Ijmet 10 01_099

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International Journal of Mechanical Engineering and Technology (IJMET)
Volume 10, Issue 01, January 2019, pp. 968–977, Article ID: IJMET_10_01_099
Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=10&IType=01
ISSN Print: 0976-6340 and ISSN Online: 0976-6359
© IAEME Publication Scopus Indexed
COST ANALYSIS OF ENDOSCOPIC
PROCEDURES IN A TERTIARY CARE
HOSPITAL IN SOUTH INDIA
Umesha P
Trainee, Master in hospital administration program, Prasanna School of Public health, Manipal
academy of higher education, Manipal, Karnataka-576104
Dr.Somu G*
Professor, Manipal Academy of Higher education, Karnataka, - 576104.
Dr.Arun Mavaji,
Hospital Administrator, M S Ramaiah Memorial Hospital, Bangalore, Karnataka.
Dr.Rajesh Kamath
Assistant Professor, Prasanna School of Public Health, Manipal academy of higher education,
Manipal, Karnataka – 576104
Ms.Brayal D’Souza
Assistant Professor, Prasanna School of Public Health, Manipal academy of higher education,
Manipal, Karnataka – 576104
Dr.Sagarika Kamath
Assistant Professor, School of Management, Manipal academy of higher education, Manipal,
Karnataka – 576104
ABSTRACT
Endoscopy is a non-surgical procedure used to examine a human digestive tract.An
endoscope is a long,thin,flexible tube with a camera attached at the end with which a
doctor can see the images of digestive tract on the monitor.It is used both for diagnostic
and therapeutic purposes and needs trained professionals.
Keywords: Endoscopy, cost analysis, endoscopic procedures
Cite this Article: Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal
D’Souza and Dr.Sagarika Kamath, Cost Analysis of Endoscopic Procedures in a Tertiary
Care Hospital in South India, International Journal of Mechanical Engineering and
Technology, 10(01), 2019, pp.968–977
http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=10&Type=01

Umesha P, Dr.Somu G, Dr.Arun Mavaji, Dr.Rajesh Kamath, Ms.Brayal D’Souza and Dr.Sagarika
Kamath
1. INTRODUCTION
Endoscopy is a non-surgical procedure used to examine a human digestive tract. An endoscope
is a long,thin,flexible tube with a camera attached at the end with which a doctor can see the
images of digestive tract on the monitor. It is used both for diagnostic and therapeutic purposes
and needs trained professionals.
Endoscopic Retrograde Cholangiopancreatography(ERCP) is a common procedure that uses
a side-viewing duodenoscope(long, slender and flexible tube) to pass from the mouth to the
duodenum(the initial curved section of the small intestine) in which instruments are passed down
the tube to the ampulla of Vater(where the common bile duct empties into the
duodenum).Contrast material is injected into the biliary tree and pancreatic ducts so they can be
viewed by the physician and x-rays are taken.ERCP is used primarily in the diagnosis and
management of bile duct stones, and other conditions such as strictures (narrowing due to
scars),leaks and cancers.
As endoscopic procedures have increased for both diagnostic and therapeutic purposes, it has
become important on the part of hospital setups to make it more effective and efficient in terms
of cost. The importance of accounting in managerial decisions has long been recognized in the
literature particularly in the field of management accounting, actual cost data, cost estimates and
cost analysis. Cost data and analysis helps managers in making decisions in such areas as pricing,
profit planning, setting standard cost, capital investment decisions, marketing decisions, cost
management decisions and others.
Cost analysis is defined as the allocation of costs to provide estimates of program costs and
benefits that are likely to be there before it is implemented. It is vital for managerial decision
making in various profit-oriented and non-profit organizations. In profit-oriented organizations,
cost and cost analysis reports are useful in management decision-making areas like product
costing and pricing, cost management, special (tactical) decisions, profit planning, capital
investment decisions, standard setting, product/customer profitability, and the like. In non-profit
organizations, cost analysis provides useful input for cost-sharing decisions, cost management
(containment), cost-recovery pricing decisions etc. In such organizations, cost analysis is a part
of program budgeting and accounting practices which allow managers to determine an accurate
cost of providing a given unit of services.
Activity based costing (ABC) is a costing methodology that identifies activities in an
organization and assigns the cost of each activity with resources to all products and services
according to the actual consumption by each.
Activity Based Costing Steps: Step1: Identify the products that are the chosen cost objects.
Step2: Identify the direct costs of the products. Step3: Select the activities and cost allocation
bases to use for allocating indirect costs to the products. Step4: Identify the indirect costs
associated with each cost allocation based on activity. Step5: Compute the rate per unit of each
cost allocation based on activity used to allocate indirect costs to the products. Step 6: Compute
the indirect costs allocated to the products. Step 7: Compute the total costs of the products by
adding all direct and indirect costs assigned to the products.
Advantages of Activity Based Costing (ABC):
ABC is easy to understand and provides for more accurate costing of products/services,
customers and distribution channels. There is better understanding of overheads.ABC utilizes
unit cost rather than just total cost. ABC integrates well with Six Sigma and other continuous
improvement programs. It makes visible waste and non-value-added costs. It supports
performance management and scorecards. It enables costing of processes, supply chains and
value streams. It mirrors the way work is done. It facilitates benchmarking.

Cost Analysis of Endoscopic Procedures in a Tertiary Care Hospital in South India
Need for the study:ABC provides more accuracy in the product/service costing, leading to
reliable pricing decisions. It increases the understanding of overheads and cost drivers by making
it more visible so as to reduce or eliminate it.Determining the utilization of endoscopic equipment
followed by the ABC analysis will help to identify ways to improve the utilization as well as to
control the cost.
Aim: To analyze the cost of Endoscopic procedures in a Tertiary Care Teaching Hospital.
Objectives: To understand the workflow of endoscopic procedure in Gastroenterology
Department. To determine the cost associated with the endoscopic procedure using ABC method.
Study Design: The prospective study involved observing the workflow, identifying the cost
heads.
Study Area: Gastroenterology Department
Study Period: 6 months data for the Prospective study (November 2015 to April 2016)
2. METHODOLOGY
Calculations:
According to Category of equipment:
Table No: 1
Replaced Depreciated
ERCP scope Anesthesia machine
Processor Fluoroscopy
Light source
Electrical cautery machine
Cardiac monitor
Computer and printer
As we are calculating the cost of the procedure per minute,we need to find out the cost
required for every minute of the procedure;hence we need to do the following steps:
Cost of equipment per year = Total cost of equipment Life of equipment (in years)
Cost of equipment per day = Cost of equipment per year Total working days in a year
Per hour cost of the equipment = Cost of equipment per day Number of hours the equipment
can be used
Cost of equipment per minute = per hour cost of the equipment Number of minutes in an hour
The equipment gets depreciated over time.
The formula for calculating the depreciation rate of the equipment is:
Net value of equipment = Cost of equipment ÷ year (number of Years it has been used) – total
cost of Equipment
Cost per procedure = Net value of equipment Total number of procedures done on the
machine
To calculate the cost of accessories per procedure, the formulas are:
Cost of accessory per procedure = Accessory cost Number of times it can be reused
To calculate per minute cost per procedure per employee:
Salary of employee per day = Total salary of the employee Working days in a month
Salary of employee per hour = Salary of employee per day Working hours per day
Salary of employee per minute = Salary of employee per hour Number of minutes in an hour

Kamath
To calculate the cost of the building.
Total rental cost of the building =Total area of the endoscopy room in square feet × Rental
cost per month per square feet.
Per day rental cost of the building = Total rental cost of the building Days in a month
Per procedure rental cost of the building = per day cost of the building Total procedures in a
day
To calculate the cost of water.Total cost of the water is 22 rupees per 1000 litres. Per litres,
water cost is 0.022 paise × 30 litres for per scope cleaning. The total cost of water is 0.66 paisa.
To calculate the cost of electricity. Kilowatts of the equipment × hour’s × cost per units
3. ACTIVITY ANALYSIS:
It identifies resources used for each activity that is necessary for an endoscopic procedure and
assists in determining the cost pools used for each resource.
Table No: 2
Equipment’s
(life in years)
Accessories
(reusability)
Consumables
Human Resources &
other Resources
ERCP Scope (8) Guide Wires (5) Nasal Cannula Receptionist
Processor (8) Cannula (5) Iv cannula Doctors
Light source (8)
Pre-cut needle knife
(10)
ECG leads Staff Nurse
Fluoroscopy (8) Sphincter tomes (5)
Dialdehyde
solution (Cidex
Solution)
Technician
Cautery machine (8) Basket (10) Enzymatic Solution Building (1596sq ft.)
Anesthesia machine (15) Dilator (10) Water (litre)
Cardiac monitor (8) Biliary Stents (0) Electricity (Units)
Endo wash machine (8) Stent Pusher (10)
Computer & Printer (4)
Channel cleaning
brush (10)
Stone Extraction
Balloons (5)
4. ASSIGNING COST CATEGORIES:
Once the resource utilized has been identified, then each resource is assigned to a cost category.
Example: labor, materials, or general overhead. These categories will then be assigned further to
either direct or indirect cost categories. The direct costs are those that are directly related to the
performance of the service (nursing) as opposed to indirect costs (accounting) which have to be
allocated to multiple services.

Table No: 3
Component Activity Categories
Pre-procedure
Registration Indirect Cost
ECG Monitoring Direct Cost
Nasal cannula Direct Cost
IV cannula Direct Cost
Processing
Receptionist Direct Cost
Doctor Direct Cost
Staff Nurse Direct Cost
Technician Direct Cost
Scope Direct Cost
Processor + light source Direct Cost
C-Arm Direct Cost
Cautery Machine Direct Cost
Anesthesia machine Direct Cost
Drugs Direct Cost
Procedure
Guide Wires Direct Cost
Sphincterectomies Direct Cost
Stone Extraction Balloons Direct Cost
Biliary Stents Direct Cost
Pre-cut needle knife Direct Cost
Stent Pusher Direct Cost
Cannula Direct Cost
Dilator Direct Cost
Basket Direct Cost
Recovery
Cardiac Monitoring Direct Cost
Scope Cleaning
Endo wash machine Indirect Cost
Dialdehyde Solution (Cidex solution) Indirect Cost
Enzymatic Solution Indirect Cost
Channel cleaning brush Indirect Cost
Housekeeping Staff Indirect Cost
Building Cost Indirect Cost
Water Indirect Cost
Electricity Indirect Cost

Kamath
5. ANALYSIS AND RESULTS
5.1. COST DRIVERS:
Cost drivers for each resource and the number of resources utilized need to be determined. In
ERCP two type of the procedure will be taken.
Table No: 4
Name of the Procedure Total Cost of The Procedure
1. ERCP + Sphincterotomy + Stenting.
10803.71
2. ERCP + Sphincterotomy + Basket Stone Removal. 14221.91
5.2. COST DRIVERS FOR ERCP+SPHINCTEROTOMY+STENTING
Table No: 5
Process Sub-Process Cost Driver
Human
Resource
Category Equipment
Total Cost
in
Rupees.
Pre-
Procedure
Registration
Minutes
used
Receptionist Direct cost Computer 8.93
ECG
Monitoring
Units cost Staff Nurse Direct cost ECG Leads 45
Nasal
cannula
Units Cost Staff Nurse Direct cost
Nasal
Cannula
63
IV cannula Units cost Staff Nurse Direct cost IV cannula 90
Processing
Labour Units cost Doctor Direct cost 1982.5
Labour
Minutes
used
Staff Nurse Direct cost 85
Labour
Minutes
used
Technician Direct cost 24.51
Scope
Minutes
used
Doctor Direct cost 143.22
Processor +
light source
Minutes
used
Doctor Direct cost 229.65
Fluoroscopy
Minutes
used
Cautery
Machine
Minutes
used
Anesthesia
machine
Minutes
used
Anesthesiolo
gist
Direct cost 15.32
Drugs
No of
patients
Anesthesiolo
gist
Direct cost 144
Procedure

Guide Wires
Reusable 5
times
Technician Direct cost 1384
Cannula 5 times Technician Direct cost 552
sphincter
tomes
5 times Technician Direct cost 2168.6
Stone
Extraction
Balloons
Biliary Stents Single use Technician Direct cost 493.50
Stent Pusher 10 times Technician Direct cost 263.75
Recovery
Cardiac
Monitoring
Minutes
used
Staff Nurse Direct cost
Cardiac
Monitor
54.13
Scope
Cleaning
Endo wash
machine
22 minutes Staff Nurse Direct cost Endo Wash 113.02
Dialdehyde
Solution
(Cidex
solution)
12
litres/14days
Staff Nurse
Indirect
material
13.53
Enzymatic
Solution
5
litres/20days
Staff Nurse
Indirect
material
21.93
Channel
cleaning
brush
10 times Staff Nurse
Indirect
material
518.7
Indirect
Cost
Water
30
litres/scope
Staff Nurse
Indirect
cost
0.66
Building Cost
1596sq ft.
area
Indirect
cost
125
Electricity
Units per
minutes
Indirect
cost
124.34
Variable
Cost
7667.41
Fixed Cost 3136.3
Total cost
for per
procedure
10803.71

Kamath
5.3. COST DRIVERS FOR ERCP+SPHINCTEROTOMY+BASKET STONE
REMOVAL
Table No: 6
Process Sub-Process Cost Driver
Human
Resource
Category
Equipmen
t
Total Cost in
Rupees.
Pre-Procedure
Registration Minutes used Receptionist Direct cost Computer 8.93
ECG
Monitoring
Units cost Staff Nurse Direct cost ECG Leads 45
Nasal cannula Units Cost Staff Nurse Direct cost
Nasal
Cannula
63
IV cannula Units cost Staff Nurse Direct cost IV cannula 90
Processing
Labour Units cost Doctor Direct cost 3200
Labour Minutes used Staff Nurse Direct cost 85
Labour Minutes used Technician Direct cost 24.51
Scope Minutes used Doctor Direct cost 143.22
Processor +
light source
Minutes used Doctor Direct cost 229.65
Fluoroscopy Minutes used Technician Direct cost 341.82
Cautery
Machine
Minutes used Technician Direct cost 13.2
Anesthesia
machine
Minutes used
Anesthesiologis
t
Direct cost 15.32
Drugs No. of patients
Anesthesiologis
t
Direct cost 144
Procedure
Guide Wires Reusable 5 times Technician Direct cost 1384
Cannula 5 times Technician Direct cost 552
Pre-cut
needle knife
Sphincter
tomes
Basket 10 times Technician Direct cost 2223.5
Dilator 10 times Technician Direct cost 386
Biliary Stents Single use Technician Direct cost 493.50
Stent Pusher 10 times Technician Direct cost 263.75
Recovery
Cardiac
Monitoring
Minutes used Staff Nurse Direct cost
Cardiac
Monitor
54.13
Scope
Cleaning
Endo wash
machine
22 minutes Staff Nurse Indirect cost 113.02
Dialdehyde
Solution
(Cidex
solution)
10 litres/14dyas Staff Nurse Indirect cost 13.53
Enzymatic
Solution
5 litres/20days Staff Nurse Indirect cost 21.93

Channel
cleaning
brush
10 times Staff Nurse Indirect cost 518.7
Indirect Cost Water 30 litres/scope 0.66
Building Cost 1596sq ft. area Indirect cost 125
Electricity Units per minutes Indirect cost 124.34
Variable Cost 9868.68
Fixed Cost 4353.8
Total cost for
per procedure
14221.91
As per as total cost of the procedure and selling prices of these two procedures.
Table No: 7
Procedure Total Cost of the Procedure Selling Price
1. ERCP + Sphincterotomy + Stenting
10803.71 14211
2. ERCP + Sphincterotomy + Basket Stone
Removal
14221.91 15661
In ABC, Costs are ascertained as the direct cost and indirect cost. However, to calculate the
contribution, margin costs have to be classified into fixed cost and variable cost accordingly.
Therefore, Contribution cost margin = Selling Price – Variable Cost ×100 Selling Price
1. ERCP + Sphincterotomy + Stenting
= 14211–7667.41
= 6553.59 ×100
14211
Contribution Cost Margin = 46.11%
2. ERCP + Sphincterotomy + Basket stone removal
=15661–9868.68
=5792.32×100
15661
Contribution Cost Margin = 36.98%
6. DISCUSSION
As the study was conducted with two objectives 1st
one to understand the workflow of endoscopic
procedure in gastroenterology department and the 2nd
one is to determine the cost associated with
the endoscopic procedure.The study revealed that the actual cost incurred by the hospital to
provide 1st
service ERCP + Sphincterotomy + Stenting was Rs. 10,803.71 and 2nd
one ERCP +
Sphincterotomy + Basket Stone Removal Rs. 14,221.91 respectively. However, in the hospital
patients are charged Rs. 14,211 for the 1st
procedure and Rs. 15,661 for the 2nd
one respectively
thereby making contribution cost margins as 46.11% and 36.98% respectively.
Hence from this study, it is clear that the pricing done in the hospital covers up the operating
cost more than sufficient as the selling price is more than cost price which is ideal for the
organization. ABC analysis can be used to determine the cost of other endoscopy services as well
to check their profitability and by providing adequate training to the staff, the damage to the staff

Kamath
can be minimized thereby achieving cost containment e.g.- Guidewire.Every hospital needs to
have health administrators who can work on cost containment in healthcare without
compromising the effectiveness of services. The ABC gives true costs and provides more accurate
information on product cost than conventional accounting system. By using this method, we can
find unit costs of the selected parameter and conclude that the prices set for the studied procedures
are appropriate for recovering the equipment cost. It further helps in increasing revenue of the
organization.
REFERENCES:
[1] http://www.myvmc.com/investigations/an-introduction-to-endoscopy/#ERCP
[2] https://webcache.googleusercontent.com/search?q=cache:6G_uGIlnPesJ:https://ohiocea.file
s.wordpress.com/2011/04/medical-equipment-life-expectancy-
list.pdf+&cd=6&hl=en&ct=clnk&gl=in
[3] http://www.valuecreationgroup.com/activity_based_costing_advantage_disadvantage.htm
[4] http://www.csus.edu/indiv/p/pforsichh/accountinginfo/121/documents/ch05inclassproblems
horngren13emycopyx2.pdf
[5] Clinical Gastroenterology and Hepatology at www.cghjournal.org, and at
doi:10.1016/j.cgh.2011.08.010.
[6] www.ccsenet.org/gjhs Global Journal of Health Science; Vol. 8, No. 1; 2016
[7] Indian Journal of Nuclear Medicine: IJNM : The Official Journal of the Society of Nuclear
Medicine
[8] Saikumar Tenepalli, SS. Asadi and K. Sai Kala, a Model Study on Comparative Cost Analysis
of Equipment Management in Construction Companies in Tirupati Region. International
Journal of Civil Engineering and Technology, 8(1), 2017, pp. 72–81.
[9] Zahraa Tawfiq Naeem, Mohammed F. Abbas and Ahmed R AlAdhadh, Life Cycle Cost
Analysis for Use of Precast Prestressed Concrete Slabs in Repair of Concrete Pavement,
International Journal of Civil Engineering and Technology, 9(11), 2018, pp. 1479–1490

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