, and what burdens the cost of service so that decision-makers can analyze to make savings, calculate the workload and improve the activity by increasing number of services, and frame costs that can be marginalized to save resources which can be utilized for patient betterment scheme and to provide subsidized care to the poorer section of the society.
- Adopting a proper model to determine the cost price of offered services to patients,,,,
- Comparing the enacted tariffs method with the ABC method
- Standardized activities and appraisal of performance (Benchmarking)
- Implement dental hospital budgeting, especially Activity-Based Budgeting.
Financial support and sponsorship
Conflicts of interest
There are no conflicts of interest.
| References|| |
Husereau D, Drummond M, Petrou S, Carswell C, Moher D, Greenberg D, et al.
Consolidated Health Economic Evaluation Reporting Standards (CHEERS) statement. BMJ 2013;346:f1049.
Rancic J, Rancic N, Majstorovic N, Biocanin V, Milosavljevic M, Jakovljevic M. Cost differentials of dental outpatient care across clinical dentistry branches. Farmeconomia Heal Econ Ther pathways 2015;16:25-32.
Tai BB, Bae YH, Le QA. A systematic review of health economic evaluation studies using the patient's perspective. Value Health 2016;19:903-8.
Rogers HJ, Rodd HD, Vermaire JH, Stevens K, Knapp R, El Yousfi S, et al.
A systematic review of the quality and scope of economic evaluations in child oral health research. BMC Oral Health 2019;19:132.
Hendriks ME, Kundu P, Boers AC, Bolarinwa OA, Te Pas MJ, Akande TM, et al.
Step-by-step guideline for disease-specific costing studies in low- and middle-income countries: A mixed methodology. Glob Health Action 2014;7:23573.
Smith BJ, Helgeson M, Prosa B, Finlayson TL, Orozco M, Asgari P, et al.
Longitudinal analysis of cost and dental utilization patterns for older adults in outpatient and long-term care settings in Minnesota. PLoS One 2020;15:e0232898.
Ganai S. Study of in-patient costing at a tertiary care teaching hospital of north India. J Med Sci Clin Res 2016;04:13223-31.
Rajabi A, Dabiri A. Applying Activity Based Costing (ABC) method to calculate cost price in hospital and remedy services. Iran J Public Health 2012;41:100-7.
Waters H, Adballah H, Santillán D, Richardson P. Project QA. Assurance Project Application of Activity-Based Costing (ABC) in a Peruvian. System; 2003. Available from: https://www.qaproject.org
. [Last accessed on 2003 Jun].
Robinson-Backmon I. An activity-based costing model for dental schools: Is ABC a feasible costing alternative. J Bus Econ Res 2011;2:71-80.
Ramireddy JK, Sundaram DS, Rabin K. Chacko. Cost Analysis of oral cancer treatment in a tertiary care referral center in India. Asian Pac J Cancer Biol 2017;2:17-21.
Febrian, Lukman S, Hardisman, Suhairi, Sari DP. Comparative study of unit cost-analysis among urban and rural dental primary health services in Padang City, Indonesia. J Clin Diagn Res 2019;13:25-9.
Vo, et al.
Hospital cost analysis in developing countries: A methodological comparison in Vietnam. Asian J Pharm 12:S8-18.
Mohd-Dom TN, Mohd-Said S, Abdul-Manaf MR, Abdul-Muttalib K, Aljunid SM. A detailed framework of methods used to calculate costs of periodontal treatment in malaysian public dental clinics. Malaysian J Public Heal Med 2016;16:249-60.
Chatterjee S, Levin C, Laxminarayan R. Unit cost of medical services at different hospitals in India. PLoS One 2013;8:e69728.
Mogyorosy Z, Smith P. The main methodological issues in costing health care services – A literature review. Medicine, Political Science 2005;7:1-244. Available from: https://www.york.ac.uk/inst/che/pubs
. [Last accessed on 2018 Apr 03].
Thompson B, Cooney P, Lawrence H, Ravaghi V, Quiñonez C. Cost as a barrier to accessing dental care: Findings from a Canadian population-based study. J Public Health Dent 2014;74:210-8.
Rosamma G, Kavyashree G. Effect of four mouth rinses on microhardness of esthetic. J Int Oral Heal 2017;9:55-9.
Desai AJ. Operational cost and treatment charges in dentistry. Dent Pract 2017;15:2.
Gupta PK, Parmar NK. Costing a hospital service product: Marginal vs. absorption costing. Med J Armed Forces India 2001;57:230-3.
Colthirst PM, Berg RG, Denicolo P, Simecek JW. Operational cost analysis of dental emergencies for deployed US Army personnel during operation Iraqi freedom. Mil Med 2013;178:427-31.
Mohd-Dom T, Ayob R, Mohd-Nur A, Abdul-Manaf MR, Ishak N, Abdul-Muttalib K, et al.
Cost analysis of periodontitis management in public sector specialist dental clinics. BMC Oral Health 2014;14:56.
Molete MP, Chola L, Hofman KJ. Costs of a school-based dental mobile service in South Africa. BMC Health Serv Res 2016;16:590.
Cornell RM, Warne R, Andrew Ford DD. Sole-practitioner professional practice case. J Bus Case Stud 2011;7:1-18.
Kakudate N, Morita M, Sugai M, Nagayama M, Fukuhara S, Kawanami M, et al.
Comparison of dental practice income and expenses according to treatment types in the Japanese insurance system. Jpn Dent Sci Rev 2010;46:4-10.
Than TM, Saw YM, Khaing M, Win EM, Cho SM, Kariya T, et al.
Unit cost of healthcare services at 200-bed public hospitals in Myanmar: What plays an important role of hospital budgeting? BMC Health Serv Res 2017;17:669.
Febrian FL. Cost calculation of dental service at pratama clinic using activity-based costing method in Padang, West Sumatera, Indonesia. J Int Oral Health 2020;12:46-51. [Full text]
Nyamuryekung'e KK, Lahti SM, Tuominen RJ. The relative patient costs and availability of dental services, materials and equipment in public oral care facilities in Tanzania. BMC Oral Health 2015;15:74.
Meenal M, Manipal S, Duraisamy P, Adusumilli P, Ahmed MA. Out-of-pocket costs in the private and the public sector in dentistry: A comparative study. Res Rev A J Dent 2013;4:14-9.
Choi JS, Lee WB, Rhee PL. Cost-benefit analysis of electronic medical record system at a tertiary care hospital. Healthc Inform Res 2013;19:205-14.
Listl S, Galloway J, Mossey PA, Marcenes W. Global economic impact of dental diseases. J Dent Res 2015;94:1355-61.
Inverso G, Flath-Sporn SJ, Monoxelos L, Labow BI, Padwa BL, Resnick CM. What is the cost of meaningful use? J Oral Maxillofac Surg 2016;74:227-9.
Yule BF, van Amerongen BM, Van Schaik MC. The economics and evaluation of dental care and treatment. Soc Sci Med 1986;22:1131-9.
Charalambous C, Maniadakis N, Polyzos N, Fragoulakis V, Theodorou M. The efficiency of the Public Dental Services (PDS) in Cyprus and selected determinants. BMC Health Serv Res 2013;13:420.
Wani MA, Tabish SA, Jan FA, Khan NA, Wafai ZA, Pandita KK. Cost analysis of in-patient cancer chemotherapy at a tertiary care hospital. J Cancer Res Ther 2013;9:397-401.
Sollenius O, Petrén S, Björnsson L, Norlund A, Bondemark L, et al.
Health economic evaluations in orthodontics: A systematic review. Eur J Orthod 2016;38:259-65.
Tan SS, Ken Redekop W, Rutten FF. Costs and prices of single dental fillings in Europe: A micro-costing study. Health Econ 2008;17 Suppl 1:S83-93.
Inverso G, Desrochers HR, Padwa BL. The value of postoperative visits for third molar removal. J Oral Maxillofac Surg 2014;72:30-4.
Sendi PP, Andrew J, Palmer CP. Some Principles of cost-effectiveness analysis in dentistry. Acta Med Dent Helv 1999;4:63-7.
Shepard DS, Hodgkin D, Anthony Y. Analysis of Hospital Costs: A Manual for Managers. Waltham, MA: Inst Health Policy, Heller Sch Brand Univ; 1998. p. 1-85.
[Table 1], [Table 2], [Table 3], [Table 4]