COST has led to an overall increase in

COST ANALYSIS OF CT SCAN AND MRI AT SHREY HOSPITALEconomic constraints are one of the major limitations on the quality of health care even in India’surbanized cities. Quality improvement demands optimizing the existing facilities within availableresources. In addition, the cost of medical services has risen dramatically in the past decade. Thishas laid a lot of importance to understand the actual cost of providing medical services.Radiology, which is an integral component of diagnostic modalities in a tertiary setting. Withmore patients availing these services at tertiary care hospitals, thus with this study, we strive toassess the cost analysis of MRI and CT scan radiology services at a tertiary care hospital.The Department of Radiology at Shrey Hospital offers a comprehensive range of highlysophisticated imaging tests that are conducted in a welcoming environment that focuses onquality and patient comfort. The hospital administrators are seeking newer methods and tools tocontrol costs without affecting the quality of patient care.A prospective study for a period of one month was carried out for calculation of unit cost ofradiological investigations – CT scan and MRI. Unit costs were computed under direct andindirect costs. The actual cost incurred by the hospital on CT scan was Rs.2339.52 and MRIRs.3924.40. However, in the hospital patients are charged Rs.4500 for a CT scan and Rs.7000 forMRI. There is a profit of Rs.2160.48 on CT scan and Rs.3075.60 on each unit of MRI whichcontributes towards hospital development, expansion and stockholdersequity.INTRODUCTIONCost control is a series of steps that a business uses to maintain proper control over its costs.Implementing this level of control can have a profound positive impact on profits over the longterm. It is well known that there has been a dramatic increase in cost of medical technology overthe past decade which has led to an overall increase in healthcare cost. This cost control analysisis not aimed to trim the quality or quantity of services provided to a patient, rather it is aimed atincreasing the performance efficiency of the entire radiology department. Cost analysis also helpsin assessing the efficiency and effectiveness of each component (functionary) in the productionprocess (in this case radiology tests – CT scan and MRI) and their cost implication with a visionto contain cost.Administrators in the healthcare sector are looking for newer tools to control costs withoutaffecting the quality of patient care. The knowledge of unit cost is required to assist planning forrecurrent budget as an indicator of efficiency and to enforce pricing of services. With advancingtechnology, the imaging equipment is very complex now than ever and the available choice isextensive. The newer imaging technologies, CT scan and MRI are replacing older ones in theevaluation of patients. Since the CT scan and MRI are costly investigations and an importantcomponent of patient care, hence attention should be focused on cost control and quality of theseinvestigations.FEATURES OF THE ORGANIZATIONShrey Hospital has been a name synonymous with advanced and world class patient care. Thehospital had a humble beginning around 20 years ago. The institution has now grown to become amajor tertiary care healthcare provider to all walks of life in the region.Shrey Hospital have designed comprehensive preventive healthcare packages covering the variedrequirements of all age groups. The Health check-up packages are flexible enough toaccommodate the specific requirements and can be tailor made to suit particular organization. Italso provides pre-employment health checks at affordable costs.OBJECTIVETo find out and analyze the Unit Cost of CT scan and MRI investigations at Shrey Hospital. Unitcost is an important tool for Hospital Administrators in planning of services and pricing to fix theuser charges.SOURCES OF DATAInterviews with the staff and supplemented by observational study carried out in radiologydepartment of Shrey Hospital.Sample records of radiology department, accounts department, and maintenance department,stores, and purchase department provided by the hospital.UNIT COST OF CT SCAN (ABDOMEN)Direct labor cost includes salary of actual staff working in CT section of Radio diagnosisdepartment. The staff includes 2 nos. of CT technicians. The total direct labor costs for CTabdomen for the study period was Rs.6,00,000 which was 6.72% of total cost.Indirect labor cost or wages and salary for common staff includes 1 HOD, 1 radiologist,1 staffnurse, 2 ward boys, 1 receptionist with total wages of Rs.4,23,6000 of which Rs.19,42,827.07was apportioned to CT scan which was 21.77% of total cost.Material cost which includes cost of CT film, film processing chemicals, film covers and otheritems was Rs.149 per scan which was 6.11% of total cost.Machine depreciation & maintenance cost: The purchase cost of CT scan machine commissionedin 2010 was Rupees 1,50,00,000. The equipment would depreciate at the rate of 10% per yearwith a straight line method. The annual AMC cost was 11,25,000. Thus, the total annual cost ofmachine maintenance and depreciation came out to be Rs.26,25,000 which was 31.87% of totalcost.Electricity cost includes cost of electricity consumption of machine and developer duringexposure time was Rs.259250 and during standby was Rs.150000 which was 4.58% of total cost.The total overhead cost which includes total telephone charges (Rs.36,000), total internet charges(Rs.14,400), total fuel for generator (Rs.2,08,000), total printing and other stationary (Rs.12,000),total linen and laundry supplies (Rs.6,000), total overhead electricity (Rs.4,50,000) wasRs.7,26,400, of which Rs.3,33,160.90 was apportioned to CT scan which was 3.73% of total cost.Facility cost: The rental value and housekeeping cost for the one year was Rs.44,20,000. Of this,Rs.13,26,000 was directly allocated to CT scan on the basis of sq.feet area used. Also,Rs.9,21,778 for facility and maintenance were allocated to CT scan from the common area cost.Total facility cost for CT scan is Rs.26,89,778 which was 14.86% of total cost.Salary, 21.77Other, 3.73Rent ,14.86Common AreaCost, 10.33 Electricity,1.68Depreciation,31.87Direct Labor,6.72Electricity forExposure, 2.9DirectMaterial, 6.11UNIT COST OF MRIDirect labor cost includes salary of actual staff working in MRI section of Radio diagnosisdepartment. The staff includes 2 nos. of MRI technicians. The total direct labor costs for MRI forthe study period was Rs.7,20,000 which was 5% of total cost.Indirect labor cost or wages and salary for common staff includes 1 HOD, 1 radiologist, 1 staffnurse, 2 ward boys, 1 receptionist with total wages of Rs.4,23,6000 of which Rs.22,93,172.93was apportioned to MRI which is 16% of the total cost.Material cost which includes cost of CT film, film processing chemicals, film covers and otherstationary items was Rs.214.29 per scan or 5% of total cost.Machine depreciation & maintenance cost: The purchase cost of MRI machine commissioned in2010 was Rupees 450,00,000. The equipment would depreciate at the rate of 10% per year with astraight line method. Thus, the total annual cost of machine maintenance and depreciation cameout to be Rs.51,20,000 or 44% of the total cost.Electricity cost includes cost of electricity consumption of machine and developer duringexposure time was Rs.1092000 and during standby was Rs.1425600 which was 12% of total cost.The total overhead cost was same as CT scan at Rs.7,26,400, of which Rs.3,93,239.10 wasapportioned to MRI which is 3% of the total cost.Facility cost: The rental value and housekeeping cost for the one year was Rs.44,20,000. Of this,Rs.13,26,000 was directly allocated to MRI on the basis of sq.feet area used. Also, Rs.8,46,222for facility and maintenance were allocated to CT scan from the common area cost. Total facilitycost for MRI scan is Rs.21,72,222 or 9% of the total cost.Overheads, 3Salary, 16Rent, 9CommonArea, 6Electricity, 10DirectMaterial, 5Electricity forExposure, 2 Direct Labor, 5Depreciation,44UNIT COST ANALYSISBASIC INFORMATION OF MRI & CT SCANMRI CT SCANYearly Volume 3360 3660Volumes / month 280 305Avg. Time/ procedure (min) 45 35Total machine h/month 210 178Total machine h/year 2520 2135Machine hours available/year 25 @10 h/d = 3000 25 @10 h/d = 3000Idle Time / Year 480 865Capacity Utilization 84 % 71 %Avg. Per unit revenue 7000 4500Revenue / month 1960000 1372500AREA USED BY EACH PROCEDUREScan Room 286.595Equipment room 126.5Console Room 96Changing Room 48Total 557.095ELECTRICAL POWER USAGEMRI CT SCANLoad details Exposure @65 KWH @ 45 KWHExposure @90 KWH @ 05 KWHMachine Hours Capacity 3000 3000Actual use 2520 2135Idle time 480 865ProceduretimeExposure time(mins)30 5Standby time(hours)840 1830Total time 1320 2695Electricity bill for exposure 1092000 274500Electricity bill for standby 594000 134750Machine standby time 75600 NAVariable electricity cost 336000 259250Fixed electricity cost 1425600 409250Total Electricity bill 1761600 409250Total Electricity cost / scan 524.29 111.82VARIABLE COSTDirect Material per scan Total per unit cost (MRI) Total per unit cost (CT SCAN)COST SUMMARY PER UNIT SCANTotal Fixed Cost for MRI = Rs. 13311748.8Total Fixed Cost for CT Scan = Rs. 8118282.6Total Variable Cost for MRI per Unit = Rs. 321Total Variable Cost for CT per Unit = Rs. 219.83BREAKEVEN ANALYSISThe break-even point of a business is the level of output or sales at which the revenue received bythe business is exactly equal to the cost of making (or selling) that output. The calculation isgiven as: (Sales Revenue – Variable Cost = Contribution Margin). This contribution margincontributes towards the incurred fixed cost.For MRI,Fixed cost = Rs. 13311748.8Sales revenue = Rs.7000; Total Variable Cost = 321Thus, contribution margin = 6679Breakeven point = Fixed cost/contribution margin = 1993.07 or 1993 MRI scans per year.For CT scan,Fixed cost = Rs. 8118282.6Sales revenue = Rs.4500; Total Variable Cost = 219.83Thus, contribution margin = 4239.18Breakeven point = Fixed cost/contribution margin = 1915.05 or 1915 CT scans per year.Thus, the radiology department at Shrey Hospital will have to perform at least 1993 MRIand 1915 CT scans annually in order to achieve breakeven.COST BREAKUP & PROFIT ANALYSISIn case of MRI, the direct and indirect cost are almost equally contributing to the total cost. Incase of CT scan direct cost accounts for 58% of the toal cost, while indirect cost contributes 42%of the total costCONCLUSIONThe actual cost incurred by the hospital to provide CT scan services was Rs.2437.94. The directcost accounts for 51% and indirect cost 49% of the total cost. The actual cost incurred by thehospital to provide MRI was Rs.4282.83. The direct cost accounts for 34% and indirect cost 66%of the total cost. The hospital charges Rs.4500 for CT scan and Rs.7000 for MRI therebyresulting in profit for unit of CT scan performed to Rs.2062.06 and a profit on per unit of MRI toRs.2717.17.Also, as per the breakeven analysis, the radiology department at Shrey Hospital will have toperform at least 1993 MRI and 1915 CT scans annually in order to achieve breakeven.Hospitals these days, are becoming technology intensive organizations and technologyacquisition is a major challenge for hospital administrators. Cost saving is an essential factor, butit should not be made at the expense of the patient lives. Physicians and healthcare providers areincreasingly pressured to contain the cost of Medicare. Such pressures are driven by competitionin the market. Thus, it is incumbent upon radiologists to have a basic understanding of the costsof radiology procedures and the factors that determine those costs.stationary