Effect of costing methods on unit cost of hospital medical services

Trop Med Int Health. 2007 Apr;12(4):554-63. doi: 10.1111/j.1365-3156.2007.01815.x.


Objective: To explore the variance of unit costs of hospital medical services due to different costing methods employed in the analysis.

Methods: Retrospective and descriptive study at Kaengkhoi District Hospital, Saraburi Province, Thailand, in the fiscal year 2002. The process started with a calculation of unit costs of medical services as a base case. After that, the unit costs were re-calculated based on various methods. Finally, the variations of the results obtained from various methods and the base case were computed and compared.

Results: The total annualized capital cost of buildings and capital items calculated by the accounting-based approach (averaging the capital purchase prices throughout their useful life) was 13.02% lower than that calculated by the economic-based approach (combination of depreciation cost and interest on undepreciated portion over the useful life). A change of discount rate from 3% to 6% results in a 4.76% increase of the hospital's total annualized capital cost. When the useful life of durable goods was changed from 5 to 10 years, the total annualized capital cost of the hospital decreased by 17.28% from that of the base case. Regarding alternative criteria of indirect cost allocation, unit cost of medical services changed by a range of -6.99% to +4.05%. We explored the effect on unit cost of medical services in one department. Various costing methods, including departmental allocation methods, ranged between -85% and +32% against those of the base case. Based on the variation analysis, the economic-based approach was suitable for capital cost calculation. For the useful life of capital items, appropriate duration should be studied and standardized. Regarding allocation criteria, single-output criteria might be more efficient than the combined-output and complicated ones. For the departmental allocation methods, micro-costing method was the most suitable method at the time of study.

Conclusions: These different costing methods should be standardized and developed as guidelines since they could affect implementation of the national health insurance scheme and health financing management.

Publication types

  • Comparative Study
  • Research Support, Non-U.S. Gov't

MeSH terms

  • Accounting / economics
  • Accounting / methods
  • Cost Allocation / methods
  • Cost Control / methods
  • Financial Management, Hospital / economics
  • Health Personnel / economics
  • Hospital Charges
  • Hospital Costs*
  • Hospital Departments / economics
  • Humans
  • Operating Rooms / economics
  • Retrospective Studies
  • Thailand
  • Time Factors