Factors determining the cost
There are many factors to determine cost of the service. It is not possible to standardise the cost of services across the country and hence it is logically not possible to control the price of the service in a hospital
What are the determinants of pricing a service?
What are the determinants of pricing a service?
Many factors determine the cost of the service and hence the price. It starts from the cost of the land where the hospital is erected to the cost of the resources offering the service.
To list few of the cost line items, contributing to overall cost of the services are
- Cost of the land
- Cost of the building
- Rentals if the hospital is not owned
- Cost of the consumables
- Cost of the human resources – doctors, nurses and other staff
- Cost of medicines
- Cost of marketing
Reasons Explained
Doctors do ask us what would be the cost of the hospital project, we exclude the land cost for the simple reason that it differs from place to place.
A doctor wanting to come up with a small hospital in a town hardly thinks of hiring a hospital consultant. whereas the team wanting to come up with a big hospital in a city like Bengaluru hires consultants like us to plan, execute and even commission the hospital. All these will be invariably passed across to the end users.
Few doctors will offer services in a rented place and as per the cost-benefit analysis, the cost of service in a rented place is higher than in an owned place.
Consumables vendors will discount if there are more numbers and hence the cost of consumables in a bigger hospital is less when compared to a small hospital, just because of the number of consumables ordered.
Hiring a nurse in a town is more challenging as a nurse will always prefer to work in a good set up where one can master their skills. This is the case in most of the small hospitals. In big hospitals, because of demand, the nurse does not stick to one hospital and have the tendency to change jobs for better pay. This is the same even with Doctors.
When it comes to Medicines, the more the orders the more discounts. Hence in smaller hospitals, it will be costlier sometimes compared to the bigger hospital. But this does not mean that the bigger hospitals will charge less. They will try to cover the overhead expenses that are not the case in small hospitals
Marketing cost is an effort that the hospital makes to pass the information to the public. People will only get to know about the services when they advertise. So, the hospital does spend on marketing and the expenses will have to be covered within the revenue.