Costing & budgeting in

Health

Gul Rukh Mehboob

HCF
MSPH 2013-14
 What is cost……..?
The market value of the inputs a firm uses in production

The amount that firm receives for the sale

of its output is called its total revenue.
Profit= Total Revenue-Total cost

Short run: In which at least one factor of

production is fixed i.e. cannot be
changed
Long run: In which all Fops are variable.
 Types of costs
Fixed Cost
Costs that do not vary with the quantity
of output produced

Variable Cost
Costs that vary with the quantity of
output produced.

Opportunity Cost
Whatever must be given up to obtain
some item or more of some item.
Cont…

Social cost
Cost paid by the society.
 Cost categories
Total cost:
The amount that firm pays to buy total inputs. It is the sum of
fixed cost and variable cost
TC=FC +VC
Average total cost:
It is total cost divided by no. of units of output produced. It
measures the cost of a typical unit of output.
AC=TC/Q
Marginal cost:
The change (increase) in total cost that arises from an extra
unit of production.
MC= ΔTC/ ΔQ
Now:
TC = FC +VC

Dividing both sides of the total cost formula by Q, we get the average
cost formula:

TC/Q = FC/Q + VC/Q

=› ATC = AFC +AVC

Average Total Cost =

Average Fixed Cost + Average Variable Cost
Budget for Research
 What is a budget?
To make sure that sufficient financial, personnel, and
infrastructure/equipment resources are available

Direct costs Sum & costs

analysis of Indirect
all costs
1. Direct costs: Directly related to project e.g
travel costs, salaries.

2. Indirect costs/overheads: not directly related

but incurs e.g utilization of institutes research
equipment and facilities, administrative
support costs etc.
 What is a Budget Plan?
Preparing the plan budget is the process of translating inputs,
targets and activities into money.
PURPOSE:

Identify overall financial Identify financial

Enable
requirements by plan requirements by line
performance
period and individual item and by specific
budgeting.
year; program, and
 Types of Budget
1. Institutional Budget
Institutional budgets are based on
where activities take place
(hospital or health center)

2. Program Budget
Program budgets are concerned
with the overall purpose and it
attempts to relate resources inputs
into program objectives (outputs).
2. Capital vs Recurrent Budgets
• Difference between items of
expenditure that occurs once as
opposed to those which are repeated.
• Should be fully integrated into the
overall planning process.

3. Volume Budgeting
• Some budgetary systems are based on
agreed volume indicators (human
resource),
• In this case supplementary budgets for
unexpected price increase (wage rise)
during the financial year are
automatically approved.
4. Cash Limited Budgets

A fixed budget is agreed and it is

expected that it will be kept to,
irrespective of the changes occurring
during the financial year.
 Steps for Preparing the Budget
1. Identify all activities that could possibly consume
resources
2. Differentiate between capital budget and recurrent
budget.
3. Translate the required items into monetary value
4. Information on unit costs of various items is often
available, market prices can be also be used. Sometimes
when the unit costs are not available or are difficult to
estimate a Lumpsum cost estimate has to be used.
Things to remember…
• Allow for contingencies (10%)
• Allow for line item flexibility which means that within
limits (usually not more than 10%), funds can be re-
allocated from one line item to another when there
is strong justification to do so.
• Avoid double-counting
EXAMPLE OF A BUDGET…
 Example of Costing…
Cost Estimation of Dengue Treatment; A
Healthcare Provider’s Perspective
 Framework for Costing
Cost of Treatment for
DF+DHF+DSS
Lab
Human Drugs &
Equipment Diagnostic
Resource Medicines

1. Doctors 1. IV Cannula 1. CBC

1.Tab Paracetamol
2. Staff 2. 5cc Syringe 2. LFTs
2. Tab Gravinate
Nurses 3. 10 cc Syringe 3. RFTS
3. Inj. Meprazole
3. Ward Boys 4. IV Set 4. Serology (IgM/IgG)
4. Inj. Zantac
4. Sanitary 5. CBC Bottle 5. Grouping/cross
Workers 5. Infusion N/S matching
6. N/G Tube 1000cc
5. Lab 6. Coagulation profile
technicians 7. Urinary 6. Infusion R/L
1000cc 7. Blood culture
8. Catheter
7. Infusion 5% D/S 8. BSR
9. Urine Bag
8. Infusion 10% D/S 9. ABGs
10.Mosquito Net
9. Tab. Flagyl 10. U/S Abdomen
10. Inj. Flagyl 11. X Ray Chest
11. Inj. Novidate 12. ECG
12. Tab. Novidate 13. MP
14. CT Scan Brain