Medical records at a healthcare clinic in Lascahobas, Haiti. Ryan McBainA few years ago, the Boston-based nonprofit health care organization Partners in Health (PIH) set out to quantify the cost of primary care for its patients--specifically those who visited the organization’s community clinics in rural Haiti. Using a costing system developed at Harvard Business School, researchers found that the cost of care varied dramatically from clinic to clinic.
The research and the concerns it raises are detailed in a recent case study, “Partners in Health: Costing Primary Care in Haiti.” The case was co-authored by Dr. Mahek A. Shah, a senior researcher and senior project leader at Harvard Business School, and Robert S. Kaplan, the Marvin Bower Professor of Leadership Development, Emeritus, at HBS.
Kaplan helped create the cost accounting method used in the study, known as time-driven activity-based costing (TDABC), which combines two basic measures: the cost of each resource used to perform an activity, and the time it takes to perform it.
The case illustrates how TDABC makes it possible for even resource-constrained health care organizations to measure how much it really costs to care for an individual patient. Ideally, this will help ministries of health in impoverished countries decide how to allocate their limited resources to optimize the quantity, quality, and access to care.
“In low-income resource countries, it’s especially important to understand the underlying resource costs to deliver services,” Shah explains. “Every hard-earned dollar needs to be fully utilized to deliver high-quality citizen care.”
Case in point is Haiti, where the governmental outlay for health care expenditures was a mere $54 per capita in 2015, compared with $9,536 per capita in the United States, according to data from the World Health Organization. By 2017, the per capita expenditure in Haiti had dropped to $13.
No surprise, then, that many of Partner in Health’s clinics had no accounting systems in place and no resources to develop them; it was all they could do just to stay open and keep up with the demand to treat patients every day.
And that’s why Partners in Health turned to the straightforward time-driven activity-based costing system to measure the cost of treating a patient, with the help of a grant from the Gates Foundation and experts from HBS and Harvard Medical School. Originally used to measure product and services costs in manufacturing, finance, and retail, TDABC had more recently been used to analyze expenses in large American hospitals. The Haiti study was the first time the system had been used in a resource-constrained setting.
The researchers compared the cost of care for the same 10 types of visits—including acute care, women’s health care, family planning, HIV, and malaria—at five rural clinics in the central highlands of Haiti. In the course of the study, the project team taught the novel costing system to community workers and clinical personnel who had no previous experience with measuring costs at all.
Working with local administrators, the team designed a simple procedure for collecting data on patient care. As the case explains: “The process started with the data collector inserting a form into the medical folder of every fifth patient visiting the clinics. They used a pink form that would be clearly visible in the folder. Each clinical and staff person seeing a patient accompanied with the pink form recorded the time when their patient meeting started and when it concluded. The project purchased small, battery-operated digital clocks, with a large display, that were placed throughout the five sites for all employees to easily see the time.”
Training the locals was very important, Shah says. “Our role on the business side was to equip trainees with the concepts of TDABC, as well as tips of how to actually do it on the ground.”
Between March 2015 and June 2016, the project team collected and analyzed data on 6,894 patient visits to the five clinics.
The data revealed huge variations in the average consult time for individual patients. Consult time depended largely on the ratio of patients to provider. The clinic that treated 1,150 patients reported a median consult time of five minutes, while a clinic that treated 344 patients reported a median consult time of 11 minutes.
There were also significant differences in the total financial costs for patient care, whether the care involved treating a complex medical condition (like HIV) or providing routine service (like preventative women’s health care). The differences were especially stark in the case of women’s health care, with costs per visit averaging $4.98 at one clinic and $35.72 at another.
How should the data be used?
While this initial data is clearly valuable, there are now questions and concerns about how best to employ it.
For example, team members are concerned that the data could be misused or misinterpreted. The case study quotes Dr. Joia Mukherjee, PIH’s chief medical officer, worrying that someone reviewing the consult times might see a six-minute engagement with a patient as proof a clinic was performing very efficiently, rather than one that was severely under-staffed relative to the demand for its services.
“The six-minute consult is not a good standard for care; it’s indicative of a severe problem, an over-crowded, under-staffed facility,” Mukherjee explains in the case study. “Our goal cannot be to deliver care at the cheapest cost; it should be to have sufficient resources to do what is right for the patient.”
One clear benefit of using time-driven activity-based costing in resource-constrained environments: It can change the way a charitable organization solicits donations.
“Donors don’t just want to buy medical equipment and supplies. They want to buy outcomes”
Rather than asking for funds toward a new building or a supply of medicine, Partners in Health can now tell potential donors exactly how much it costs to provide critical care to patients.
“Donors don’t just want to buy medical equipment and supplies. They want to buy outcomes,” says Dr. Ryan McBain, the project lead at PIH. “They want to make sure that the money they are investing is making a difference in people’s lives. TDABC allows us to quantify the cost of delivering high-quality impacts.”
Shah elaborates: “Now PIH can say, for example, ‘Here’s what it costs to support one woman’s cycle of care for an entire year. Would you like to support one woman’s cycle of health care with your annual donation? Most people will say yes to that. It really shifts the way you think about donating to an organization. You’ve humanized it.”