Costing in Vaccine Planning and Programming
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1 Costig i Vaccie Plaig ad Programmig
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3 Objectives Uderstadig vaccie ecoomics Defiig costs ad ratioale for costig Classificatio of costs for program Uses of cost data for program maagers Cost data: sources, process, ad quality Applyig costig methodology for routie immuizatio program
4 Costig i Vaccie Plaig ad Programmig Cost ad Cost Classificatio
5 Objectives Defiig costs Uderstadig cost classificatio Measurig costs Cost classificatio for program More cost cocepts for maagerial decisios
6 What do we mea by cost"?
7 What do we mea by "cost? Cost may be defied as the value of resources used to produce a good or health care service. However, the way these resources are measured ca differ.
8 Ecoomic vs. Fiacial Costs Fiacial Costs Payer s perspective Costs are resources foregoe by a payer Ecoomic Costs Social perspective Costs are resources foregoe by all of society
9 Practical Implicatios Fiacial Cost Time spet by voluteers omitted Doated goods ad services omitted Ecoomic Cost Time spet by voluteers icluded Doated goods ad services icluded From payer s perspective these resources are free. From social perspective, these resources could be doig somethig else ot free
10 Fiacial Cost Fiacial cost represet actual expediture o services purchased. Costs are thus described i terms of how much moey has bee paid for the resources used i the project or service. We eed to kow the price ad quatity of the resources used.
11 Ecoomic Cost (= Opportuity Cost) The ecoomic cost or opportuity cost is the broader way of defiig the cost. Defiig the costs i terms of the alterative uses that have bee foregoe by usig a resource i a particular way. It recogize that the cost of usig resources, as these resources are the uavailable for productive use elsewhere. If you do A, you caot do B Costs of doig A is the forgoe value of doig B
12 Which Cost Should be Used? Always try to estimate both ways Readers ca decide to use fiacial, ecoomic or both approaches depedig o their objectives Explore Affordability: Fiacial costs Address Sustaiability: Ecoomic costs Aalyses usig ecoomic costs do ot replace those usig fiacial costs but supplemet them with additioal iformatio useful for decisio-makig.
13 Cost to Whom?
14 Cost to Whom? Cost to Program (Provider Cost) Cost to Cliet (Household Cost)
15 Cost to Cliet
16 Estimatig Cost to Cliet Direct Cost: Provider s fee Vaccie/other supplies expese Medicie expeses Test charges Hospital fee
17 Cost to Cliet.. Associated Costs: Trasport expeses for patiet Trasport expeses for accompayig perso Food expeses for accompayig perso Stay expeses for accompayig perso Opportuity Costs: Wage loss to the patiet Wage loss to the accompayig perso
18 Cost to Program
19 Classificatio of costs To estimate a Immuizatio program cost, it is ecessary to classify their compoets. A good cost classificatio scheme depeds o the eeds of the particular situatio or problem. It must be relevat to the particular situatio The classes or categories must ot overlap The classes chose must cover all the possibilities
20 Why cost classificatio is importat? Resources used for Immuizatio program ca be described i may differet ways. For example immuizatio program might be described as usig the followig resources: persoel, moey from exteral sources ad mass media. These categories are well defied ad meaig is clear.
21 Why cost classificatio is importat? However, they do ot costitute a very useful way of thikig about resources used for this program. The mai problem is that the categories overlap; moey from exteral sources ca be used for persoel ad persoel are likely to be ivolved i mass media operatios. If we added up the value of these three categories, they may well come to more tha the total cost of the program.
22 Why cost classificatio is importat? Oe reaso why the categories above are difficult to use is that they cofuse differet dimesios of resources, mixig-up activities (i this case mass media ) with sources ( moey from exteral sources ) ad with iputs (such as persoel). Obviously, several differet classificatios are ivolved here.
23 Classificatio of Costs Classificatio by Iputs Classificatio by Fuctio/Activity Classificatio by Level Classificatio by Source Classificatio by Currecy
24 Classificatio by Iputs Capital cost items: those that last loger tha oe year. Recurret cost items: those that are used up i the course of a fiacial year ad are usually purchased regularly. Recurret costs are the ruig costs of the program (sometimes referred as operatioal costs of the program).
25 Capital Cost Items Buildig Vehicles Equipmet: with a uit price of $ 100 or more, such as cold chai equipmet Traiig : traiig activities for health persoel that occur oly oce or rarely, such as iitial traiig, TOTs, curriculum developmet workshop Social mobilizatio: promotioal activities that occur oce or rarely such as IEC material developmet, sesitizatio, mobilizatio ad commuicatio guidelies ad tools preparatio workshop, district campaig preparatio meetig, materials pritig, media semiar for jouralists, Radio spots are projects to air
26 Recurret Cost Items Persoel: admiistrators, doctors, district immuizatio officer (DIO), cold chai hadlers, vaccie logistics maagers, supervisors, laboratory techicias, vacciators, health workers, etc. Supplies: vaccies, ijectio supplies, drugs, syriges, small equipmet. Buildig Operatio ad Maiteace: electricity, water, telephoe, cleaig, etc. Vehicle Operatio ad Maiteace: POL, spare parts, isurace, etc. Equipmet Operatios ad Maiteace: operatioal costs icludig cold chai maiteace ad maiteace of other equipmet Traiig : recurret Social mobilizatio: routie activities
27 Classificatio by Fuctio/Activity This classificatio ivolves the kid of activity or fuctio for which resources are used i the program. Examples : Service delivery Traiig Moitorig ad evaluatio Program maagemet Commuity mobilizatio Advocacy
28 Classificatio by Level Aother way of dividig the resources is accordig to the levels at which they are used. I a Natioal program, resources are used at: Natioal level District level Health Ceter level
29 Classificatio by Source The source of the resources (that is, who provides them) is a importat characteristic. Source/cotributors may iclude: Cetral Govermet State / Provice Govermet Doors NGOs
30 Classificatio by Currecy Closely associated with the source of the resources is the type of currecy required to purchase those resources. Type of currecy required to purchase those resources may be Domestic Currecy or Foreig Currecy (USD)
31 Exercise 1 Exercise o cost classificatio
32 How Volume AffectsCosts
33 Volume Related Costs Fixed Costs Variable Costs Mixed Costs Semi-fixed Costs Semi-variable Costs
34 Fixed Costs Total Fixed Cost (TFC) Per Uit Fixed Cost (FCU)
35 Total Fixed Cost (TFC) Total Fixed Costs are those costs that do ot vary with chages i volume of service.
36 Total Fixed Cost (TFC) Behaviour 15,000 10,000 TFC ($) 5, Number of Examiatios (Volume)
37 Per Uit Fixed Costs (FCU) Per Uit Fixed Cost vary with chages i volume. Example of Per Uit Fixed Cost Nursig staff salary is INR 10,000 per moth. If oe patiet is see by this ursig staff the ursig cost per patiet will be equal to (10,000/1), INR 10,000. However, if 100 patiets are see by the same ursig staff, the per patiet ursig cost will be equal to INR (10,000/100) = INR 100.
38 Per Uit Fixed Cost (FCU) Behaviour FCU($) Number of Examiatios (Volume)
39 Variable Costs Total Variable Cost (TVC) Per Uit Variable Cost (VCU)
40 Total Variable Costs Total Variable Costs chages i a liear fashio with a chage i volume. Example of Variable Cost For istace, if performig a certai examiatio costs $ 10/- the each time aother examiatio is give, the total costs go up by $ 10/-. This cost is variable sice it chages directly with a chage i the umber of examiatios give.
41 Total Variable Cost (TVC) Behaviour TVC ($) 5,000 3,000 2,000 1, Number of Examiatios (Volume)
42 Per Uit Variable Cost (VCU) Per uit variable cost do ot chage with chage i volume.
43 Per Uit Variable Cost (VCU) Behaviour VCU ($) Number of Examiatios (Volume)
44 Mixed Costs Semi-fixed/Semi variables costs vary but ot directly with volume chages. These costs are called mixed costs. Example: retal equipmet that has a flat rate ad so much per miute used.
45 Cocept of Relevat Rage The term relevat rage refers to the fact that the cost relatioships described pertai oly to a certai time period ad a certai volume - that time frame ad volume pertiet to the decisio beig made.
46 Example Ret, a fixed cost, will be costat durig the budget period if there is o dramatic icrease i volume. However, should volume icrease beyod what we realistically aticipate, the we may have to icrease our space, ad thus our ret. This idea gives rise to the cocept of step-fixed costs.
47 Step Fixed Costs Step fixed costs stay the same i total util a certai volume is reached ad the icrease aother step at that poit.
48 Step-fixed Cost ( Assume fixed cost = Rs 1,500 per moth, max volume = 1,00,000 tests per moth) 6,000 TFC (Rs) 4,500 3,000 1,500 1,00,000 2,00,000 3,00,000 4,00,000 Number of Examiatios (Volume)
49 How to use fixed costs, variable costs ad average costs for various maagerial decisios by hospital admiistrators? Example:.
50 Uses for Maagerial Decisio The followig iformatio is available regardig the admiistratio of a diagostic test: TFC = Rs. 10,000 VCU = Rs. 10. What are the required total ad per-test costs if (a) 1, (b) 200, or (c) 500 test are coducted?
51 Uses for Maagerial Decisio Uit TFC Total Fixed Cost FCU Fixed Cost per Uit VCU Variable Cost Per Uit TVC Total Variable Cost TC Total Cost (TFC+TVC) TCU Total Cost Per Uit 1 10,000 10, ,010 10, , ,000 12, , ,000 15,000 30
52 As the umber of exams icreases : 1. The total fixed costs remai the same 2. The per uit fixed costs decreases. 3. The per uit variable cost remais the same. 4. The total variable cost icreases. 5. The total cost icreases by the amout of the icrease i variable cost. 6. The per uit cost decreases as the umber of exams icreases because there are more exams over which to spread the fixed costs.
53 Costs & Volume Relatios Fixed Variable Total Costs Do ot chage Chage Per-uit Costs Chage Do ot chage
54 Uderstadig More Costs for Maagerial Decisio
55 Uderstadig More Costs for Maagerial Decisio Full/ Icremetal costs Average/ Margial costs Direct/Idirect costs Budgeted/ Actual costs
56 Full ad Icremetal Costs A full cost aalysis estimates the costs of all resources that are beig employed i implemetig a FP programme. A icremetal cost aalysis looks at the cost of addig or implemetig the additioal programme to existig services.
57 Average ad Margial Costs The average cost is the total cost per uit of output, ad is calculated by dividig total cost by the uits of outputs or services. The margial cost is the additioal cost of producig oe more uit of output. What is the differece betwee icremetal cost ad margial cost?
58 Direct ad Idirect Costs Direct costs are those costs that ca be traced to a specific uit or departmet or activity. Idirect costs are those costs that ca ot be specifically traced to a uit/departmet/activity. Examples are hospital admiistratio, utilities, vehicles, OPD space for ANC or EPI programs.
59 Direct/Idirect Costs... Poits to be oted Ofte, whether a cost is cosidered direct or idirect depeds upo the ability of accoutig system to track the cost. The rule of thumb for maagerial cotrol is to try ad make as may costs as possible direct costs.
60 Budgeted ad Actual Costs Budgeted costs are those costs that the orgaizatio plas to icur durig a budget period. Actual costs are the expeses actually icurred durig the budget period. I fact, for the mid-level maagers, this set of costs may be the most importat. Variace Aalysis
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