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How
to keep your hospital healthy
Dr
K C Ojha -
 Keeping
a hospital in sound health is to run as a viable venture
by applying the right financial management practices.
These practices come into play right from the time a hospital
is built and also form an integral part of the day to
day running of the hospital. Healthcare being a capital,
labour, knowledge, technology and space intensive industry,
profitability norms are comparable with IT industry since
each skilled service can be charged.
Moreover,
entrepreneurs must understand that good services are rare,
they therefore cost more and cannot be distributed free.
In other words, quality treatment comes at a price. The
patient must therefore pay for it. But the hospitals must
also realise that this treatment must be given at the
right price.
The
rates charged for each individual service should reflect
properly the operating expenses of the service rendered,
plus an equitable share of the other financial needs,
for which the patient is responsible. In India, the pricing
of healthcare services is structured primarily after considering
charges for similar services in the neighbouring areas
and the paying capacity of the patients expected to seek
the services. The rate setting is rarely cost based which
is the way it should be. This aspect is one of the myriad
facets that must therefore be considered well in advance,
at the stage of creating a hospital.
Creating
a hospital
Successful
financial management in creating a hospital is the only
way to keep it viable. First step in achieving this is
by symbiosis of demand, capacity and achievability.
1.
Analyse demands. Which is the category of patient seeking
your service? While deciding on the number of beds do
not go by international standards but go by what the demand
for that service is in the area too.
2.
Next is to phase services and make each phase self-supporting
and profitable. Even medical equipment should be purchased
in phases thus supporting this cause. Postpone purchase
of image building equipment, i.e., hi-tech equipment.
Else, technology will become obsolete and lead to depreciation
even before the project is up and running. For optimal
utilisation of equipment, it is necessary that equipment
be bought at the right stage. Do not purchase all the
high cost equipment all at one time. It is important that
the break even is achieved at least at the end of second
year.
3.
Minimising period of implementation and commissioning
will help create a healthier hospital. If the commission
period goes to 5-7 years, project is sure to fail. I advise
that the hospital be set up before construction is complete.
For this, rent a building around the premise and start
some basic services. Once new building is ready, services
can be shifted.
4.
Invariably, once construction begins, funding is never
forthcoming. If funds are not kept ready and project is
further delayed. Therefore, synchronise the funds with
the implementation programme.
5.
Physical expansion should be only after 85 per cent of
utilization of occupancy for 3 years. I would say that
ideal occupancy is 115 per cent. To generate maximum occupancy
cross subsidise by giving concessions to the lower income
group too utilize the infrastructure fully.
Lastly,
I would suggest that anyone interested in setting up a
hospital must purchase an existing hospital rather than
building a new facility.
Running
a hospital
1.
Bring down the average length of stay through continuous
efforts. Facilitate continuous growth in income by calculating
per bed per day realisation from fully utilised and currently
occupied beds.
2.
Calculate specialities per day realisation and then nourish
the ones, which show a potential for growth.
3.
Profits come mostly from surgical work. Surgery brings
nearly three times more income than non-surgical beds.
Utilise 70 per cent beds for surgical patients and concentrate
in this area. More surgical beds means more income but
that doesn’t mean step motherly treatment to other
specialities.
4.
Use craftmanship in computing list of services for rate
structuring by using different service mix. Keep the rates
lower for services where patients have discretion to choose
between different hospitals. eg path lab services.
5.
Increase productivity with existing infrastructure but
also create resources of income by creating new facilities.
Sixty per cent investment in upgradation should go towards
direct income generating services and 40 per cent for
services whose returns are intangible.
6.
Market diagnostics and other procedures for referral patients
from other centers.
7.
Medical community is a sensitive one and therefore acknowledge
its support so that doctors feel it is their own hospital.
8.Right
facilities and product mix must be planned for earning
profits.The don’ts in running a hospital are to control
expenses irrationally and at the cost of efficiency and
standard. One cannot slash the price for any service so
as to affect the quality of service. At the same time
it is vital to note prices must not rise to the level
where customer refuses to purchase. Rates revision must
be done after a moderate time gap and should be acceptable
to users.
(As
told to Soumya Viswanathan)
The
author is managing director, Hospital
Consultancy Bombay Pvt Ltd (Hospic), Mumbai-based hospital
consultancy firm.
He
may be contacted at hospic@hotmail.com and hospic@rediffmail.com
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