User's Guide for the Hospital Recurrant Cost Projection … · USER’S GUIDE FOR THE HOSPITAL RECURRENT COST ... and then applies these norms to the hospital’s future ... The Recurrent

USER’S GUIDE FOR THE

HOSPITAL RECURRENT COST PROJECTION MODEL

(Excel 2003 Field Test Version)

prepared by: Elizabeth Lewis

Management Sciences for Health

May 2007

based on an earlier version by: Guillermo Barreto-Vega

Gerald Rosenthal The original version of the model was developed by Management Sciences for Health (MSH) as part of its work under the Health Sector Reform Project, Nicaragua Ministry of Health/World Bank, March 1996, Managua, Nicaragua. Further development and adaptation of the model was carried out with support from the Family Planning Management Development (FPMD) Project (USAID Cooperative Agreement No. CCP-A-00-95-00000-02), the Leadership, Management and Sustainability (LMS) Program (USAID Contract No. GPO-A-00-05-00024-00), and Management Sciences for Health. All support for the development of the model and this accompanying User’s Guide is gratefully acknowledged.

TABLE OF CONTENTS I. INTRODUCTION: WHY IS THIS MODEL NECESSARY? .......................................... 3 II. THE MODEL...................................................................................................................... 4

A. Data entry / information collected (“inputs”) ......................................................... 4 B. The results (“outputs”)............................................................................................ 5 C. Assumptions............................................................................................................ 5

III. HOW TO USE THE MODEL ............................................................................................ 6 A. Assumptions, terminology, and conventions .......................................................... 6 B. A quick overview of the workbook ........................................................................ 7 C. Guidelines for using the model and entering data .................................................. 7

1. The Data_Entry worksheet ..........................................................................7 2. The Unit_Costs worksheet.........................................................................10 3. The Norms worksheet ................................................................................12 4. The Summary_Results worksheet..............................................................14 5. The Calculations worksheet.......................................................................14

D. Points to keep in mind when entering data ........................................................... 14 IV. HOW TO MODIFY THE MODEL.................................................................................. 16

A. If you need to add rows for more Specialty Services ........................................... 17 B. If you need to add rows for more categories of Personnel ................................... 18

ANNEXES.................................................................................................................................... 21 A. ANNEX: NORMS CATEGORIES ..................................................................... 22 B. ANNEX: DATABASE ASSUMPTIONS FOR THE RECURRENT COST

STUDY ................................................................................................................. 25

Management Sciences for Health (MSH) 3 Recurrent Cost Projection Model

I. INTRODUCTION: WHY IS THIS MODEL NECESSARY?

Management Sciences for Health (MSH) originally developed the Recurrent Cost Projection (RCP) Model for the Ministry of Health (MOH) of Nicaragua in order to plan more accurately for hospital facility construction and renovation. The MOH recognized that construction costs represented only the initial funding obligation of all the resources needed to benefit from expanded and renovated facilities. Providing services also requires an ongoing commitment of human and financial resources. The model has been designed to provide calculations of the annual recurrent costs that are needed to sustain efficient production of services. The original model incorporated data that were specifically applicable to Nicaragua at the time of development. Unit costs and prices, estimated from a sample of hospitals and ambulatory settings, were assumed as fixed with the users specifying certain characteristics of the proposed new institution. The model presented here has been generalized from the Nicaragua experience to enable users to inform the model for any setting by entering the appropriate costs and prices. The RCP model does not offer a prediction of future costs; rather, it identifies various norms for inputs required to produce services of a given level of quality, and then applies these norms to the hospital’s future level of operations. The model projects the recurrent costs for a facility, provided that the facility maintains certain norms in employing resources. Users of the model also have the option to modify the norms to reflect experience and local priorities. The RCP model was designed to link operational performance with future levels of assistance needed. In this manner, decisions about dedicating resources to construction can be linked systematically to future budget requirements. This capability should aid in establishing more realistic priorities, and will also ensure that anticipated benefits of new facility construction can be realized.


II. THE MODEL

The general objective of this effort was to create a simple and general model which incorporates local experience and specific output norms, which will then be used to calculate recurrent cost projections for various types of inpatient facilities throughout their useful lives. The RCP model is designed to support hospital facility planning by estimating future operating costs that are sufficiently realistic to (1) permit macro-level planning of investments and health service operations at the time the project is being considered, and (2) avoid future unplanned expenditure commitments. The model is based on the realities found during the Nicaragua study and includes adjustments based on experiences of other institutions in more- and less-developed countries, as well as the professional experience of the MSH team. In its present form, the model permits you, as the user, to specify and test the implications of different sets of institution characteristics, prices, unit costs, and applicable operating norms. The original model, created in an earlier version of Lotus 1-2-3, was macro-based; that is, users could run a series of simple programs in order to calculate the results after they input the necessary data. This current Excel 2003 field test version is formula-driven, so there are no programs to run. This feature also makes it easier to modify the model if necessary. Finally, an advantage of having a spreadsheet-based model is that you may enter different assumptions to see the financial impact of those assumptions. For instance, some renovations may be planned for your hospital, and you would like to see the recurrent costs for two different scenarios, such as keeping the same number of beds or adding a wing to have more hospital beds.

A. Data entry / information collected (“inputs”)

By opening the RCP Model workbook in Excel, you have the opportunity to provide three types of specific data about the planned hospital facility: • Facility data: for example, type of hospital, location of hospital, number of beds, value of

investments, etc. • Costs and prices: current unit costs and prices. • Facility-specific norms (if different from the default values): for example, the appropriate

ratio of hospital beds per doctor or nurse. The model already contains some data (the norms), which are divided into categories. Each category has both intermediate and optimal norms, as well as unit costs for all three types of hospitals: primary, general, and specialty. The categories of norms are as follows: • Personnel (number of beds per cadre of staff/human resources)


• Drugs and Replacement Medical Supplies • Maintenance • Food Service • Operating Costs • Depreciation A complete description of these categories is found in Annex A. You may modify these norms based on local experience or changing international and local standards.

B. The results (“outputs”)

After you enter the necessary data, you may click on the Summary_Results page of the model to see the desired information, that is, the projected recurrent costs of the facility. The model takes the data that you provide and calculates the hospital facility’s recurrent costs, based on your input and the established norms for the efficiency level that you specified when you entered the data.

C. Assumptions

The norms have been established based on the information collected by the team of consultants, as well as their experiences from other countries. This does not mean that the norms will be “perfect” for every situation. For example, if your hospital treats a large number of trauma cases requiring more monitoring and care, your personnel requirements may well be different than the default norms in the model. You have the option to adjust those norms to obtain more realistic projections of recurrent costs for your facility. The instructions for modifying the model are found in Section IV of this manual.


III. HOW TO USE THE MODEL

A. Assumptions, terminology, and conventions

This User’s Guide assumes that you have some familiarity with electronic spreadsheets and with Excel in particular. The Recurrent Cost Projection Model is an Excel workbook with multiple worksheets (or pages). The workbook file name is RecCostProj.xls. Each worksheet within the workbook also has a name, as described below in the next section. The worksheets are “linked,” that is, when you enter data on one worksheet, the model refers to that data when needed for calculations elsewhere (the formulas link back to the cell where you entered the data), and you do not need to enter the same data more than once. Near the bottom of your computer screen, you will see worksheet tabs with the names of each worksheet. You may click with your mouse on any of the tabs to view that sheet and make it “active.” When the instructions tell you to enter data on the Data_Entry worksheet, for example, you would click your mouse on the worksheet tab named Data_Entry in order to have access to the cells where those data are entered.1 The worksheet tabs have different colors. A green tab means that you will need to enter data on that worksheet every time you use the workbook for a different facility. A yellow tab means that you might need to make modifications initially, but once you have reviewed and adjusted the data on that page, you will not need to make changes again unless the underlying assumptions change (such as salary increases or changes in the published norms on staffing ratios). A gray tab indicates that no data entry is necessary for that worksheet. Within each worksheet, some cells are colored (shaded) and some are not. The green-shaded cells are the ones where you may need to type in your data.

TIP: When you use the model for the first time, please do the following: • Open the RecCostProj.xls file in Excel. • From the main menu, choose File, Save As… • Save the file under a new name. For example, if your hospital is Central

General Hospital (CGH), you might name the file RecCostProj_CGH.xls. By doing this, if you need to analyze more than one facility, or if you accidentally erase a formula, you can always go back to the original version of the model.

All of the worksheets have been protected. This prevents accidental deletions of formulas. You may still enter data in the green-shaded areas. If you need to modify the model, Section IV contains instructions on how to do so, including how to “unprotect” the worksheets. 1 You may wonder why the worksheet names have an underscore between words (for example, “Data_Entry” instead of “Data Entry”). It makes the formulas easier to read and prevents some problems in Excel, which sometimes seems to have difficulty if there is a space in the name of a worksheet.


B. A quick overview of the workbook

The RCP Model contains five worksheets: • Data_Entry: As the name suggests, this sheet is where you enter the basic data for your

facility. • Unit_Costs: On this worksheet, you enter unit costs for the types of resources needed for the

running of a hospital—personnel salaries, drugs and supplies, and food. • Norms: You may or may not have to enter data on the Norms page. You will want to

review the norms to see if they are consistent with your particular facility, or if they need to be adjusted to reflect local conditions.

• Summary_Results: No data entry is required on the Summary_Results page. You click on this worksheet tab when you want to see the results of the recurrent cost projections, based on the assumptions and data that you entered.

• Calculations: This page is used for intermediate calculations only. You do not need to enter data here, and you may ignore it completely unless you need to make modifications to the model itself, as explained in Section IV.

C. Guidelines for using the model and entering data

1. The Data_Entry worksheet

When you first open the workbook, the Data_Entry worksheet should appear. (If it doesn’t, look near the bottom of your computer screen for the green-colored tab called Data_Entry and click on it.) As the name suggests, this page is where you provide specific data for the model. The top part of the worksheet is shown in Figure 1 below. (Rather than show a blank worksheet, we are showing a worksheet that has been prepared for a fictitious hospital, Central General Hospital.)


Figure 1: Part of the Data_Entry worksheet

As you can see, the Data_Entry worksheet contains several areas to be filled in, as follows. Note: if the instructions say to leave a cell blank, please do not hit the Space bar and type a space to create the appearance of a blank cell. If you do this, then you will have a cell with a space character in it. This is not the same as a blank cell. If you need to remove data that are already in a cell, please use the Delete key to clear the cell.


Cell(s) in worksheet Data that you should enter in the cell(s) Cell E3: Name of Hospital Type the facility name. Cells C6 – C8: Type of Hospital

You have three choices: Primary, General, or General with specialty. Type an X (either uppercase or lowercase) in the cell that corresponds to the appropriate choice.

Cell C11: Number of Beds Type in the total number of beds. Include the number of specialty beds that you specify in the Specialty Services section below.

Cell C12: Occupancy Rate Type in the occupancy rate as a whole number rather than a percentage—that is, if occupancy is 80%, type 80.

Cell C14: Basic Services • Type an X in the box if your hospital provides basic services. • If it is strictly a specialty hospital, leave the box blank.

Cells B17 – B22: Names of Specialty Services

If your hospital has specialty services, type in the names of those services in cells B17 to B22. (If you have more than six specialty services, see Section IV first on how to modify the model to include the proper number of rows.)

Cells C17 – C22: Specialty Services

• Next to the names of specialty services that you just entered in column B, type in the number of beds allocated to each type of specialty in cells C17 to C22.

• If you do not have specialty services, leave these cells blank or enter zero (0) in each one.

Cells C25 and C26: Diagnostic Services

• If your hospital has laboratory services, type an X in cell C25. • Similarly, if your hospital has imaging services, type an X in

cell C26. • Otherwise, leave both of these cells blank.

Cell C28: Outpatient Consulting Services

Type in the number of outpatient consultation rooms in cell C28.

Cells E31 – E33: Total Investment Value

• In cell E31, enter the value of investments in electromedical equipment.

• In cell E32, enter the value of investments in electromechanical equipment.

• In cell E33, enter the value of investments in infrastructure. The model will add these three figures and display the total automatically in cell E34.

Cell C36: Salary Differential

Some facilities pay their service providers a salary differential as an incentive to work in areas that are considered hardship posts. If your hospital pays a salary differential to service providers, enter that percentage here.

Cells C40 and C41: Efficiency Level

Mark either cell C40 or cell C41 with an X to indicate the appropriate efficiency level. If your hospital is at an intermediate efficiency level, type an X in cell C40. If your hospital is at an optimal efficiency level, type an X in cell C41.

Cell C43: Official Exchange Rate

If you would like to display your results in US dollars as well as your local currency, enter the exchange rate in cell C43.


After entering the data, you may print the entire page so that you may refer back to your basic assumptions while working elsewhere in the model. Then save your file before proceeding to the next step.

2. The Unit_Costs worksheet

To move to the next worksheet, click on the Unit_Costs worksheet tab near the bottom of your screen. Recall that you need to review the data on this page the first time you use the model, and then you will not need to change any unit cost data unless the costs of the inputs change. For example, if personnel receive annual salary increases, you will need to adjust the salary figures once a year. If you are projecting costs for more than one hospital in the same country and the salaries are consistent across different areas, you will need to make sure that the unit costs are updated, save the file under a new name, and then make a new file for each hospital so that you can enter facility-specific data on the Data_Entry worksheet. Figure 2 below shows part of the Unit_Costs worksheet. Notice that the format of the worksheet is similar to what you saw on the Data_Entry worksheet; that is, the areas where you might need to make adjustments are shaded green. Note also that some of Section IV of the worksheet (Specialty Services) is not shaded green. This is because you already entered the names of any specialty services on the Data_Entry worksheet, and they have been linked to this Unit_Costs worksheet so that you do not need to type the same information twice.


Figure 2: part of the Unit_Costs worksheet

The unit costs that you will need to enter on the Unit_Costs worksheet include the following: • Personnel: description of each category of staff, and the annual base salary for each category

of staff (if you have more than 14 categories of staff, please see Section IV for instructions on modifying the model)

• Drugs and Replacement Supplies: average unit cost per prescription and per replacement supply

• Food Service: average cost per meal • Specialty Services: annual base salary for each type of specialist


Regarding the average unit cost for prescriptions, obviously there is a wide range of costs for different drugs. This model does not attempt to provide detailed costs for a particular type of treatment; rather, it is used primarily for planning and budgeting. Thus, a general average can be used here.

TIP: To calculate average unit cost of a prescription for the model, • Determine the total cost of drugs dispensed during the prior year (or other

period—the past six months, or the past quarter) • For the same time period, determine how many prescriptions were written • Divide the total cost by the total number of prescriptions to get the average

cost per prescription If any of the unit costs do not apply to your hospital (for instance, if you do not offer specialty services), then leave the corresponding cells blank. Note: please do not hit the Space bar and type a space to create the appearance of a blank cell. If you do this, then you will have a cell with a space character in it. This is not the same as a blank cell. If you need to remove data that are already in a cell, please use the Delete key to clear the cell. After updating the unit costs, you may print this page for reference as you continue to work through the model. Then save the file before proceeding to the next step.

3. The Norms worksheet

The third worksheet in the RecCostProj.xls workbook is called Norms. As the name suggests, all of the norms upon which the calculations are based can be found here. These norms were selected from the database of information collected during the original study. They have been adjusted as necessary, based on the consultants’ experience and the experience of hospitals in other countries. There are two sets of norms—intermediate and optimal—for each type of hospital (Primary, General, and General with Specialty). Based on your selections on the Data_Entry worksheet, the model calculates recurrent costs using the relevant set of norms. • Intermediate Norms: these are derived from experiences found in the sample hospitals of the

original study in Nicaragua; they have been adjusted for basic functioning of a hospital facility. It is assumed that the intermediate norms should be met in the short to medium term (one to five years).

• Optimal Norms: these norms are based on findings from facilities surveyed, as well as on consultant recommendations and hospital experience in other countries. The optimal norms were designed to serve as guidelines in the quest of providing better secondary-level health care in the medium to long term (six to 10 years).


Figure 3 below shows part of the Norms worksheet. Again, the areas that you might need to adjust are shaded green.

Figure 3: part of the Norms worksheet

Following is a brief description of the various norms. More detail about them can be found in Annex B on Database Assumptions. • For Personnel, the norms indicate an appropriate number of beds per category of human

resource. For instance, it is estimated that at an intermediate level of efficiency, one general physician is needed for every 6.67 beds. In contrast, at an optimal efficiency level, one general physician is needed for every 5 beds. - At intermediate efficiency, then, for an 80-bed hospital, this would mean that 12 general

physicians would be needed. - At optimal efficiency, one general physician would be needed for every 5 beds. For an

80-bed hospital, this would mean that 16 general physicians would be needed. • For Drugs and Replacement Supplies, the norms indicate the average number of prescriptions

per occupied bed-day. You can see in Figure 3 above that the average number of prescriptions is lower at the primary hospital than it is at the general hospital.


• For Maintenance, the norms indicate the percentage of investment value needed to maintain the equipment properly.

• For Food Service, the norms show the average number of servings per bed-day. • For Operating Costs, the norms indicate what percentage of the total cost of the facility is

consumed by operating costs. • For Depreciation, the norms indicate the average number of years of useful life for

equipment and infrastructure. • For Specialty Services, the norms indicate an appropriate number of beds per category of

human resource. (They are separate from the other Personnel norms because different specialties have different requirements; for example, the Intensive Care Unit requires different staffing than the Orthopedics Unit.)

• For Diagnostic Services, the norms indicate what percentage of the total drugs and replacement supplies cost is needed for laboratory and imaging services.

• For Outpatient Services, the norms indicate the percentage time that a specialist needs to operate an outpatient services office.

You may or may not need to change any of the norms, based on your own country’s norms, cost of supplies, or other factors. If you have changed the norms, you may wish to print the page in order to be able to reference them easily. If you have not changed them, you will find a copy in Annex A of the User’s Guide. If you have made any changes to the norms, save your file before proceeding to the next step.

4. The Summary_Results worksheet

The Summary_Results worksheet contains the results of the spreadsheet calculations, based upon the data you entered on the prior three worksheets. On this worksheet, you can see a summary of the recurrent costs for the facility being planned, both excluding and including the cost of depreciation. Recall that you may wish to test different assumptions (“what-if” analysis) with the model—for instance, to see the financial impact of varying the number of hospital beds, or to determine what the cost would be when operating under either intermediate or optimal norms. If you wish to vary any of the initial specifications, return to the Data_Entry worksheet to enter the new assumptions and then return to the Summary_Results page to see the resulting recurrent costs.

5. The Calculations worksheet

As mentioned earlier, this worksheet is used only for intermediate calculations. You will not need to enter any data or make any changes to it, unless you are modifying the model itself (see Section IV).

D. Points to keep in mind when entering data

As you fill in the requested data, please remember the following:


• Indicate percentages in whole numbers, e.g., type 78 for 78%

• If you are supposed to mark a choice with an X, you may use either uppercase (X) or lowercase (x)

• Note: if the instructions say to leave a cell blank, please do not hit the Space bar and type a space to create the appearance of a blank cell. If you do this, then you will have a cell with a space character in it. This is not the same as a blank cell. If you need to remove data that are already in a cell, please use the Delete key to clear the cell.

• If the figures on the Summary_Results worksheet do not seem to change, even after you have made changes to some of the data, check to see whether your spreadsheet is calculating automatically. From the main menu, choose Tools, Options and then click on the Calculation tab. Check to see that Automatic is selected (see below).

• Remember to save your work! You should save the file under a new name so that you can

always go back to the original if your own file becomes corrupted.


IV. HOW TO MODIFY THE MODEL

You may find that you need to modify the model to reflect the situation at your hospital. Perhaps you have more than 14 categories of personnel, or you offer more than six specialty services. This section will outline how to go about making modifications to the model itself—not the inputs (data entry), but rather the actual model.

IMPORTANT CAUTION: The instructions below assume that you are at least at an intermediate level of Excel expertise. If you do not feel comfortable making changes (inserting rows, copying formulas, and so forth), you may want to ask a colleague for assistance.

Note: if you have fewer categories of staff or specialty services, you will not need to modify the model. Simply leave the corresponding sections blank. (It is easier to leave data cells blank than it is to delete unnecessary rows, and you will avoid the risk of deleting something accidentally.) If you do not want the blank rows to appear on-screen or in your printouts, you may hide the unused rows by choosing Format, Row, Hide from the main menu.

Worksheet protection: If you need to make modifications to the model itself, you will need to unprotect the relevant worksheets. To unprotect a worksheet:

From the main menu, choose Tools, Protection, Unprotect Sheet Once you have made modifications, you should reprotect the worksheet to avoid accidentally deleting a formula or key data. To reprotect a worksheet:

From the main menu, choose Tools, Protection, Protect Sheet, OK

When inserting rows, also remember: When you are inserting rows within a range (e.g., to expand a list to include more categories), it is better to insert the new rows in the middle of the range. That is, you generally do not want to insert additional rows before the first item in a list or at the end of an existing list. Why is this? If there are formulas that add numbers in the list, the formulas will not look at figures in those new rows. Also, special formats for a range of cells are not carried over to the new cells if you insert extra rows at the beginning of the range. But if you insert the new rows in the middle of the range, the new figures will be included in the formulas, and the formats will carry over as well. The directions below will guide you through the process of inserting extra rows in appropriate places in the model to make sure that the existing formulas will


work properly, and that you will not have to reformat cells.

A. If you need to add rows for more Specialty Services

• The RCP model has space for up to six Specialty Services.

• If you have six or fewer specialty services, but the names are different than the default names in the model, you do not need to add extra rows. Instead, simply customize the list of Specialty Services by typing the names of your services in cells B17 to B22 on the Data_Entry worksheet, and then make sure that the corresponding staffing norms on the Norms worksheet are correct for your particular specialties. (You may hide any extra rows that you are not using so that the worksheet looks “cleaner.” To hide one or more rows, click and drag with your mouse on the row(s) that you want to hide, then do the following from the main menu: Format, Row, Hide.)

• If you have more than six specialty services, you will need to add one or more rows to each worksheet (except Summary_Results), as follows:

- Begin on the Data_Entry worksheet.

Unprotect the worksheet as described above in the “Worksheet Protection” box.

Click in cell B18—that is, the second row within the list of specialty services. Do not click in the first or last row of specialty services.

From the main menu, choose Insert, Rows. This will insert one row. Repeat if necessary until you have enough rows.

Reprotect the worksheet.

Type in the name(s) of your specialty services in column B, and fill in the number of beds in column C.

- Now go to the Unit_Costs worksheet.


Click in cell C31—that is, the second row within the list of specialty services. Do not click in the first or last row of specialty services.


Now click in cell C30—that is, the first item within the list of specialty services.

Copy the formula from cell C30 to C31 (and any additional new row below it, if necessary). This will link the names from the Data_Entry worksheet to the Unit_Costs worksheet.



- Now go to the Norms worksheet.




Now click in cell B39—that is, the first item within the list of specialty services.

Copy the formula from cell B39 to B40 (and any additional new row below it, if necessary). This will link the names from the Data_Entry worksheet to the Norms worksheet.


Enter the corresponding norms for the specialty services at your hospital in columns G and H.

- Now go to the Calculations worksheet.




Now click in cell B44—that is, the first item within the list of specialty services.

Copy the formula from cell B44 to B45 (and any additional new row below it, if necessary). This will link the names from the Data_Entry worksheet to the Calculations worksheet.

Copy the formula from cell C44 to C45 (and any additional new row below it, if necessary).


B. If you need to add rows for more categories of Personnel

• The RCP model has space for up to 14 categories of Personnel (not including the Specialty Services, which are tracked separately as described above).

• If you have 14 or fewer categories of Personnel, but some of the category titles are different than the default category names in the model, you do not need to add extra rows. Instead, simply customize the list of Personnel by typing the category names of your personnel in cells C10 to C23 on the Unit_Costs worksheet, and then make sure that the corresponding staffing norms on the Norms worksheet are correct for your particular personnel categories. (You may hide any extra rows that you are not using so that the worksheet looks “cleaner.” To hide one or more rows, click and drag with your mouse on


the row(s) that you want to hide, then do the following from the main menu: Format, Row, Hide.)

• If you have more than 14 categories of personnel (not including the Specialty Services), you will need to add one or more rows, as follows:

- Begin on the Unit_Costs worksheet.


Click in cell C11—that is, the second row within the list of personnel. Do not click in the first or last row of the personnel list.


If you wish, you may renumber the categories in column B, but this will not affect any of the calculations. It is more for your convenience if you wish to know at a glance how many personnel categories there are.


On a separate sheet of paper, make a list of your personnel categories and divide them into direct service staff and support or administration. List the direct service staff first.

On the Unit_Costs worksheet, type in the name(s) of your personnel categories in column C, making sure that all direct service provider categories are listed first, and fill in the unit cost (annual base salary) for each category in column D.

- Now go to the Norms worksheet.


Click in cell B11—that is, the second row within the list of personnel categories. Do not click in the first or last row of personnel categories for this step.


Now click in cell B10—that is, the first item within the list of personnel categories.

Copy the formula from cell B10 to B11 (and any additional new row below it, if necessary). This will link the names from the Unit_Costs worksheet to the Norms worksheet.


Enter the corresponding norms for the personnel categories at your hospital in columns C through H. You will enter the intermediate norm for each category of personnel in columns C, E, and G; you will enter the optimal norm for each category of personnel in columns D, F, and H.


- Now go to the Calculations worksheet.


Click in cell B12—that is, the second row within the list of personnel categories. Do not click in the first or last row of personnel categories for this step.


Now click in cell B11—that is, the first item within the list of personnel categories.

Copy the formula from cell B11 to B12 (and any additional new row below it, if necessary). This will link the names from the Unit_Costs worksheet to the Calculations worksheet.

Copy the formula from cell C11 to C12 (and any additional new row below it, if necessary).

Important: Review the subtotal formulas in column E. Since the model distinguishes between direct service providers and personnel who work in support or administration, you need to make sure that each subtotal refers to the appropriate categories in your revised list. If you need to adjust the range for either subtotal formula, click in the appropriate cell, press the function key F2 to edit the formula, and adjust the formula as necessary. (We cannot give more detailed instructions for this step, because the adjustment depends on how many rows you added, how many categories of personnel you have, and how many of those are direct versus support or administration.)


Note: if you have copied the RCP model onto the hard drive of your computer, make a clean back-up copy of your modified version, with all of the adjustments that you have made for your facility. If you wish to use the original version of the model at a different time, the version with your modifications should be given a different name to avoid confusion. For instance, the original model is called RecCostProj.xls. You may call your own version with that title plus the name of your hospital. Then, each time you use the model to project recurrent costs, you may rename it again to indicate the time period of the projection (such as CGH_RecCostProj_2007 estimates.xls).


ANNEXES


A. ANNEX: NORMS CATEGORIES


NORMS PRIMARY HOSPITAL GENERAL HOSPITAL SPECIALTY HOSPITAL Intermediate Optimal Intermediate Optimal Intermediate Optimal I.- PERSONNEL (beds per human resource) (3) (4) (5) (6) (7) (8)

1 General Physician 6.67 5.00 6.67 5.00 6.67 5.00 2 Specialty Doctor 9.32 9.00 9.32 9.00 9.32 9.00 3 Professional Nurse 4.50 2.27 4.50 2.27 4.50 2.27 4 Nurse Assistant/Auxiliary 2.50 3.45 2.50 3.45 2.50 3.45 5 Technician / Lab, Pharmacy, etc. 7.14 9.33 7.14 9.33 7.14 9.33 6 Public Health Technician 7 Pharmacy 12.50 10.00 12.50 10.00 12.50 10.00 8 Food Service 5.56 5.00 5.56 5.00 5.56 5.00 9 Laundry/Housekeeping 5.26 6.67 5.26 6.67 5.26 6.67

10 Vehicle Repair and Maintenance 6.00 4.00 6.00 4.00 6.00 4.00 11 Finance 50.00 50.00 50.00 50.00 50.00 50.00 12 Information Management 20.00 10.00 20.00 10.00 20.00 10.00 13 Medical Administrator 40.00 25.00 40.00 25.00 40.00 25.00 14 Administration 10.00 4.00 10.00 4.00 10.00 4.00

II.- DRUGS AND REPLACEMENT SUPPLIES Average prescription (per occupied bed-day) 1.49 1.71 2.69 3.09 2.73 3.14

III.- MAINTENANCE Electromedical Equipment (% inv. value) 3.00 6.00 3.00 6.00 3.00 6.00 Electromechanical Equipment (% inv. value) 2.00 5.00 2.00 5.00 2.00 5.00 Infrastructure (% investment value) 1.00 4.00 1.00 4.00 1.00 4.00 IV.- FOOD SERVICE (servings per occupied bed-day) 5.00 4.40 5.00 4.40 5.00 4.40 V.- OPERATING COSTS (as percentage of total costs) 11.44 10.00 11.00 9.00 11.00 8.00 VI.- DEPRECIATION (years of useful life) Electromedical Equipment 6.00 10.00 6.00 10.00 6.00 10.00 Electromechanical Equipment 6.00 10.00 6.00 10.00 6.00 10.00 Infrastructure 30.00 50.00 30.00 50.00 30.00 50.00 VII.- SPECIALTY SERVICES (beds per human resource) Orthopedics N/A N/A N/A N/A 7.00 5.00 Oncology N/A N/A N/A N/A 8.00 6.00 Neonatology N/A N/A N/A N/A 6.00 5.00 Neurology N/A N/A N/A N/A 5.00 4.00 CCU (Cardiac Care Unit) N/A N/A N/A N/A 4.00 3.00 ICU (Intensive Care Unit) N/A N/A N/A N/A 3.00 2.00 VIII.- DIAGNOSTIC SERVICES (as percentage of total drug/supply cost) Laboratory 1.00 2.00 1.00 2.00 1.00 2.00 Imaging 1.00 2.00 1.00 2.00 1.00 2.00 IX.- OUTPATIENT SERVICES (percentage time of specialist) 0.50 0.50 0.50 0.50 0.50 0.50



B. ANNEX: DATABASE ASSUMPTIONS FOR THE RECURRENT COST STUDY

I. INTRODUCTION The recurrent cost database (that is, the norms) created for the computerized RCP model is found in Annex A of this User’s Guide. It consists of eight (8) columns that contain information and data regarding recurrent costs in Nicaraguan hospitals. The columns are laid out as follows: • The first column contains the names of specific items in the following categories of hospital

recurrent costs:

I. Personnel II. Drugs and Replacement Supplies III. Maintenance IV. Food Service V. Operating Costs VI. Depreciation VII. Specialty Services VIII. Diagnostic Services IX. Outpatient Services

• The second column contains the unit costs of the resources that make up the recurrent costs.

In this column, the user will find:

- annual unit costs for hospital PERSONNEL. - unit costs of DRUGS per occupied bed-day, for the three types of hospital. - unit costs of the REPLACEMENT MEDICAL SUPPLIES per occupied bed-day. - unit costs per serving of FOOD. - OPERATING COSTS, which are not based on unit cost; rather, they are shown in the

norms as a percentage of total costs. - DEPRECIATION costs; these are not unit costs, but a function of investments made. - SPECIALTY SERVICES, presented as a function of the annual unit costs of the medical

specialists who are employed to provide services. - DIAGNOSTIC SERVICES costs, presented as a certain percentage of the cost of drugs

and replacement medical supplies. - OUTPATIENT SERVICES costs, which are presented as a function of the medical

specialist costs. • The third, fourth, fifth, sixth, seventh, and eighth columns reflect the intermediate and

optimal norms for each of the recurrent cost categories for all three types of hospitals used in the model, that is, primary care hospital (fewer than 100 beds); general hospital (between 101 and 250 beds); and general hospital with specialties (more than 250 beds).


II. NORMS

A. The INTERMEDIATE and OPTIMAL NORMS FOR PERSONNEL reflect the number of beds per human resource. For instance, let us look at the first category of personnel (general physicians) in this section:

The figure 6.67 that appears in the third column—intermediate norm for a

primary care hospital—signifies that one (1) general physician attends 6.67 beds;

The figure 5.00 that appears in the fourth column—optimal norm for a primary care hospital—signifies that one (1) general physician attends 5.00 beds;

The remaining personnel figures presented in columns 5-8 have the same significance as the two examples mentioned above.

B. The INTERMEDIATE and OPTIMAL NORMS for DRUGS are calculated as

follows:

The figure 1.49 in the third column—intermediate norm for a primary hospital—means that an average of 1.49 prescriptions are written per occupied bed-day.

The figure 1.71 found in the fourth column—optimal norm for a primary hospital—indicates that an average of 1.71 prescriptions are written per occupied bed-day.

The remaining figures for drugs in columns 5-8 have the same significance as the two examples above.

C. INTERMEDIATE AND OPTIMAL NORMS FOR MAINTENANCE OF

EQUIPMENT AND INFRASTRUCTURE reflect a specific percentage of the value of investment in equipment and infrastructure. For instance, let us examine the norms for electromedical equipment (the first row in this section of the norms):

The figure 3.00 that appears in the third column—intermediate norm for a

primary hospital—indicates that 3% of the value of investment in electromedical equipment will be set aside for maintaining such equipment over the course of the year.

The figure 6.00 that appears in the fourth column—optimal norm for a primary hospital—indicates that 6% of the value of investment in electromedical equipment will be set aside for maintaining such equipment over the course of the year.

The remaining maintenance figures in columns 5-8 have the same significance as the examples mentioned above.

D. INTERMEDIATE AND OPTIMAL NORMS FOR FOOD SERVICE are based on

the number of servings per Occupied Bed-day (OBD):


The figure 5.00 in the third column—intermediate norm for a primary hospital—

means that one (1) hospital inpatient (i.e., occupying a bed) receives five (5) servings of food per day;

The figure 4.40, found in the fourth column—optimal norm for a primary hospital—means that one (1) hospital inpatient (i.e., occupying a bed) receives 4.4 servings of food per day;

The remaining figures for food service (columns 5-8) have the same meaning as the examples stated above.

E. INTERMEDIATE AND OPTIMAL NORMS FOR OPERATING COSTS reflect a

specific percentage of total recurrent costs less operating costs:

The figure 11.44 in the third column—intermediate norm for a primary hospital—indicates that operating costs represent 11.44% of the total recurrent costs for the hospital;

The figure 10.00 in the fourth column—optimal norm for a primary hospital—indicates that operating costs represent 10.00% of the total recurrent costs for the hospital;

The other figures for operating costs, found in columns 5-8, are interpreted in the same way as the examples given above.

F. INTERMEDIATE AND OPTIMAL NORMS FOR DEPRECIATION of

electromedical and -mechanical equipment and infrastructure reflect the years of useful life of the equipment and infrastructure. For example, let us examine the norms for depreciation of electromedical equipment:

The figure 6.00, in the third column—intermediate norm for a primary hospital—

indicates that the useful life for electromedical equipment is six (6) years; this includes a 40% reduction in useful life due to climactic conditions, type of electrical system, and lack of capacity of the human resources;

The figure 10.00, in the fourth column—optimal norm for a primary hospital—indicates that the useful life for electromedical equipment is 10 years; this does not include any reduction in years of useful life.

The remaining figures for depreciation noted in columns 5-8 are interpreted in the same way as the examples described above.


G. INTERMEDIATE AND OPTIMAL NORMS FOR SPECIALTY SERVICES reflect the number of beds per medical specialist resource. For example, let us look at Orthopedics, the first row in this section of the norms:

The figure 7.00 in the seventh column—intermediate norm for a specialty

hospital—means that for an intermediate level of quality, one (1) orthopedist attends 7.00 beds;

The figure 5.00 in the eighth column—optimal norm for a specialty hospital—means that for an optimal level of quality, one (1) orthopedist attends 5.00 beds;

The other figures in columns 7 and 8 that relate to specialty services have the same meaning as the examples noted above.

H. INTERMEDIATE AND OPTIMAL NORMS FOR DIAGNOSTIC SERVICES

reflect additional quantities of drugs and replacement medical supplies needed to operate laboratory and imaging services.


means that an additional 1% of the total for drugs and replacement medical supplies is needed for the operation of laboratory services;

The figure 2.00 in the fourth column—optimal norm for a primary hospital—means that an additional 2% of the total for drugs and replacement medical supplies is needed for the operation of laboratory services;

The remaining figures for diagnostic services found in columns 5-8 mean the same thing as the examples mentioned above.

I. INTERMEDIATE AND OPTIMAL NORMS FOR OUTPATIENT SERVICES

reflect the additional number of medical specialist resources necessary to operate the outpatient services area:


indicates that a medical specialist working half-time (50%) is needed to operate an outpatient services office;

The figure 0.50 in the fourth column—optimal norm for a primary hospital—indicates that a medical specialist working half-time (50%) is needed to operate an outpatient services office;

The rest of the figures on outpatient services (columns 5-8) are interpreted in the same manner as the examples explained above.


III. FORMULAS The detailed arithmetic formulas used to perform the calculations for each recurrent cost are as follows. When numbers are used, they are from the original study in Nicaragua. They are included for illustrative purposes; your results will differ, depending on the unit costs that you specify when you use the RCP model.

A. PERSONNEL

General Medical Costs = GMC Unit Cost = UC Occupancy Rate = OR GMC = UC * (no. of beds * OR / Norm) = 21,120 * (100 * 0.85 / 6.67) = 21,120 * 12.74 = 269,145 Córdobas

B. DRUGS AND REPLACEMENT MEDICAL SUPPLIES

1. DRUGS

Cost of Drugs = CD Unit Cost = UC Occupancy Rate = OR Year = 365 days CD = UC * Norm * (no. of beds * OR * 365) = (24.70 * 1.49) * (100 * 0.85 * 365) = 36.80 * 31,025 = 1,141,720 Córdobas

2. REPLACEMENT MEDICAL SUPPLIES

Cost of Replacement Medical Supplies = CRMS Unit Cost = UC Occupancy Rate = OR Year = 365 days Occupied Bed-days = OBD CRMS = UC * OBD = UC * (no. of beds * OR * 365) = 4.56 * (100 * 0.85 * 365) = 4.56 * 31,025 = 141,474 Córdobas


The cost of drugs and replacement medical supplies (CDRMS) is the sum of the drug cost plus the replacement medical supplies cost. CDRMS = 1,141,720 + 141,474

= 1,283,194 Córdobas

3. MAINTENANCE

Maintenance Cost of Electromedical Equipment = MCEE Investment Value = IV Maintenance Index Norm = MIN MCEE = IV * MIN

= 10,000,000 * 0.02 = 200,000 Córdobas

The same formula is used for other equipment and infrastructure calculations.

4. FOOD SERVICE

Food Cost = FC Unit Cost = UC Occupied Bed-days = OBD Year = 365 days Occupancy Rate = OR Norm for Number of Servings per OBD = Norm FC = UC * Norm * OBD = UC * Norm * (no. of beds * OR * 365) = (3.28 * 5) * (100 * .85 * 365) = 16.40 * 31,025 = 508,810 Córdobas

5. OPERATING COSTS

Operating Costs = OC Total Cost Minus Operating Cost = TC

OC = (TC * Norm)/(100-Norm) OC = (500,000 * 0.1144)/(1.00 - 0.1144) = 57,200 * 0.8856 = 50,656 Córdobas

6. DEPRECIATION

Cost of Depreciation of electromedical equip. = CDEE


Investment Value = IV Depreciation Norm Index = DNI CDEE = IV / DNI = 10,000,000 / 6 = 1,666,666 Córdobas

The same formula is used for the remaining equipment and infrastructure calculations.

7. SPECIALTY SERVICES

Cost of Specialty Services = CSS Unit Cost = UC Occupancy Rate = OR CSS = UC * (no. of beds * OR / Norm) = 33,120 * (100 * 0.85)/(9.32) = 33,120 * 9.12 = 302,060 Córdobas

8. DIAGNOSTIC SERVICES

Cost of Diagnostic Services = CDS Cost of Drugs and Replacement Medical Supplies = CDRMS CDS = CDRMS * Norm

= 1,283,194 * 0.01 = 12,832 Córdobas

9. OUTPATIENT CONSULTING SERVICES

Cost of Outpatient Consulting Services = COCS Unit Cost = UC Norm = 0.5 No. of Consultation Rooms = 12 COCS = UC * (no. of consultation rooms * Norm) = 33,120 * (12 * 0.50) = 33,120 * 6 = 198,720 Córdobas

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User's Guide for the Hospital Recurrant Cost Projection … · USER’S GUIDE FOR THE HOSPITAL RECURRENT COST ... and then applies these norms to the hospital’s future ... The Recurrent