|Year : 2021 | Volume
| Issue : 4 | Page : 300-306
Cost of a unit of blood – An activity-based costing in a tertiary care teaching hospital
Shrinivasan Sowmmya, Melanahalli Dayananda, Jagiri Narotham Rao
Department of Hospital Administration, JSS Medical College and Hospital, Mysore, Karnataka, India
|Date of Submission||22-Apr-2021|
|Date of Acceptance||09-Aug-2021|
|Date of Web Publication||17-Nov-2021|
Dr. Shrinivasan Sowmmya
Department of Hospital Administration, 4th Floor, JSS Medical College, JSS Hospital, M.G. Road, Agrahara, Mysore - 570 004, Karnataka
Source of Support: None, Conflict of Interest: None
CONTEXT: Costing enables administrators in planning for future expansion, evaluates cost-effectiveness, and helps in mobilization of resources. Costing of services like blood banking and transfusion is complex, more particularly in a service-oriented (not for profit) setup. Activity-based costing (ABC) helps in identifying all the resources involved at every step.
AIM: The aim of the study was to analyze the cost of processing blood components in the blood transfusion services (BTS) department (blood center) of a private trust-funded tertiary care teaching hospital in South India.
SETTINGS AND DESIGN: This was a retrospective study and an economic evaluation.
METHODOLOGY: Cost an activities data was collected by observation and unstructured interviews of Blood Centre staff. The costing model was created based on the activities, cost heads and the costs were apportioned appropriately followed by calculation of the final costs.
RESULTS: An ABC model with nine steps, which identified fifty substeps modeling the activities, was used to estimate the cost. The manpower cost (direct and indirect) was the highest cost driver followed by the direct material cost of the blood bag. ABC analysis revealed that component separation was the most expensive process step followed by cross-matching, specialized packed cells preparation, storage, and infection testing.
CONCLUSIONS: Despite excluding fixed costs related to land, infrastructure, building, and equipment capital and depreciation, the ABC model costing was higher than the Government of India released costing. A homogenized ABC model helps in identifying and refining methods to adopt cost efficiency measures at the institutional level but also raises the question whether cost-efficiency requires a policy-level intervention. Additional data collected across the country and analyzed in a standardized manner can aid in the same.
Keywords: Activity-based costing, blood center, blood component, blood transfusion service, cost of blood, fresh frozen plasma, packed cells, platelet concentrate
|How to cite this article:|
Sowmmya S, Dayananda M, Rao JN. Cost of a unit of blood – An activity-based costing in a tertiary care teaching hospital. Int J Health Allied Sci 2021;10:300-6
|How to cite this URL:|
Sowmmya S, Dayananda M, Rao JN. Cost of a unit of blood – An activity-based costing in a tertiary care teaching hospital. Int J Health Allied Sci [serial online] 2021 [cited 2023 Feb 4];10:300-6. Available from: https://www.ijhas.in/text.asp?2021/10/4/300/330557
| Introduction|| |
Human blood is an essential medicine as per the WHO. According to the National Blood Policy (NBP) in India, a main component of the integrated strategy includes collection of blood donated of free will (voluntary), without any compensation, with adequate screening for all transfusion-transmitted infections (TTIs), and reducing unnecessary transfusions.
The NBP, formulated and adopted by the Government of India in April 2002, aimed to develop a nationwide system to ensure easy access to adequate and safe blood supply and make available adequate resources to develop and re-organize the blood transfusion services (BTSs) in the country by introducing guidelines through National Blood Transfusion Council (NBTC), thereby ensuring nonprofitable cost recovery as well as a subsidized system.
The cost of blood transfusion is reported to be growing worldwide and the variables that affect the production of a unit of blood vary across nations. Cost of blood components to the consumer is influenced by direct and indirect costs due to storage, testing, hospital personnel, consumables, and capital costs. Any administrator would like to explore the costing components that affect the blood and blood component preparation when catering to variable demand (due to multiple causes). This is necessary to balance the revenue and expenditure so that the BTS department runs efficiently, can mobilize resources optimally and support planning for future expansion.
The Society for the Advancement of Blood Management in the USA reported that the estimated cost of a unit of blood varied within a country, which was also confirmed by other studies in Europe, and sub-Saharan Africa. More recent studies by Toner et al., Stokes et al., and Fragoulakis et al. also corroborate the continuing presence of variations, including the type of organization, within a country.,, In many of these studies, the analyses differed, as did the methods for estimating fixed and overhead costs. Considering the complexity of the costing process as applicable to BTS, Shander et al. opined that it is even more pertinent that health-care delivery organizations carefully evaluate and balance the cost burden with the safety, demand, and supply of blood and blood components to patients. A standardized model of activity-based costing was proposed, which aims to homogenize the steps considered for costing activities, which leads to better allocation of cost heads to inputs and resources.
NBTC in India has formulated guidelines for recovery of processing charges for blood and components, implemented the same through principal secretaries of states and union territories in August 2017 and compliance to this is mandatory for licenced blood centers in India. However, in 2017, when this study was initiated, there was no available published research from India regarding cost analysis of blood and blood product processing. For procuring blood components by the patient as a consumer, the pricing of processing charges for components is capped and is fixed depending on government-owned or non government-owned institutions.
The standardized approach proposed for costing methodology by the multidisciplinary consensus conference was adapted for this study and modified to suit the national regulations. Hence, this study was an effort to evaluate the cost of blood processing in the BTS department of a tertiary care teaching hospital in South India.
| Methodology|| |
The study was conducted in the blood center of a private trust-funded (not-for-profit) tertiary care teaching hospital in Mysuru, Karnataka, South India.
This was a retrospective and prospective study and an economic evaluation using activity-based costing from the observational data, process flow in the blood center, and financial data. Data from April 2017 to March 2018 was approved for utilization assessment and financial computations. The inclusion criteria were costs involved in production of whole blood, packed red blood cells (PRBCs), random donor platelets, fresh frozen plasma (FFP), and cryoprecipitate. Single donor platelets (SDPs) and apheresis related costs were excluded since it was a request-based seasonal service, available only for SDP, performed infrequently, and would yield inadequate data for a single-observer study during the study period. Societal costs and transfusion costs (ABC model recommended) were excluded (transfusion was out of scope of the blood center services).
The unit cost was derived from aggregated costs, based on defining parameters specific to the line item, with appropriate financial computations, cost apportionment, and necessary assumptions, to arrive at the results.
Methods of data collection
Observations were made in the blood center with reference to physical facilities, equipment, organization, staffing, workflow, workload, standard operating procedures, quality management systems, donor blood collection, testing, grouping, processing, storing, distribution of blood and blood components, and utilization patterns based on issue statistics. Data were collected from the registers maintained in blood center as well as from the hospital information system with reference to indents made, cost of materials, and equipment costs. Financial and supportive data were collected from the finance department, purchase department, general stores, nursing services, engineering sServices, biomedical engineering department, information technology, and human resources departments. Informal interviews of all categories of staff in the blood center were also conducted to map the process flow and identify cost centers and cost heads. Cost analysis was done using MS Excel©. Costing methodology was to (1) identify the cost object (demand for the service.), (2) outlining the process and separating into activities and subactivities, (3) defining the outputs for the activities (the cost drivers), (4) listing the resources needed for the required output, (5) identify resource inputs (adding any capacity constraints), and (6) adding the cost data for estimation.
| Results|| |
The blood center collected and processed 11,016 units of whole blood during the 12-month period including voluntary blood donations, replacement donations, and blood donation camp collections. One hundred percent of the blood collected was subjected to component separation and the number of component units prepared was 28,826. Of these, 4979 units were handed over to a pharmaceutical vendor for processing other plasma fractionation products such as albumin and clotting factors. The overall wastage rate was 11% with 1259 units discarded in the year due to following reasons: seropositivity, expiry, partial or un-transfused blood component. The number of blood components issued for use during the same period was 22,588 (excluding SDP).
Among the various components, the PRBC units (CPDA=Citrate Phosphate Dextrose Adenine, SAGM=Saline Adenine Glucose Mannitol) were most frequently issued accounting for 44% of total issued components, followed by FFP – 30%, platelet concentrate – 26%, and cryoprecipitate accounting for 1% of all issued components during the study period. The top 10 clinical departments in the hospital that utilized blood components in descending order of utilization were Medicine (37.25%), Pediatrics (10.05%), General Surgery (8.89%), Neurosurgery (7.86%), Nephrology (7.36%), Obstetrics and Gynecology (5.56%), Orthopedics (3.90%), Requests by patients admitted in other hospitals in the city (3.72%), Gastroenterology (3.19%), and Cardiothoracic and Vascular Surgery (3.15%) followed by other clinical departments accepting inpatients (IPs). The NBTC permits the sale of surplus plasma to vendors and utilization of the revenue for the blood center activities. The Blood Centre in this study used this revenue for future expenditures related to equipment capital and infrastructure maintenance.
Once the processes in the blood center were observed, the list of activities, outputs observed, inputs, and resources required were tabulated. Since blood collection and supply is a not-for-profit activity, the direct fixed costs identified as land, infrastructure, equipment capital cost, and cost of furniture were excluded as per the Ministry of Health and Family Welfare and NBTC-recommended guidelines for processing charges of blood components. The manpower cost and the activities cost were separated. The manpower cost was considered as fixed direct and indirect cost since direct blood processing activity as well as indirect activity (supportive functions in blood center) had to be considered together, as the staff are posted to a dedicated area of the blood center on a rotation basis in various shifts to cover 24-h service. The materials pertaining to the steps were listed separately. The purchase price of the equipment was apportioned over the prescribed useful life as per Schedule-II of Companies Act, 2013, by the Ministry of Corporate Affairs and the estimated annual cost was used to determine the direct operating cost in processing the blood component; hence, depreciation was not added to computations separately.
The activities leading to safe and adequate processing of blood components were identified and listed into nine activity steps in the cost model. They were:
- Donor recruitment and qualification – Including voluntary donor as well as blood donation camp activities
- Blood group confirmation and antibody screening
- Blood collection
- Component preparation – Blood processing and listing special needs such as leukodepleted PRBC, washed PRBC, and pediatric bags
- Storage and inventory
- Sterilization and disposal and washing of glassware
- Pretransfusion preparation – Cross-matching and preparation of component for issuing
- Administrative and generic elements.
The model identified fifty key substeps in processing blood components.
Staffing in blood center included one blood center officer (MBBS, MD), two junior doctors, five staff nurses, 12 Technicians, and one housekeeping personnel deployed by facility management. All activities pertaining to the direct processing of blood in their deployed area of work, as well as the supporting tasks, are performed during the working hours by all technicians/staff nurses. Supportive tasks that contributed to indirect labor costs in the activity areas were indenting of materials required in blood center, indent stock checking and receiving, dues tracking for IP blood issued, camp activity-keeping camp kit ready, camp activity-keeping equipment ready, documentation in various registers, documentation for various regulatory requirements, inventory checking and reporting to blood center officer, temperature monitoring of storage devices, miscellaneous supportive activities, performing and documenting quality control of reagents, quality assurance-related activities, phone calls to uncommon blood group donors for emergency need, transfusion reaction follow-up reporting, donor reaction follow-up reporting, and hands-on training of junior staff. A camp co-ordinator involved in camp-related activities was also considered as indirect labor cost. Additional staff were recruited on a need basis and the same was apportioned based on available data.
The direct manpower cost was estimated as Indian rupees (INRs) 728.63 per bag and indirect manpower cost was INR 96.88, adding up to a total manpower cost of INR 825.51 per bag [Figure 1]. Assuming optimum efficiency, the direct blood processing activities accounted for 69.86% of total labor cost and the supportive tasks accounted for about 28.19% and 1.95% of miscellaneous activities.
The major cost drivers when processing a unit of blood or component were direct and indirect manpower cost (28.1%), direct operating cost (26%), and direct material costs (25.43%), followed by cost of blood bags (13.83%) [Figure 2]. The most expensive activities contributing to direct material and operating costs were component preparation which accounted for 22.78% of the total cost per unit. Cross-matching accounted for 5.27% of direct operating and material cost, TTI accounted for 3.86%, and storage accounted for 4.45% of direct operating costs. Indirect overhead cost was only 3.25% of the total cost.
[Table 1] shows the cost distributed across the nine steps. Five configurations of blood bags were in use in the blood center. Their cost was apportioned by weighted average of each component based on utilization statistics and the total cost of the various configurations used for that component was apportioned accordingly to estimate the cost per unit of blood bag.
|Table 1: Distribution of the cost per unit across the nine process steps in the model|
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The distribution of cost across the process steps is presented in [Figure 3].
To arrive at the cost of one component, the costs related to the activities which were common to all components were consolidated and then added to individual component costs as a weighted average of component utilization. The common cost per unit applicable to all components was INR 1380.69. This was distributed to packed cells (PRBCs) (43%), platelet concentrate (26%), FFP (30%), and cryoprecipitate (Cryo) (1%). The individual component-related costs were PRBC – INR 802.35, platelet concentrate – INR 480.84, FFP – INR 552.88, Cryo – INR 382.35, DU Test (to be apportioned to PRBC) – INR 32.74, and washed PRBCs – INR 227.83. After apportionment, the final cost per unit of component inclusive of all direct and indirect costs was estimated as PRBCs (packed cells) – INR 1660.55, platelet concentrate – INR 836.76, FFP – INR 964.74, and cryoprecipitate – INR 397.64.
| Discussion|| |
According to NBTC Annual Report 2017–2018, the estimated annual requirement of blood for the country is 12.8 million units of blood and the need is endeavored to be met through voluntary nonremunerated blood donation by establishing an adroitly coordinated and networked BTS. The BTS in India is comprised of 2903 licensed Blood Centres across all states and Union Territories, of which a network of 1,131 Blood Centres are supported by National AIDS Control Organization (NACO) by providing equipment, man power and consumables. In this study, the manpower cost accounted for 28.1% of the overall cost and Blood Bag accounted for 13.83% of the overall cost. This was higher than the NBTC costing table which reported that manpower was 17% & Blood Bags were 8.9% of overall costs. This higher cost of manpower may be due to compliance-related issues – teaching hospital staffing should comply with the Medical Council of India requirements as well as Drugs and Cosmetics Acts and Rules, 1940, guidelines. It can be speculated that approaching costing in terms of utilization and efficiency of labor in a private nonprofit setup may be the need of the hour instead of trying to identify overheads and minimize them to achieve cost efficiency.A potential Solution could be increasing Automation; however, the investment required as well as the need for supervision of the same should be considered. The higher cost of the blood bags may be due to local vendor negotiated prices for the blood bags and the application of Goods and services tax to consumables. Bulk purchasing of consumables and updating the negotiated cost after review will aid in cost-efficiency at the organizational level. At a broader level, the finding presents an opportunity for examining if subsidizing or reducing tax on consumables would aid in reducing costs to blood centers since blood components are considered as a nonprofitable essential drug when dispensed. The fixed costs of land, infrastructure and capital which are vital to operating a blood center and significantly adds to the overall cost, is eliminated from costing models due to NBTC guidelines. Hence, the burden is transferred to the parent organization since the actual cost of operations is higher than what is recoverable through processing charges, which could discourage many private entities. This could pose a deterrent to the Government's vision as per NBP, to develop a well-networked system of BTS.
It remains an open question – how should a blood product be costed? It is neither simple nor straight forward, considering that the BTS involves components of a production line (laboratory processes) as well as service delivery. The variability of the output is inherently based on the demand for a component as well as the input (voluntary donors matching the on-demand blood group and type) available. Many variations can be expected from donor recruitment, qualification, research, registries, and associated tasks as well as quality management systems within and among institutions, which have been acknowledged by NBTC as contributing to variation in the processing charges. Introducing a systematic sharing systematic method of sharing blood components among Blood Centres will better aid in the management of demand and supply.
ABC has identified the opportunity to reduce the wastages (blood) in the blood center of this study. As compared to the NBTC model, the cost component in ABC was 11% versus 7% assumed by NBTC. An opportunity for identifying the cause for wastage and implementing a corrective and preventive action was initiated by the blood center. Regular internal audits of utilization statistics can improve the monitoring of the same.
The minutes of the meeting of the 28th general body meeting, released by the NBTC on November 28, 2018, has noted the following with respect to blood processing charges: the processing charges for blood and blood components are to be brought under the ambit of a regulatory body, to ensure compliance to the same and penalize those who are not following the NBTC guidelines. ABC methods can aid in refining the existing cost model and help in deciding the latitude of variability that can be offered in terms of cost accounting within the state or even the country. A cost variation of 2%–3% per unit for every 1000 units collected may be estimated, i.e., if 1000 units more were to be collected, the cost would reduce by 2.13% and increase by 2.69% if 1000 units less were collected.
| Conclusions|| |
The estimated cost in this study using ABC is higher than the existing cost proposed by the Government. The potential for reducing the cost in the blood center of this study exists and can be achieved by identifying the cause for wastage and minimizing the same. Regular audits of statistics internally can improve in monitoring of the same. The study also opens up questions about whether the cost efficiency measures should be applied at the study center to reduce costs or if government subsidies can help in reducing the cost across the country. However, additional data across the country are needed to understand the prevalent cost drivers and if they are uniformly high or variable. The modified ABC approach provides a detailed breakdown of the elements of blood processing such as administration and general elements, manpower (area wise), donor recruitment, grouping, blood collection, TTI and screening, component preparation, storage, sterilization and discarding, cross-matching and issuing, and camp activities. The study incorporates all observed direct and indirect (tangible and individual) costs and their role in the ABC model to uncover the opportunity for cost management in blood processing.
Fixed Cost elements like Land, Building and Infrastructure, Equipment capital Investments were excluded in this study but they are significant contributors to the overall cost. Although ABC models consider the investments in capital and infrastructure, these were discounted in the study due to the NBTC guidelines in India, thereby underestimating the true cost associated in blood center services. Societal cost and transfusion cost are important when looking at patient blood management. However, due to non-availability of a centralized data source for this activity, it was beyond the scope of one investigator to collect the data for estimating societal costs.
The authors wish to acknowledge JSSAHER, Mysuru, Karnataka, for the opportunity to conduct the study including Dr. Pallavi. P, Associate professor and Blood Bank officer – Department of Pathology for guidance, support, and encouragement, Mrs. Sujatha Raghuram CA, ICWA, and Mrs. C. Hemamalini, CA, ICWA, Sujatha and Associates, for guidance through the costing analyses, Dr. M.D. Ravi, Professor of Pediatrics and Facilitator for Student Research Fair, 2019, for his critique and recommendations for improvement of the article. We also thank Mr. K.M Bhagawan, Mr. Santhanam, all the Blood Centre and general stores staff for their support and co-operation.
Financial support and sponsorship
Conflicts of interest
There are no conflicts of interest.
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[Figure 1], [Figure 2], [Figure 3]