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# WPS 934

This paper is a product of the Population and Human Resources Operations Division, Country Department I, Latin American and the Caribbean. Support forthis project was provided by USAID, through the REACH Project, and by The Urban Institute. Copies of the paper are available freZ from the World Bank, 1818 H Street NW, Washington DC 20433. Pease contact Patricia Trapani, room I7-183, extension 31947 (July 1992, 21 pages).

Measuring costs in public hospitals in developing countries is hampered by the lack of an appropriate costing system, or of any systematic cost accounting. Invoices for goods and services, prices for inputs, and patient records are generally absent As a result, "cost measures" have historically been based on budget figures -the only available financial data. But budget allocations bear little relationship to the resources actually required to provide services to hospital patients.

The patient-based methodology described by Lewis, Sulvetta, and LaForgia circumvents this problem by measuring actual hospital resources allocated to patients. Their study was conducted in a single Dominican hospital during a oneweek period in April 1989. Their approach documents and gives prices for goods, services, and personnel time provided by the hospital to emergency patients, inpatients, and outpatients.

They used the following to measure quality and efficiency:

* The qualifications and relative costs of medical manpower delivering services.

* The extent and nature of shortages.

* Comparisons of physician ordets and actual services provided.

> * (For selected diagnoses) die specifics of clinical practices In the hospital, compared with accepted clinical norms for the Dominican Republic.

They found that average and total costs of services understate the true costs - because of shortages, inappropriate and underused personnel, and nonfunctioning equipment. Quality of care measures suggest low quality and poor efficiency. Norms of medical practice were not followed in more than 80 percent of the cases examined. Rates of completion for diagnostic tests were below 50 percent for outpatient services and between 60 and 70 percent for inpatient and emergency services. The study registered significant monthly "savings" of $641 for noncompletion of tests and $824 for nonavailability of drugs.

Policy recommendations of Lewis, Sulvetta, and LaForgia center on the need to reform the organization and delivery of health care as vell - as physician payment practices and to giving more authority to hospital administrators. To make Dominican hospitals more efficient, there must be greater autharity and accountability for hospital directors and better incentives for improving medical and management performance. Quality assurance needs great improvement if the Dominican system is to ensure a basic standard of care.

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