The cost of
A 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. Continue reading