State Universit% of Nev. Yor^ at Stony Brook Group Health Associalioti of America (GHAA? InternatioriJ Resources Group, Ltd. (IR(i) resep'ch Report No.. 2 Health Care Financing in Latin America and the Caribbean Financing and Costs of Health Services in Belize Susan Ueber Raymond Barbara Lewis Paul Meissner Jeremiah Norris 1987 AID Contract No. LAC 0632-C-00-5137-00 Stony Brook, NY, June FINANCING AND COSTS OF HEALTH SERVICES IN BELIZE Susan Uebe. -Raymond Barbara uewis Paul Meissner Jeremiah Norris June 1987 This technical report has been prepared by International Group, Ltd., sub-contractor to the Research Resources USAID Foundation of the State University of New York, under Contract No. LAC-0632-C-00-51 37-00. FOREWORD This is the second in a series of technical reports on Financing in Latin America and the Caribbean Health Care for (HCF/LAC), produced under contract with the U.S. Agency Development. Its authors worked through the International to the International Resources Group, Ltd., under subcontract of New York at 3tony brook. Research for the State University with study was designed and carried out in close cooperation health authorities and staff members of USAID/Belize. A Belizean at the first draft of the report was subjected to de tailed review HCF/LAC workshop, held in Quito Ecuador, in April second annual of 1987. The final draft was reviewed by Yr. Sam Dowding and Mr. Douglas Fairweather, Permanent Secretary of USAID/Belize printed for the Belizean Ministry of Health, prior tc being distribution. by The design of the study (based on an explcratory report Norris), implementation of field research, data Mr. Jeremiah a team analysis, and preparation of the final report represent by Dr. Susan Ueber Raymond, who was assisted by effort directed who Ms. Barbara Lewis and Mr. Paul Meissner. Belizean authorities in the design and field research for the study included advised Belizean (in addition to Mr. Fairweather) Sir Edney Kane, of Finance; Mr. Leo J, Cuellar, Manager of the Social Minister Belize Security Board; and Mr. Wayne Usher, Administrator of the City Hospital. Belize City Hospital personnel who cooperated closely with in compiling data on the organization and the researchers included financial management of Belize City Hospital services Pott, Senior Medical Officer; Mrs. Russell, Head of Dr. Gregorio Stores, Accounting; Mr. Raymond Lashley, Head of Central Medical. department heads and staff of Belize City Hospital, In and the advice of addition, the team benefitted from the assistance and Finance Officer, Ministry of Health; Mr. Jose Mr. Jorge Nabett, Mr. Encalada, former Administrator of Santiago Castillo Hospital; PAHO consultant; Dr. Mora Reddy, Stann Creek John Turnbull, members Mr. District Medical Officer; and USAID/Belize staff Dowding and Ms. Mary Ellen Tanamly. The final report was edited by Dr. Gretchen Gwynne, Research Associate to the HCF/LAC project. Dieter K. Zschock Director, HCF/LAC EXECUTIVE SUMMARY Responding to a request from Belizean officials, the USAID-sponsored project "Health Care Financing in Latin America and the Caribbean" (HCF/LAC) carried out a detailed examination of costs and financing patterns in the Belize health care system. The goal of the study was to establish a cost database, primarily for the Belize City Hospital (the govecnment's central health care provider) and secondarily for other public curative and primary care institutions in the country. This database was needed to update the public medical service tariff schedule, developed during British rule, and was also to serve as a point of departure for more efficient publi/social-security/private sector linkages in the delivery of health services. The study team also addressed the management structures and policy alternatives requirea to successfully implement a series of cost containment and revenue expansion options. The findings of this cost study are of particular importance at this time in Belize. A new hospital, scheduled for completion in 1989, is under construction to replace thi existing structure, which dates from the 1800s. The need for baseline cost data is tharefore immediate, bot.h in teris of tariff policy and in terms of facility budgeting. Moreover, the Government of Belize has recently instituted several changes An its methods of public budget development, most notably mandating a move from line-item to program budgeting. Thus both the methods and results of this study provide the Ministry of health with important budgeting technology for use in conforming to new public budget parameters. The Belizean economy is one of the most open in the region, with minimal government restriction and ownership of economic production mostly in private hands. The health sector represents a mix of public and private financing. The central government budget covers 56% of health sector expenditures, with an annual budget of over BZ $10 million (1). The private sector comprises 44% of health service outlays, with estimated expenditures of BZ $8 million. Most health facilitie , however, are government owned and operated, includinig the central Belize City Hospital, 6 district hospitals, and 2,. health centers. The Belize City Hospital (BCH), with 186 beds, is the largest inpatient facility in Belize, providing routine medical and surgical care to Belize City and its environs and serving as the national referral center for sophisticated medical and surgical treatment. It has no tertiary capability, however, and complex cases such as burn care, cardiac surgery, and eye surgery are sent abroad to other i Central American or CariLbean facilities or hospitals in the U.S. The key data developed for the BCH include the following: -- Total annual cost of BCH is $6.3 million. -- Annual operating cost is $5.4 million per year. -- One third of total costs are absorbed by indirect departments that do not deliver direct medical care, and by overhead. costs -- Since all LCH physicians are on salary, payroll as a percentage of operating costs are higher than is normally secii in a medical facility of this level. ($147 per -- Average total cost per patient is $896 patient day). per -- Average operating cost per patient is $737 ($121 patient day). occupancy, -- There are significant differences in ward with the children's medical ward lowest (38%) and the male medical ward highest (90%). Thus, although the cost per patient in the male ward is the highest in the hospital, its cost per bed day is lowest. clear that -- Comparing costs across wards, it is BCH has evolved into an efficient provider of obstetrical and gynecological services. Nearly half of all admissions are ob/gyn cases, with operating costs that are the lowest in the hospital. Fairly efficient organization to provide this largely routine care contributes to cost control in this ward. by excess -- Overall costs are being pushed up capacity, which probably exceeds stand-by needs, in the post-op and children's medical wards. Moreover, diagnostic-based unit costs for maintaining capability in such infrequently-treated categories as cancer care are also inflating BCH operating costs. While the facility needs to have stand-by capacity in such areas, its managers should look more closely at demand so as to reallocate any excess capacity to other high-demand areas. The study supplies detailed updated tariff schedules for radiology and laboratory procedures. It also supplies data on patient costs per day by hospital ward, providing a basis for government decisions on overall inpatient charges as well ii as budgeting for the new hospital. Cost data for diagnostic related groups (DRGs) are also provided, although these are estimates onlr. More reliable DRG costs must await improvements in the BCH patient records system so as to more directly link diagnoses to individual costs. The study also examines the six district hospitals in Belize. Using a similar step-down methodology, total annual costs per hospital average $457,000. Payroll accounts for an average of 50% of total annuaL costs, and operating costs average 70% of total costs. The annual cost per patient averages $339, rangi.ig between $197 and $400. Annual cost per patient day averages $122, with a range of $73-$182. It is interesting to note that the cost per patient day at BCH falls within that of district hospitals, even though its annual cost per patient is much greater. An avera. length of stay at BCH, which is three times that of the districts, is largely responsible. The district hospitals are operating significantly below capacity. Bed occupancy averages as low as 17% and, even at the busiest district facility, never more than 50%. The district hospitals thus represent serious excess capacity, as well as excess costs, for the Ministry of Health. These Ministry resources might better be spent on improved management (e.g., evening and weekend on-site administration of BCH) than on staffing and maintaining underutilized facilities at their current bed size. The study reviews the status of the private medical sector in Belize, and the cost and finance relationship between the Social Security Board and the overall health system. The SSB makes a payment of $50,000 annually to the Ministry of Finance to cover public medical facility treatment of work-related injuries. A key policy question in Belize involves the adequacy of this payment. Since no differentiation in the use of inpatient or outpatient hospital services for Social Security beneficiaries is available, a series of simulations was prepared showing the combination of services that could be purchased for $50,000 at current public health facility costs. A number of options were developed for the Government of Belize in which various measures to contain costs and increase the revenue base of the health sector are presented. These options were categorized as either short term (i.e.#, available for immediate action) or long term (i.e., requiring some amount of prerequisite policy or organizational change).