1. Case study on
Finance and Accounts Department
at
Columbia Asia Referral Hospital,
Yeshwanthpur, Bangalore.
Guiides::
Gu des
Mr.. Dinesh Mishra
Mr Dinesh Mishra
Fiinance Manager,, Collumbiia Asiia Hospiittall
F nance Manager Co umb a As a Hosp a
Dr.. Major Madhu
Dr Major Madhu
Regiionall Head – Soutth,, Hosmac Indiia Pvtt.. Lttd..
Reg ona Head – Sou h Hosmac Ind a Pv L d
Dr.. Jithendra Kumar
Dr Jithendra Kumar
Seniior Consullttantt,, Hosmac Indiia Pvtt.. Lttd..
Sen or Consu an Hosmac Ind a Pv L d
Presented by
Presented by
Rijo Stephen Cletus.. B..E..
Rijo Stephen Cletus B E
PGDHHM course by HOSMAC--PESIT
PGDHHM course by HOSMAC PESIT
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2. ii

3. The Columbia Asia Hospital at Brigade Gateway
Interview with Dr Nandakumar Jairam
What follows is a more detailed version of the interview with Dr Nandakumar
Jairam, Chairman of Columbia Asia Hospital that appeared in the latest issue of
Brigade Insight. The interview was conducted by Viswa Pratap Desu (Sr. General
Manager—Marketing) and Mathew Abraham (Manager—Corporate
Communications) of Brigade Enterprises Ltd, on 17 December.
We would like to know a little about Columbia Asia Hospital—its origin,
history and how it’s come to India.
Columbia Asia is an international company—currently with operations and
developments in Malaysia and Vietnam. And it was about three years ago that
Columbia Asia decided to come to India. We have facilities opening almost
simultaneously in Delhi and Kolkata, and are expanding to the other metros and
Class A cities of this country. Within a couple of years, the name Columbia Asia
will be seen through the length and breadth of this country.
Yes, but why India—and why specifically Bangalore?
Basically, India has a rapidly emerging middle class population—one that
always has a certain ‘splurge’ capacity and increase in the need for healthcare of
a different kind.
In the developing and the not-so-developed countries, healthcare
generally takes the shape of governmental or social methods of healthcare
provisions: that is, through government hospitals or subsidised healthcare. But
as the population becomes more affluent, and aspects such as health insurance
and a better paying group of patients emerge, the quality of life improves and
the need for cleaner, better surroundings come up. Columbia Asia witnessed this
in Malaysia—and is sure it will happen in India very soon.
Bangalore is a rapidly growing city with an equally vibrant and growing
population. But the distribution of hospitals in Bangalore is not even. South
Bangalore has a lot of hospitals, but North Bangalore is medically under-served.
And so Columbia Asia decided to open its first hospital in the north of
Bangalore. Subsequently of course, it has decided on starting hospitals in various
other locations in India as well.
How many branches of Columbia Asia hospitals do we have in Bangalore at
the moment?
We have one running facility (which was Columbia Asia’s first in India) at
Hebbal. The second is coming up in the Brigade Gateway project; the third and
fourth are in the east and south of Bangalore—and expected to be operational in
about a year’s time or so.
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4. How different will Columbia Asia at Gateway be from other hospitals?
The Columbia Asia model is very different from other models. We always
believe in keeping our beds at small numbers. All our community hospitals, like
Hebbal, would be around 100 beds (of course, the hospital in Brigade Gateway is
different, and I will speak about that separately.)
Now when we restrict to a 100 beds, we find that we are able to provide
medical care at costs which are extremely competitive, because the investment is
less and the hospital is easier to manage. In present day medical care, a large
portion of the care is moving away from hospitals into the domiciliary form, so
we can reduce the number of days the patient spends in the hospital. Seen as a
model, this has profound relevance: we can offer healthcare at value for money.
In fact, we can use the word affordable, within the realms of corporate
healthcare.
We also provide “evidence based” medicine. Now what is evidence based
medicine? It is information collated from throughout the world to decide the
method of investigation and treatment of every perceived illness. This is based
on journals, text books and also other institutions which provide such
information—to add to all this, we also keep the local situation in view, since
what is done in the US or Europe may not be applicable to the current Indian
situation at all. I am proud to say we follow this system.
I am also we are proud to say that from the day of our inception, we are
almost paperless. We have got a seamless electronic mechanism which takes care
of not only billing and other financial requirements but also almost every aspect
of patient information.
Patients are treated differently in Columbia Asia…here, the patient sees
the treatment and then pays; not vice-versa. And there are no queues: people are
seated, people are escorted…it’s a different feeling!
I have a few more points to add: All rooms at Columbia Asia have natural
light. When you are sick, you are already depressed and if you are in a cold room
with no light it adds to the depression. Plus our interiors are not like a hospital.
We believe in vibrant colours. We also have ample parking and our location is
strategic: on a broad road where people can come quickly into the hospital. So
these are some of our differences.
One of the biggest problems of Indian hospitals throughout the country is
high rates of hospital related infection. This adds to the morbidity. By morbidity
we mean delayed improvement and mortality which means death of patients
who come in with problem. This is a world wide problem but the percentage of
hospital related infection is conventionally quite high in India. We have, I am
proud to say, bought that down to extremely good levels, in keeping with
international standards. For example, the air conditioning and the engineering
standards of the operating rooms in our hospitals are based on American
standards which are excellent.
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5. You mentioned, at the beginning, that all the hospitals are 100 beds but
Gateway is different because I think it is 200 plus…
Gateway is an entirely different model. Now in the community hospitals we take
care of the routine problems that a patient has, whatever it may be: it could be to
do with the heart, lungs, with babies being born, with broken bones…whatever.
But some of the high level care—such as heart operations, interventional
cardiology and so on—is not available in abundance in some of the other
hospitals that we have started, which we refer to as referral hospitals.
Columbia Asia at Brigade Gateway has the complete complement of
medical services. It is therefore double the size of our other hospitals.
What are the key areas of specializations Columbia Asia will have at Brigade
Gateway?
Like any other hospital, will have internal medicine, general surgery,
orthopedics, neurology and pediatric surgery, state-of-the-art diagnostic facilities
including radiology, labs and so on.
Apart from this, we will have some very unique departments. One of
these will be emergency medicine, which would provide care at your doorstep
(it’s a method of treating people from the time they report sick rather than lose
precious time by waiting for them to come to the hospital). We will also
specialize in neurosciences, trauma and orthopedics, high risk pregnancies,
critical care, transplants, gastro intestinal surgery, minimal invasive surgery,
entire internals of cardiology and bypass surgery, endocrinology, bariatric
surgery (for obesity and overweight) and neo-natal care ( infants and small
children). We have an excellent team of people to provide all this.
Have you already recruited or is the process in progress?
We have begun recruitment…it commenced soon after the foundation was laid
by Brigade. Hospitals require a combination of the best infrastructure and the
best skills, and I feel proud to say that the people that I have gathered—doctors,
administrators and non-medical people—are indeed unique. I have people
relocating directly from the United States, United Kingdom and the best of
institutions in this country to serve our people.
There have been recent reports on associations with the upcoming
international airport…
Yes…that’s true, and we are privileged that BIA have chosen us from among all
the healthcare providers in the city. We have signed an agreement with them to
provide not just medical care for the people in the airport terminal, but also for
the passengers who arrive at or depart from the terminal. We are also prepared
for a mass disaster management—an eventuality every airport has to be
prepared for.
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6. With the opening of medical tourism, Bangalore being one of the destinations,
I am sure this definitely would be …..
While we will not say no to others, serving the world and not serving our own
people is not what we want to do. Our priority is the Indian population. The
hospital aims to deliver efficient and affordable healthcare in a hygienic and
caring environment with the belief that every citizen has the right to proper
medical facilities. We have to serve our people first.
Is the “integrated enclave” concept the reason for choosing Brigade Gateway
as one of the locations?
For Columbia Asia, strategic locations are of high importance. As far as possible,
we do not believe in starting a healthcare facility in congested areas of the city
where approach and movement would be difficult. Outskirts of cities, where
people are medically under-served, are our preferred locations to set up a
facility.
In this light, Brigade Gateway is extremely strategic in its location—
considering the amount of open space that is existent in the centre of the city. It is
at the junction of three large areas of Bangalore—Yeshwanthpur, Malleshwaram
and Rajajinagar—so it was an obvious choice.
People today have the ability to choose and live well; they look at
cleanliness in the environment, infrastructure which they would like to
have...Unfortunately in the centre of the city you cannot get all that you would
like. See you may get a nice house but you may not get good surroundings, you
may get a nice house but not a school close by, so on and so forth.
But an enclave provides all this. Enclaves are an emerging concept, and a
place of that nature in the heart of the city is more precious than gold. I think
enclaves are the way of the future and I would probably be correct in saying that
we are one of the lucky few to have found such an area within the heart of the
city
How large a patient base will it be?
Ideally, as in the case of a community hospital like Hebbal, we look at people
within half an hour of driving distance from the hospital. But with Brigade
Gateway, we think really far and wide.
One last question: would you have some special facility for the Gateway
residents?
We will definitely have to involve them. We shall see what best we can do.
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7. Table of Contents
THE IDEAL FINANCE DEPARTMENT .................................................................... 1
THE IDEAL FINANCE DEPARTMENT
METHODS OF FINANCE ............................................................................................................................ 2
FINANCIAL OBJECTIVES........................................................................................................................... 2
FUNDS REQUIRED .................................................................................................................................... 3
FINANCIAL PLANNING ............................................................................................................................ 3
Policies influencing financial plan........................................................................................................ 3
Implementation of the Financial Plan................................................................................................... 3
Administrator............................................................................................................................................................3
Finance Officer (finance controller/treasurer) ........................................................................................................4
Department head .......................................................................................................................................................4
BUDGETING .............................................................................................................................................. 4
OPERATING REVENUE BUDGET. .............................................................................................................. 5
OPERATING EXPENDITURE FORECAST .................................................................................................... 6
Salaries and wages ................................................................................................................................ 6
Supplies................................................................................................................................................. 6
Utilities ................................................................................................................................................. 7
CAPITAL BUDGET ..................................................................................................................................... 7
CASH BUDGET .......................................................................................................................................... 7
CATEGORIES OF EXPENDITURE ............................................................................................................... 8
Capital vs Recurring (Revenue) ........................................................................................................... 8
Fixed vs Variable .................................................................................................................................. 8
Direct vs Indirect .................................................................................................................................. 8
FACTORS AFFECTING HOSPITAL EXPENDITURES .................................................................................. 8
Size of the Hospital ............................................................................................................................... 9
Volume of Activity................................................................................................................................ 9
Competition .......................................................................................................................................... 9
Service Intensity ................................................................................................................................... 9
Degree of Investment ............................................................................................................................ 9
Efficiency .............................................................................................................................................. 9
Design of the Hospital .......................................................................................................................... 9
Reimbursement Pattern ........................................................................................................................ 9
EXPENDITURE CONTAINMENT .............................................................................................................. 10
Cost Awareness................................................................................................................................... 10
Cost Monitoring ................................................................................................................................. 10
Cost Management............................................................................................................................... 10
STRATEGIES FOR EXPENDITURE CONTROL .......................................................................................... 10
Decrease the cost of Inputs relative to Outputs.................................................................................. 10
Increase Output Relative to Input ...................................................................................................... 11
After the Technology........................................................................................................................... 11
Other Economy Measures................................................................................................................... 11
RATE SETTING ........................................................................................................................................ 11
COST FACTORS......................................................................................................................................... 12
DETERMINING RATES ............................................................................................................................ 12
Relative Values ................................................................................................................................... 12
Cost plus a percentage ........................................................................................................................ 12
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8. Hourly Rates....................................................................................................................................... 12
Routine Services ................................................................................................................................. 12
DEPRECIATION ....................................................................................................................................... 13
Straight line method ........................................................................................................................... 14
Accelerated Rate of Depreciation ........................................................................................................ 14
INTERNAL CONTROL.............................................................................................................................. 14
FINANCIAL INFORMATION SYSTEM ..................................................................................................... 15
INTERNAL CONTROL.............................................................................................................................. 15
REPORTS AND STATEMENTS FOR EFFECTIVE MANAGEMENT ............................................................ 15
Daily Reports...................................................................................................................................... 15
Monthly Reports................................................................................................................................. 15
Quarterly Reports............................................................................................................................... 15
Half yearly Reports ............................................................................................................................. 15
Yearly Reports .................................................................................................................................... 16
REQUIREMENTS OF A CONTROL SYSTEM ............................................................................................. 16
PREPARATION OF INCOME AND EXPENDITURE ACCOUNT AND BALANCE SHEET. .......................... 16
INCOME ................................................................................................................................................... 17
Routine Services ................................................................................................................................. 17
Special Professional Services .............................................................................................................. 17
Free Care and Concessional Services .................................................................................................. 17
Other Income ...................................................................................................................................... 17
Non-Operating Income....................................................................................................................... 17
EXPENDITURE ......................................................................................................................................... 18
Operating Expenditure....................................................................................................................... 18
Other Expenses ................................................................................................................................... 18
Non-Operating Expenses.................................................................................................................... 18
BALANCE SHEET ..................................................................................................................................... 18
PREPARING A BALANCE SHEET ............................................................................................................. 18
Fixed Assets ........................................................................................................................................ 18
Current Assets.................................................................................................................................... 19
Specific Purpose Fund cash and Investment....................................................................................... 19
Other assets......................................................................................................................................... 19
LIABILITIES ............................................................................................................................................. 19
Current Liabilities............................................................................................................................... 19
Long term liabilities ............................................................................................................................ 20
Specific Purpose Fund ........................................................................................................................ 20
CAPITAL .................................................................................................................................................. 20
ACTUAL FINANCE AND ACCOUNTS DEPARTMENT ................................... 21
ACTUAL FINANCE AND ACCOUNTS DEPARTMENT
INTRODUCTION TO THE HOSPITAL ...................................................................................................... 22
WHO THEY ARE...................................................................................................................................... 22
The Columbia Asia Difference ............................................................................................................ 23
Advanced technology .......................................................................................................................... 23
Excellence and trust............................................................................................................................ 23
Affordability........................................................................................................................................ 23
Proximity............................................................................................................................................ 24
Patient focused.................................................................................................................................... 24
Specialties and Services ...................................................................................................................... 24
Facilities.............................................................................................................................................. 24
Partnerships........................................................................................................................................ 25
Some of the current ventures .............................................................................................................. 26
THE LOCATION OF THE DEPARTMENT .................................................................................................. 26
FIGURE: THE PHYSICAL STRUCTURE OF THE FINANCE BACK OFFICE ............................................... 27
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9. THE ORGANIZATIONAL STRUCTURE.................................................................................................... 27
FIGURE: ORGANIZATIONAL STRUCTURE ............................................................................................. 28
TECHNOLOGY USED .............................................................................................................................. 29
THE FUNCTIONS OF THE DEPARTMENT ................................................................................................ 29
Insurance Clients................................................................................................................................ 30
Cash Clients........................................................................................................................................ 30
Corporate Clients ................................................................................................................................ 30
ACCOUNTS PAYABLES ........................................................................................................................... 30
TREASURY ............................................................................................................................................... 31
CORPORATE ACCOUNTS........................................................................................................................ 31
PURCHASE AND STORES ........................................................................................................................ 31
INSURANCE ............................................................................................................................................. 31
Public Insurance Companies .............................................................................................................. 32
Private Insurance companies .............................................................................................................. 32
Types of Health Insurance .................................................................................................................. 32
General Conditions in individual policy............................................................................................. 33
Other General conditions which are not covered under Insurance policy .......................................... 33
TPA’S who are tied-up with Columbia Asia Hospital........................................................................ 34
How to avail cashless Hospitalization at the hospital? ....................................................................... 34
What are documents required to lodge claims with TPA for reimbursement? ................................... 34
What are the standard Billing Protocols?........................................................................................... 35
Do’s for hospital insurance coordinator while serving Insurance Patients ........................................ 35
Don’ts for hospital insurance coordinator while serving Insurance Patients..................................... 36
What are the points one must note while getting hospitalized under cashless access scheme? .......... 36
How does one get Reimbursement for pre and post hospitalization expenses under this scheme? ..... 37
What happens when patient have to undergo a treatment like dialysis, cataract when discharged on
the same day?...................................................................................................................................... 37
What are Non-Medical items?............................................................................................................ 38
Few more points to be verified while dispatching the bills.................................................................. 38
CORPORATE CLIENTS ............................................................................................................................ 39
CASH MANAGEMENT ............................................................................................................................ 39
METHODS OF FINANCE .......................................................................................................................... 39
FUNDS REQUIRED .................................................................................................................................. 39
FINANCIAL PLANNING .......................................................................................................................... 39
Pre-Operations.................................................................................................................................... 39
Post-Commissioning........................................................................................................................... 40
THE BUSINESS PLAN SUBMITTED TO ASIAN DEVELOPMENT BANK FOR FUNDING BY THE
PROMOTERS OF COLUMBIA ASIA HOSPITALS (INDIA) ....................................................................... 40
I. THE PROPOSAL ................................................................................................................................... 46
II. BACKGROUND ................................................................................................................................... 46
A. Health Sector in India ................................................................................................................ 46
B. Government Policies and Plans ................................................................................................ 49
C. ADB’s Operations ....................................................................................................................... 50
1. ADB's Country Strategy ................................................................................................................................51
2. ADB's Sector Strategy ....................................................................................................................................51
III. THE BORROWER AND THE SPONSOR ............................................................................................. 51
A. Background .................................................................................................................................. 51
IV. THE PROPOSED PROJECT ................................................................................................................ 52
A. Project Description..................................................................................................................... 52
Table 1: Project Details................................................................................................................... 53
B. Project Implementation Arrangements.................................................................................... 55
1. Project Management.......................................................................................................................................55
2. Construction Management ...........................................................................................................................55
3. Project Operational Arrangements.............................................................................................................55
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10. C. Environmental Aspects and Social Dimensions ..................................................................... 56
D. Development Impacts................................................................................................................. 57
1. Impact, Outcome, and Output .....................................................................................................................57
2. Development Effectiveness..........................................................................................................................57
V. THE PROPOSED ASSISTANCE ........................................................................................................... 58
A. Loan .............................................................................................................................................. 58
B. Justification for ADB's Assistance ........................................................................................... 58
C. Anticorruption Policy, and Combating Money Laundering and the Financing of
Terrorism........................................................................................................................................... 60
VI. ASSURANCES.................................................................................................................................... 60
VII. RECOMMENDATION ....................................................................................................................... 60
Design and Monitoring and Development Effectiveness Frameworks .................................... 62
Table A1.1: Design and Monitoring Framework..................................................................................................62
Table A1.2: Development Effectiveness Framework.............................................................................................65
Summary of Initial Environmental Examination ....................................................................... 68
A. Introduction.....................................................................................................................................................68
B. Project Description.........................................................................................................................................69
1. Project Components ......................................................................................................................................69
Table A2.1: Project Details ..........................................................................................................................69
2. Status of Compliance with Environmental Laws and Regulations ...........................................................70
3. Biomedical Waste and Liquid Wastes Management Practices...................................................................70
Table A2.2: Daily Waste Generation at Hospital in Hebbal ..........................................................................71
C. Description of the Environment.................................................................................................................72
1. General Environmental Conditions .............................................................................................................72
a. Yeshwanthpur, Bangalore...................................................................................................................72
b. Hebbal, Bangalore.................................................................................................................................73
c. Gurgaon District, National Capital Region, Delhi .........................................................................73
d. Patiala City, Punjab ..............................................................................................................................73
e. Mysore City, Karnataka.......................................................................................................................73
f. Chandigarh City, Punjab......................................................................................................................74
g. Lucknow City, Uttar Pradesh.............................................................................................................74
h. Pune City, Maharashtra.......................................................................................................................74
i. Ghaziabad, National Capital Region, Delhi .....................................................................................75
j. Ahmedabad City, Gujarat ....................................................................................................................75
2. Specific Baseline Environmental Conditions for Hospital in Yeshwanthpur ...........................................75
a. Topography, Soil and Land Use ........................................................................................................76
b. Climate ....................................................................................................................................................76
c. Air Quality ..............................................................................................................................................76
d. Noise Level.............................................................................................................................................77
e. Water Quality.........................................................................................................................................77
3. Biological Environment ................................................................................................................................77
4. Socioeconomic Environment.........................................................................................................................77
D. Anticipated Environmental Impacts and Mitigation Measures........................................................78
1. Impacts during construction ........................................................................................................................78
2. Impacts during Operations...........................................................................................................................79
a. Air and Noise Quality ..........................................................................................................................79
b. Water and Wastewater Quality .........................................................................................................79
c. Terrestrial Environment.......................................................................................................................80
d. Biomedical and Domestic Waste Management..............................................................................80
E. Institutional Requirements and Environmental Management Plan ................................................81
1. Environmental Management Plan...............................................................................................................81
F. Public Consultation and Disclosure ..........................................................................................................82
G. Findings and Recommendations ...............................................................................................................82
H. Conclusion .......................................................................................................................................................82
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11. xi

12. Pa ge Left Bla nk
Intentionally
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13. THE IDEAL FINANCE DEPARTMENT
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14. Introduction
One of the biggest headaches for a hospital administrator is finance. Health
services used to be labour intensive. Now it ahs become both capital and labour
intensive, with escalating costs, the act of balancing income and expenditure had
become difficult. The demand for expenses always seems to be far higher than
the income generated. The professionals and public demand costly and newer
tests and equipment. The real importance of finance is often not understood till
there is a serious breakdown in financial operation, just as the importance of
health is not thought of till the person becomes ill.
Methods of Finance
These vary depending on the type of ownership. In government hospitals these
are derived almost wholly from taxes. The same is true for hospitals run my
municipal or local bodies. Grants are the main sources. Very little is received by
way of patient charges. In the private sector it is usually fee for service. The fees
are relatively less in the non-profit voluntary hospitals whereas they tend to be
high for corporate hospitals and nursing homes. There may be varying amounts
of donations from philanthropic persons or organizations often for capital
expenditure and sometimes for the treatment of the poor and the needy. Those
still vary small insurance schemes are building up whether it be social insurance
or voluntary Insurance.
As a hospital administrator you have the responsibility to see that sufficient
income is generated and that the income is use wisely to provide the best
possible care at the lowest possible cost. Cost consciousness is almost a must for
all health care organizations.
Health care institutions irrespective of ownership need an adequate system of
financial planning and control for better utilization of the scarce resources and to
curb the rising cost of medical care. Better trained and experienced finance
officers and accountants are required. Continuous support from the top
administration is always a pre-requisite.
Financial Objectives
In Financial planning process the foremost task is to determine the financial
objectives.
1. Provide financial resources for all essential services and then for other
desirable activities.
2. Maintain the services within the reach of the people served by your
hospital including free or concession care for the poor and the needy.
3. Improve employee satisfaction by increasing benefits such as salaries,
provident fund, gratuity, pension, housing, training, loans etc.,
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15. 4. Reduce dependency on grants, donations or contributed service.
5. Provide for the community health development work in the neighborhood
if that is an institutional objective.
Funds Required
1. Regular operating income to meet salaries and wages, maintenance,
materials and labour costs and other routine expenses.
2. Reserve (emergency or sinking fund)
3. Funds for training personnel. If research is the objective of the institution,
funds for research.
In order to have financial stability and to maintain the basic character of the
hospital, you would do well to have a fairly large endowment fund. The above
do not include capital (nonrecurring) funds for building, equipment etc.,
Financial Planning
Hospitals need both long term and short term planning. Majority of the
hospitals don’t have long term (5 yrs or more) plans. A few may have often they
have done as formality rather than based on analysis of trend, projection of data
and evaluation of past performance and future requirements. Financial planning
must be based on analysis of hospital activities, both in terms of quantity and
quality of services. The most important (and difficult) Factor is to find a
reasonable basis of projection of future activities. The short term plan (annual)
should fall in line with the objectives of the long term plan.
Policies influencing financial plan.
1. Service mix and decisions regarding specialization.
2. Pricing.
3. Free and concession care.
4. Community health and involvement in social developmental activities.
5. Training and research.
6. Growth, Expansion and Modernization
Implementation of the Financial Plan
Many persons play important roles in an effective planning system
Administrator
1. Assumes responsibility for implementing the plans and policies approves
by the governing board/ Government/ Higher authorities.
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16. 2. Meets with the heads of departments and others concerned to discuss the
plans, policies and strategies.
3. Appoints a budget committee or designates a budget officer (generally the
finance officer).
4. Assumes responsibility for the development, applying the corrections
needed, control and execution of the plan within a timeframe.
Finance Officer (finance controller/treasurer)
1. Provides information about costs experience and historical trend.
2. Translates the effect of change in hospital activities – addition or
modification of facilities and services.
3. Provides data on environment – population changes in the hospital
service area, price trend, changes in regulations such as taxes, provident
fund contributions and gratuity.
4. Translates the effect of changes in the policy, such as pay scales,
allowances and perquisites
5. Compiles and collates data generated by departmental heads.
6. Provides information about financial performance variances.
7. Advices on investments and endowments.
8. Coordinates annual budget, does cash flow budgeting.
9. Monitors budgetary – actual variances.
Department head
1. Accepts responsibility for the departmental portion of the budget
2. Analyses the financial and statistical data generated by the department or
supplied to him/her.
3. Studies critically the departmental operations and performances.
4. Develops indices for planning and control.
5. Assesses the operation of the department in relation to the total plans and
cooperates with the total plan of the hospital.
6. Monitors and controls income and expenditure related to the
departments.
Budgeting
Budgeting is an important financial procedure, which must receive full attention
by the administrator. Many administrators don’t like budgeting. To them
budgeting represents restrictions. But well thought out budgets bring about
guidance, stability, balance and direction. The administrator should not only
understand full the budgeting process but also give whole hearted support to it.
A Budget expresses the plan of the hospital to provide optimum care at
reasonable cost in financial terms. A budget is a financial plan. It is usually a
short term (annual) plan. In order to be an effective tool to 1. Provide for a
4

17. quantitative expression of the plans of the hospital, 2. Evaluate financial
performance in accordance with the plans and 3. Control costs.
The budget must be planned and prepared well. Often, the tendency is to take
the financial performance for the previous eight or nine months for which
accounts are available, add pro – rata for the succeeding three or four months
and an adhoc percentage ( say 10 to 20 %) to the total to offset inflation and make
a forecast. Another method suggested is zero based budgeting. This has not
caught on.
Budgeting is an opportunity to consider better performance by the hospital.
While planning a budget we must apply our minds to think in terms of
improved quality and quantity of care.
All departments and sections must cooperate in the preparation of the budget.
The individual plans of the departments and sections must fit into the overall
plan of the hospital. The plans must be realistic so that they can be implemented.
There can be different kinds of budget.
1. Appropriation.
2. Forecast.
3. Flexible.
Government hospitals usually have appropriation budgets. They provide for a
certain level of spending. Normally this level cannot be exceeded. If it becomes
essential, a supplementary appropriation has to be made available. Forecast
budgets are more flexible which is seen fully in the flexible budgets. It provides
for variations in the level of activity. Flexibility pre-supposes, realistic standards
to measure activity.
Budget can be divided into
1. The operating budget.
2. The capital budget.
Operating revenue budget.
In order to have a proper revenue budget, we must have full statistical data. The
prediction of revenues is somewhat speculative, even with good quality data. It
is related to the volume of work anticipated. Any change in work load will affect
revenues. It also depends on the rate or schedule of charges.
The revenue comes form the activities of the hospital.
1. Patient services.
2. Activities incidental to patient services.
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18. 3. Income from investments.
4. Other income – donations, grants etc.,
The income from patient services represents the largest part of revenue for
voluntary and private hospitals. It consists of two parts.
1. Daily service charges (room, nursing care, diet etc.,) This varies with the
daily census, mix of accommodation and type of service. There may be
fees for Out patient registration and / or consultation.
2. Special services ( operative procedures, investigations etc.,) There may be
some deductions, such as free and concession care
Operating Expenditure forecast
Recurrent (operating) costs are required for the operation or maintenance of
facilities and services. The more important costs are for salaries and wages,
supplies like drugs, dressings, reagents, fuel etc., Utilities including electricity,
water, telephone etc., and equipment maintenance and purchase of spare parts.
And often neglected item is the budgeting for on the job training.
Salaries and wages
Once we know the work load for each service unit, the staff requirement could be
easily projected. From the analysis of past years data we know
• Doctor : Patient ratio
• Nurse : Patient ratio
• Lab technician : Tests ratio
• X-Ray technician : Examination ratio
In this manner detailed indices could be developed. The trend could be
analyzed, over staffing could be avoided. The salaries have to be fixed for all the
personnel. In fixing the salaries, consideration must be given to the requirements
of qualifications, experience and skills, nature of work, fatigue, prevailing
salaries in similar nearby hospitals etc., For certain categories the minimum
wages have been fixed statutorily. These have to be implemented. In addition to
salaries (Pay and allowances, as per scale), provision has to be made for
provident fund contributions, Gratuity and other benefits.
Supplies
Supply indices could be developed for various services, working our per OPD
visit, IP day, normal and abnormal delivery, various types of operation,
laboratory tests, radiograph, meals housekeeping etc.,
6

19. Utilities
There is need to know the expenditure on utilities of high consuming areas like
X-Ray, Central AC, CSSD, Laundry, Kitchen and others.
Maintenance Expenditure
To a considerable extent it could be projected in advance
Capital Budget
Funds should be available for expenditure on capital (nonrecurring items).
These are required for
1. Growth with new facilities being provided and
2. Replacement of obsolete, worn out equipment, furniture and machinery.
The new facilities may be by way of buildings, plant and machinery or
equipment.
There will be many competing requirements. Funds are never available to meet
all the demands. Choice has to be made. The needs may be classified as
essential and desirable. Some of the demands for those for replacement of
inefficient life saving equipment have to be met. Others may be cost saving
proposals. Yet others may improve conveniences and comfort.
Hospital T had a number of proposals. 1. A communication system, replacing
the old inefficient telephone system, 2. New building for the casuality and 3.
Image intensifier. The hospital decided to install the new communication system
which was given top priority. The hospital also decided to put up the building
for casuality because a philanthropist offered to meet one half of the cost. The
purchase of image intensifier was postponed.
Cash Budget
Enough cash must be available to meet the obligations as and when they arise.
There is need to maintain the right flow of cash. Yet unnecessary cash in hand
must be avoided. It must be invested to yield optimum returns. This is done by
cash planning.
Cash receipts and disbursements must be estimated: amounts and time. Among
the receipts will be the revenue for the patient services. Some of these will be
paid when the bills are presented. Other bills may take time. This is so for credit
bills, especially those for services rendered to employees of companies and firms,
7

20. who have arrangements for payment. It is also true for payment form insurance
organizations. Estimates should be made of other revenues. Interest on
investments will fall due at certain times of the year. Investments can be so
made that the flow of returns is smooth spread over, as thought best to meet the
demands.
The major item among disbursements is pay roll. Salaries have to be paid on the
pay day. Along with salaries, other items like contributions to the provident
fund have to be met. Payments have to be made for electricity and water so also
insurance premiums, taxes on vehicles and property, and service contracts.
Payments have to be made for supplies and expenses. Most of these payments
are usually made at the beginning of the month. Good planning wil help in an
even flow of cash as required.
Categories of Expenditure
The hospital expenditures can be classified into the following three categories:
Capital vs Recurring (Revenue)
Capital costs are initial one time expenses to make available a particular service.
These include expenses on building, equipment, instruments, fixtures and
furniture.
Recurring Costs are incurred on a continuing/ periodical annual basis. They
include salaries, consumables and supplies, water, electricity, maintenance and
contingent expenditures.
Fixed vs Variable
Fixed costs are expenditures incurred irrespective of the quantum of workload.
When fixed costs are high, average cost per procedure can be brought down by
increasing the number of procedures. Overheads are then shares output base,
resulting in lower unit costs. Variable costs include the portion of operating
costs which vary in proportion to the volume of work (number of patients serves;
type and number of services provided)
Direct vs Indirect
Direct costs can be apportioned directly to the particular activity or procedure.
Indirect costs include those miscellaneous costs which are incurred but which
cannot be wholly or conventionally linked to one particular procedure.
Factors Affecting Hospital Expenditures
8

21. Size of the Hospital
There is an optimum size of each type of hospital and the area it serves. As the
size of the hospital increases, the range of comprehensiveness of services
increase, resulting usually in a higher cost per patient per day.
Volume of Activity
Higher the patient turnover, higher the number of staff required and greater the
total number of procedures carried out. This leads to higher total operating
costs; the unit cost may be lower.
Competition
Competition between hospitals usually does not lower the charges to the patient.
It often results in higher costs but more facilities and conveniences are provided
by the more competitive hospitals.
Service Intensity
Specialization leads to higher cost per patient day. High technology care
warrants sophisticated, costly equipment, expensive procedures, greater use of
consumables and supplies and more skilled staff.
Degree of Investment
Higher operating costs result when capital and fixed costs are high. Availability
of costly equipments and facilities lead to greater use and higher costs to patient.
Efficiency
With an efficient management system, manpower and material resources are
deployed economically, resulting in a better output to input ratio.
Design of the Hospital
The age, location, architecture, layout type of building material and facilities
provided have a bearing on maintenance costs, number of staff employed, work
flow etc., and thus affect hospital expenditures.
Reimbursement Pattern
9

22. Payment of hospitalization bills by the third parties often results in rising
hospital costs. Beneficiaries want to be hospitalized, even where ambulant
treatment might have been sufficient or tend to remain longer in hospital. Not
feeling the pinch, to play safe or to increase their revenue, might administer more
procedures than necessary.
Expenditure Containment
There are many elements in an expenditure containment program:
Cost Awareness
Intensify awareness of all hospital personnel what the costs (direct and indirect)
are, how can they be manages and the processes available to contain them.
Cost Monitoring
Provide a mechanism to identify report and analyze actual expenditures, against
budgets and standards. What are the reasons for major variations? Contrast
against workload for a period. Focus on where, how much and why excess
money is spent.
Cost Management
Establish a responsibility system for communicating and controlling the
attainment of plans, strategies, and programs involving expenditure
containment. Focus on what can be done to contain costs and by whom.
Motivate all personnel to contain expenditures.
Strategies for Expenditure Control
Decrease the cost of Inputs relative to Outputs
a. Materials: All suggestions given under “Materials Management” must be
followed. These include standardization, demand forecasts, inventory control,
centralized and group purchases, purchase contract, periodical and preventive
maintenance and avoiding pilferage.
Carry out a value analysis to use lower priced and more durable substitutes of
equivalent quality, which fulfill the same objective. Every effort must be made at
all levels to utilize supplies in the most conscientious manner; avoid any form of
wastage. Monitor consumption. Relate monthly supply – usage reports with the
workload.
10

23. b. Manpower: Periodical appraisals of job positions should review the need for
existing posts, their contribution to overall objectives and possibility of
amalgamation of jobs currently assigned to different individuals. Identify which
category of staff can perform the tasks at an optimum of quality and cost. Allot
the work to the personnel at the lower skill level, satisfying the requirements.
Sometimes personnel may not be kept fully occupied but it is necessary to have
them on hand. Identify ways and means of sharing the services of such an
individual across departments and task.
Leave should be planned to coincide with periods when the patient census is
low.
Increase Output Relative to Input
a. Scheduling: Ensure proper scheduling of procedures. Remove bottlenecks at
service areas. Smooth flow of services can lead to higher turnover without
altering the inputs.
b. Automation: Higher output can result from the use of automated equipment.
This involves initial capital expenditure but the costs can more than be offset by
savings.
c. Sharing: Expensive equipment and facilities can be shared between
departments of a hospital and between hospitals. This results in decreased
capital investment and lower operational costs.
After the Technology
a. Focus on promotive and preventive care, in preference to curative services.
b. Preference for ambulant care instead of hospitalization. An extension of this
would be the provision of a day-care centre.
c. Narrow the service mix to increase efficiency and reduce the cost per patient.
Other Economy Measures
Depending on the situation, there will be many ways of increasing output and
reducing costs.
With good management, the Hospital Administrator can control expenditure,
without compromising quality.
Rate Setting
An important administrative function is to determine the schedule of charges for
the services rendered. The charges must be reasonable; yet sufficient income
11

24. must be generated. The first requirement is to find the actual total cost for
providing each of the services. The fixing of rates would depend on
Cost Factors
There are direct and indirect costs. The direct costs include salaries and wages
(including employee benefits) and cost of supplies. The indirect costs are many
and have to be apportioned equitably – electricity and water, housekeeping and
maintenance, depreciation and overheads.
Non – cost Factors
They include the philosophy of the hospitals in general and with respect to a
particular service (e.g. rehabilitation), and comparison with rates in vogue in
other similar hospitals in the neighborhood.
Cost finding is complex. Determining the cost to the hospital of any test
procedure is important though not done usually. Most often, the charges are
fixed comparing the charges levied by neighboring hospitals or diagnostic
centers. Not ascertaining the real cost to the hospital can lead to loss.
Determining Rates
There are many methods of affixing rates.
Relative Values
The rates may be fixed on the basis of time and skill involved as also considering
the cost of supplies. This procedure is usually adopted in fixing rates for
operative and other procedures. The total cost for laboratory tests can be
determined and then, the rate fixed.
Cost plus a percentage
This is usually done in the pharmacy. The rate fixed must be within the
maximum retail price determined by the government.
Hourly Rates
This method is often used to determine charges for the use of operating rooms,
anesthesia and use of ventilators. Costing operating room charges by the hour is
often criticized. Different surgeons operate at different speeds.
Routine Services
12

25. Room charges (including nursing care) are fixed based on the type of
accommodation and facilities provided – general wards and semi – private
rooms. Often the charges are fixed on a differential/ graded basis, depending on
whether the patient is in the general ward or special ward. Philosophical, moral
and economical issues stem such differential charges. Is it right to charge
different rates for the same service provided? Is it ethical to charge higher rates,
just because it is presumed that the person in the special ward can afford to pay
more to offset the inability of the inability of the person in the general ward, who
cannot afford to pay actual cost? The general consequences are, given the
conditions in the country, it is perfectly valid to charge the richer client a little
more to offset the inability of the poorer patient to pay the full charge.
Rate setting is important for many purposes, including budgeting. IT should be
such as to ensure adequate income for the operating and capital budgets. Rates
must be revised periodically, based on changes in the cost and other factors.
Depreciation
Buildings, machinery, equipments, furniture, vehicles and other assets are
acquired by making sizable investment. Each of these assets has limited life span
and shall be unusable and obsolete after carrying periods. Depreciation accounts
for that part of value of capital assets which are considered “used up” during the
accounting year. It has a number of important implications. Although it is
considered as expenditure, there is no ‘cash shield’. As such, while analyzing the
sources and uses of funds or cash flow it adds up to the flow of cash toll such
time the amount is invested as depreciation fund.
Depreciation was considered as a provision to replace the assets which become
unusable over a period of time. For this to occur, the amount has to be funded.
The more modern view is that the assets can be imagined as a ‘bundle of future
services”, to be used over a period of their usefulness. Accordingly, the process
of charging depreciation is the mode of recovering the cost of expiration of the
asset over a period.
Depreciation is the allocation of depreciable amount of an asset over its estimates
useful life. Depreciable assets are assets which
• Are expected to be used during more than one accounting period;
• Have a limited useful life; and
• Are held for use in the production or supply of gods and services.
Depreciated amount of a depreciable asset is its historical cost less residual value.
There are many ways of calculating depreciation.
13

26. Straight line method
The asset value is depreciated by a fixed equal annual amount for the entire life
span of the asset. This method has two distinct disadvantages. First, the cost of
repair and maintenance of an asset is negligible during the initial years and
keeps on increasing during the later years. By following the straight line
method, for the same equipment and same use, the expenditure is low in the
initial years and grows gradually during later years. Secondly, the replacement
cost of the equipment will always be higher than the initial cost due to inflation
as well as technological changes.
Accelerated Rate of Depreciation
A higher rate of depreciation is charges in the initial year. The amount of
depreciation gradually goes down, usually on a percentage basis. Once larger
amounts are invested in the earlier years, they could generate additional returns
to meet the replacement cost of the machine at a later date. For taxable and profit
making institutions, it provides a larger ‘tax shield’.
Generally, for assets like building, plant and machinery, furniture and fittings,
etc., depreciation is charged on straight line method. But the high value medical
and surgical equipments which have higher rate of obsolescence due to change
in technology, accelerated rate of depreciation is preferable. The administrator
should draw up a policy, with the approval of the management, for application
of the method of depreciation as well as fixing the rate of depreciation. The rate
of depreciation should be within the limits fixed by the government.
Internal Control
It is mandatory for the Administrator to have a control over the finances of the
hospital. Unfortunately, this is an area which many Administrators skim over
leaving it to the Finance Manager/ Accounts officer to deal with. The
administrator must be conversant with what is the financial status, day to day,
month to month, year to year and in the long perspective. Adequate accounting
system should be instituted for all income, expenditure assets and liabilities. The
Finance Manager / Accounts Officer will not be discharging his duties fully, if he
doesn’t explain the situation and provide reports in a manner understandable by
the administrator and the Governing Body. They have a right to know how the
money is received and used.
Organizational structure should provide appropriate segregation of functional
responsibilities and a system of authorization and recording, adequate to provide
accounting control on assets, liabilities, revenue and expensed.
14

27. Financial Information System
Financial Information System is designed to economically collect, carefully
organize, properly process and selectively transmit financial data to designated
points in the organization. The focus is on the flow of information. It presents a
network of information of information required for management decisions.
Internal Control
Assets Liabilities Revenue Expenditure
Land and build Accounts payable Patient Revenue Salaries & Wages
Major Fixed Long term loan Accounts Supplies and
Equipment Receivable expenses
Minor Equipment Specific Purpose Grants & Repair &
Fund Donations Maintenance
Cash Capital Income from Plant operation
property
Investments Other Income Utilities, Admin
Expenses
Inventory Research, Training
and Development
Reports and Statements for Effective Management
Daily Reports
1. Daily Cash Collection and Cash Disbursement
2. Daily Census Report
3. Daily Bank / Cash Position
Monthly Reports
1. Monthly Financial Report (income and expenditure statements), with
departmental breakup in budget format
2. Free and Concessional Care
Quarterly Reports
Budget Performance – Comparative Statement of all major departments.
Half yearly Reports
1. Revenue/ Expense summary with comparative analysis.
2. Balance Sheet(if possible). If Balance Sheet drawn, following ratios also
could be calculated
a. Current Ratio
b. Working Capital
15

28. c. Inventory Turnover
d. Collection period
e. Payables Outstanding
Yearly Reports
1. Comparative Balance Sheet
2. Analysis of Departmental income and balance sheet
3. Cost Analysis – broken down by departments and further broken down to
give unit costs of service
4. How much does it cost to patient, General/ Semi-private/ Private, service
wise?
5. Salary and Wages Content (includes pay and allowances, wages and all
employee benefits like Provident Fund, Gratuity, Pension, Uniform, etc.,)
Requirements of a Control System
a. A functional chart of account with detailed explanatory note on each
account head.
b. A well drafted “Accounting Manual” containing detailed system and
procedure for cash handling; payment; purchase, storage and issue of
items of supply (medical, surgical and others); inventory control; asset
accounting; condemnation and replacement.
c. Detailed procedure for the of long term plan, annual operating budget,
cash budget, and budgetary control.
d. Procedure for cost analysis; segregation, accumulation, grouping and
analysis of required financial and service data for identification of direct
cost and allocation of indirect cost and use of cost data for decision
making and control.
e. A detailed procedure for internal audit and internal control.
f. System and procedure for periodical review, evaluation and corrective
action.
g. Financial reporting system for internal control, external reporting,
evaluation of financial performance by the governing body/ council or
authorities.
Preparation of Income and Expenditure Account and Balance Sheet.
Hospital accounting is a special branch of accounting. The majority of finance
managers and auditors, responsible for the preparation of financial statements,
are not familiar with the special requirements of hospitals. It is high time for the
management and administrator to discuss and decide their own format and ask
the auditor to follow the format.
16

29. Separate OPD income and expenditure from inpatient income and expenditure.
Depending on the size of the hospital, the income and expenditure of various
departments are required to be worked out and shown department wise.
Departmentalized income and expenditure help in evaluating the financial
performance of each department, allocation of resources and also in the
determination of cost of providing each of these services.
Income
Routine Services
• Room, medical care, nursing care, food etc.,
• OPD services like registration, consultation, dressing, injection, minor
operation, and other procedures.
• Casuality Services
• Nursery /Neonatal care services
Special Professional Services
• Operation Theatre
• Delivery Room
• Intensive Care Unit
• Medical and Surgical units – wards
• Clinical Pathology
• Radiology
• Pharmacy
• Physiotherapy
Free Care and Concessional Services
These should be shown as a deduction from the operating income
Other Income
• Fees for training programs – school of nursing, laboratory training,
radiographers training others.
• Recoveries from staff for accommodation, food electricity water etc.,
• Income from ambulance, canteen, parking lot etc.,
Non-Operating Income
• Donation
• Grants
• Bank Interest
17

30. • Property Income
• Investment returns
• Sale of Assets.
Expenditure
Operating Expenditure
• Salaries and wages including employee benefits like provident fund
gratuity,
• Supplies and expenses
• Utilities
• Maintenance
• Administrative expenses
Other Expenses
• Training Programs – School of Nursing Training, Laboratory training
• Community health and community development.
Non-Operating Expenses
• Depreciation
• Amortization
• Fund raising – internal and external
• Property management / upkeep
If there is departmentalized income and expenses, the income and expenditure
summery shall include the heads mentioned above and complete department
break-up needs to be shown in the attaches schedule.
Balance Sheet
Balance sheet is a snap shot picture of the assets and liabilities of an institution
on a particular date. It is very important to use a proper format for preparation
of balance sheet without which financial analysis becomes very difficult.
Preparing a Balance Sheet
Assets (what the hospital owns)
Fixed Assets
These are intended for use over a long period.
18

31. • Land and improvements to land
• Building – value of hospital building, residential building, nursing school
and other buildings should be available separately in the schedule
together with accumulated depreciation.
• Plant and equipments – Laundry equipments, large Sterilizers, Central air
conditioning, Boilers, piped oxygen, suction, lifts etc.,
• Furniture and Fittings – General furniture could be separated from
special hospital furniture.
• Medical and surgical equipments.
• Vehicles.
Current Assets
They vary from day to day
• Cash in hand and at the bank
• Investment
• Accounts and notes receivable
• Prepaid expenses
• Other receivables
• Inventories
Specific Purpose Fund cash and Investment
• Cash in hand
• Cash in bank
• Investment
Other assets
• Properties
• Farms
• Buildings on rent which are not normally located within the same
premises/campus
Liabilities
Current Liabilities
• Salaries and wages payable
• Accounts and notes payable
• Accrued expenses
• Taxes payable
19

32. • Secured liabilities
Long term liabilities
• Bank Loans
• Long term notes
• Mortgages
• Bonds
Specific Purpose Fund
Emergency Fund, Contingency Fund, Scholarship Fund, Training Fund,
Endowment and free care.
Capital
Capital shall be divided into two parts:
a. Original capital plus additions by capital, grants and donations
b. Summery of Income and Expenditure.
Each year’s excess of income over expenditure or excess expenditure over
income is required to be adjusted in the summery account and the net capital or
net worth worked out. This will help to find out the original amount that was
invested as capital (fund investment) and subsequent additions to it.
20

33. ACTUAL FINANCE AND ACCOUNTS
DEPARTMENT
AT
COLUMBIA ASIA REFERRAL HOSPITAL,
YESHWANTHPUR, BANGALORE
21

34. Introduction to the Hospital
Who They Are
Columbia Asia is a consortium of healthcare companies operating across the
Asian continent, with hospitals in India, Malaysia, Vietnam and Indonesia. There
are 13 Columbia Asia facilities in operation, 14 under construction and the land
purchased for another 12. Most of the growth will be in the company's largest
market - India..
The companies share a common name, common operating systems, common
building designs and a common business strategy. The Columbia Asia name,
proprietary operating software and building designs are protected worldwide.
The strategic business unit of the consortium, located in Kuala Lumpur,
Malaysia, provides infrastructure development, including software operating
systems, management of financing, reporting and auditing for all of the
companies in the system.
Columbia Asia's management is based in Bangalore, India, and Kuala Lumpur
and provides ongoing supervision of operating hospitals and construction
activities. The general ledgers of the companies, including payroll and
accounting requirements, are centralized at the management offices.
22

35. The Columbia Asia Difference
Columbia Asia facilities provide trusted affordable care with an emphasis on the
most prevalent medical issues of a region, from births and children's health to
waterborne illnesses, broken bones, diabetes and other health challenges.
The clean, modern facilities have many qualities that set them apart and make
them the preferred choice for businesses, workers and their families:
Advanced technology
All the group hospitals are connected by a common software operating system
that allows for seamless record-keeping, diagnostics and billing.
"The designs are a result of their belief that hospitals in the 21st century were
going to be much smaller than those built in the past, and that they would rely
heavily on computer systems," said Rick Evans, chairman of Columbia Asia.
"There are more computers in their community hospitals than there are inpatient
beds."
Excellence and trust
Every hospital is staffed with highly trained doctors recruited from and working
in their native country to provide care that is compatible with the culture of the
region. Each facility also has its own pharmacy where patients can trust that they
receive safe, quality medications that are not outdated, tampered with or
contaminated.
"At Columbia Asia the practice is in accordance with medical by-laws that
require the highest ethical standards in medicine," said Dr. Nandakumar Jairam,
Medical Director of Columbia Asia Hospitals Pvt. Ltd - India.
Affordability
The emphasis on efficient administration, accurate diagnosis and effective care
helps keep costs affordable for patients. With fewer beds, their community
hospitals can offer higher quality care and allow patients to return home sooner.
The average stay at a community hospital is less than two days.
The price of delivering a child at one of their Malaysia facilities, including
overnight stays, doctor fees, and other charges, is less than US$500. The cost at
our Indian hospitals is even lower.
23

36. Proximity
Each facility is located close to patients and is right-sized to become a true
community health center where people receive care in their own neighborhoods.
Patient focused
Every waiting room is equipped with a plasma display screen to tell every
patient exactly how many people are ahead of them and when they will be seen.
Specialties and Services
Anesthesiology, Cardiology, Dermatology, Ear, Nose and Throat, General
Surgery, Internal Medicine, Maxillofacial Surgery, Obstetrics and Gynecology,
Ophthalmology, Orthopedic Surgery, Pediatrics, Psychiatry, Urology
Facilities
CAH has 13 facilities open and providing care, will has 14 more under
construction by this fall and have the land purchased for another 12.
The most common type of facility is a community hospital, providing primary
and secondary medical services. They usually have no more than 100 beds and
are staffed by as many as 250 people, including as many as 150 nurses and 30
doctors.
These facilities are usually two stories and include inpatient rooms on the top
floor, operating rooms, emergency room and pharmacy on the ground floor and
a basement for parking.
The second type is a tertiary facility, which performs the procedures not done at
the community hospitals. These include invasive cardiology procedures, organ
transplants and other procedures that require a hospital stay of at least four
days.
The building is designed to be four to six stories, with 150 beds and six operating
rooms.
The first completed tertiary facility is in Bangalore and just opened earlier this
year.
The third type is a neighborhood hospital, which has about 25 beds and is built
to serve smaller markets. It offers most of the services provided by a community
24

37. hospital and includes two operating rooms, two birthing rooms and clinics for
six specialists.
The first neighborhood hospital is under construction in Bintulu, Malaysia.
Goals and Objectives (&Purpose) of the department. Importance - to understand
and analyze in detail the subject considered with in the scope.
Structure – Physical structure and social / organization structure. (Outline
drawing / hierarchy – staffs nos.)
Technology available in the department – major equipments and minor
equipments (gross description- company’s name, make, model and the
sensitivity details if any.
Systems and procedure (systematic outline on the functions at the department
level, records and registers to be maintained for smooth functioning
Performance analysis – Optimal capacity of working standard.
Partnerships
Columbia Asia is looking for joint ventures with other enterprises that have an
interest in the booming Asian healthcare market.
The emerging middle-income group in India, Indonesia, Malaysia and Vietnam
is generating a huge demand for quality medical care.
India's private healthcare system generates about $34 billion a year and is
growing 16 percent annually. The country's 1.1 billion people account for one-
sixth of the world's population, and India is expected to overtake China as the
world's most populous nation by 2030.
Indonesia, Malaysia and Vietnam also have some of the fastest growing
economies in the world. Each country has a multibillion-dollar private healthcare
market, with a middle-income group that is greatly underserved.
All of Columbia Asia's facilities are expected to operate around full capacity,
though the demand in these countries will continue to grow. We expect each new
hospital to create positive cash flow within 12-18 months of opening.
For a fraction of what it costs for care in many Western countries, employers can
provide branded quality care to workers and their families.
25

38. Large business operations may be in need of co-location opportunities to provide
quality health care to their employees and attract a healthy workforce.
We are open to partnerships ranging from real estate to employee care.
Some of the current ventures
Our Gleni International Hospital in Medan, Indonesia includes a nursing school
that will help meet the need for an additional 7,000 nurses at our hospitals and
other healthcare facilities over the next few years. We will own the hospital
through a partnership with the Employee Provident Fund of Malaysia.
In Vietnam one of our larger customers is Tokyo Fire and Marine, which insures
Japanese expatriates.
Under a contract with the new Bangalore International Airport, we developed
and now operate a healthcare clinic for airport travelers.
The location of the department
The Finance department of the Columbia Asia Hospital is located very close to
the entrance and behind the main reception area. There are two cash collection
centers, one at the ER entrance and the other along the main reception line. The
ER has once cash counter and the main reception has 2 cash counters. Since the
Hospital has a policy of pay after availing all services, the cash collection area
with two counters is sufficient. The back office is located behind the Reception
and has a single entrance. The safe is located at the corner of the back office. The
layout of the back office is as shown in the figure below.
The management and project office are centralized and are located in different
buildings respectively. These offices cater to all the group hospitals.
26

39. Figure: The Physical Structure of the Finance Back Office
The Organizational Structure
The Finance department of the Columbia Asia has a unique and empowered
organizational structure.
Starting from the General Manager – Ms. Uma Nambiar, we have the Finance
Manager – Mr. Dinesh Mishra – Who has been pivotal in me doing this case
study successfully. His department has 8 key members empowered to handle 8
key aspects of the Finance department Accounts receivables, Accounts Payables,
Treasury, Corporate Accounts, Purchase and Stores, Insurance, Corporate Clients
and Cash Management. Additionally the Front office staff is also part of his
department. They are 8 in number, with two of them in cash.
27

40. Figure: Organizational Structure
Of the Finance Department at CAH
CFO at CAH Management Office, Indiranagar
GM at CAH - Hebbal GM at CAH Yeshwanthpur
Finance Manager at CAH Yeshwanthpur
Accounts receivables
Front Office Staff
Accounts Payables
Treasury
Corporate Accounts
Purchase and Stores
Corporate Clients
Cash Management
Cashiers
28

41. Technology Used
The department is well illuminated, and as seen on the layout map is adequately
spacious enough for handling the present capacity of the hospital. The internal
ambience is also very good.
The Finance Department at Columbia Asia Hospital is fully computerized. All
practically possible points where paper can be eliminated has been done.
The entire operations of CAH are controlled using CARE 21 Software. The
Finance Module of this software application fully facilitates for all of the
Documentation, Computation and Reporting requirements of the finance
department.
A common multi tray laser printer has been provided at a convenient location.
Phones have been provided at all desks and general outgoing enabled on people
who handle external communications. There is a communications desk, from
where the incoming calls are answered.
Paper file storage racks are also in place.
There is a documents and currency chest in the far corner of the room where
there is limited access.
Stationary stocks are sufficient at all times and every one has adequate supply of
office stationary.
The functions of the department
The Finance department of the Columbia Asia Hospital independently handles
following functions
1. Accounts receivables
2. Accounts Payables
3. Treasury
4. Corporate Accounts
5. Purchase and Stores
6. Insurance
7. Corporate Clients
8. Cash Management
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42. Accounts receivables mainly deals with the collection of payments for the
services rendered.
The clients here may be classified as
1. Insurance Clients
2. Cash Paying clients
3. Corporate clients whose payments are made by the companies
Insurance Clients
The Insurance clients form 70% of the client base at Columbia Asia Hospital. The
process of Medical Insurance is detailed in later in this section. Generally
Insurance claim settlements take about 45 days from the date of service. The
companies process the claims and then send the payment cheque by courier. The
responsibility of the in charge is to get the approved eligibility for any insurance
patient on the limits available and then process the admission of the patient.
Then regularly follow up with the insurance clients for the claim processing
status and settlements.
Cash Clients
The cash paying clients contribute to 25% of the client base. They either make
the payment using credit card or hard cash. Major portion of the cash clients are
OPD clients. For credit card payments, the hospital incurs an excess service
charge of 1.5% as transaction charges. However this charge is presently not
transferred to the clients.
Corporate Clients
These are patients coming from the corporate client companies whose medical
bills would be settled by the companies. Companies like ISRO, BEL etc. The
payment would be settled against each patient or monthly with a 45 days credit
period etc., depending upon the type of MOU signed mutually. Presently they
contribute to about 5% of the client base as the corporate tie-ups have just
started.
Accounts Payables
The payables are for all the materials and services procured. The process
followed here is that they create an excel sheet with all the payment particulars
for which they have been billed. This excel sheet even contains the payment due
date as moist payments are on 45 days credit. This excel sheet is sent to the
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43. management office monthly. Then based on the data available, the resource will
follow up with the management office for the release of the payments.
The CARE21 software has a provision to directly take the feed on the accounts
payable. However, since the software is not fully integrated, the excel sheet was
being used. However, When I had been to study about the process of how
accounts payable is handled, they had just then got the information that the
software module was fully integrated and they need to start using the accounts
payable module of the CARE21 Software.
Treasury
The treasury in charge handles all the interactions related to bank. The treasury
persons responsibility is to monitor and verify the realizations of the cheques
deposited, the credit card payments made etc.,
Corporate Accounts
These are patients coming from the corporate client companies whose medical
bills would be settled by the companies. Companies like ISRO, BEL etc. The
payment would be settled against each patient or monthly with a 45 days credit
period etc., depending upon the type of MOU signed mutually. Presently they
contribute to about 5% of the client base as the corporate tie-ups have just
started.
Purchase and Stores
All Clinical and Non-clinical as well as Services are handled by a single person
from the finance team. The procurement board comprising mainly of Purchase
Manager, Finance Manager, Medical Director and General Manager decides on
the quality and brands of implants, and other major procurement decisions.
Once the items are approved, it goes for budget approval to the management
office. Once the budget allocation is through, items are ordered and then the
normal accounts payable procedure is followed.
Insurance
Mediclaim Insurance is a hospitalization benefit policy offered by general
insurance companies. The policy takes care of medical expenses following
Hospitalization/Domiciliary Hospitalization of the insured in respect of the
following situations:
• In case of sudden illness,
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44. • In case of an accident
• In case of any surgery which is required in respect of any disease which
has arisen during the policy period
Medical insurance in India is provided by the following Insurance Companies
Public Insurance Companies
• National Insurance Company
• Oriental Insurance Company
• United India Insurance Company
• New India Assurance Company
Private Insurance companies
• ICICI Lombard
• Reliance
• Bajaj Allianz
• Royal Sundaram
• Cholamandalam GIC
• Apollo DKV
• Tata AIG
Types of Health Insurance
Individual Insurance - If an individual directly take’s insurance policy for
himself and his family.
Corporate Insurance - When a company takes group insurance for the staff
working in the corporate.
Third Party Administrator (TPA) - The concept of TPA or the THIRD PARTY
ADMINISTRATOR has been introduced by IRDA (Insurance Regulatory and
Development Authority) for the benefit of both the insured and the insurer.
While the insured is benefited by quicker & better service, insurers are benefited
by reduction in their administrative costs, fraudulent claims and ultimately
bringing down the claim ratios.
In brief, the job of the TPA is to maintain databases of policyholders and issue
them identity cards with unique identification numbers and handle all the post
policy issues including claim settlements. In terms of infrastructure, the TPA is
expected to run a 24-hour toll-free number, which can be accessed from
anywhere in the country. And they are expected to have full-time medical
practitioners under their employment and are expected to take a decision on
whether the ailment is covered under the policy or not.
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45. Conditions for Individual insurances
General Conditions in individual policy
• 30 days waiting period: No admission will be covered in the first 30days
after taking the policy. However any hospitalization that occurs due to
accident will be covered.
• 1st, 2nd and 4th year exclusions are not covered which are mentioned in
the policy conditions. Ex: Cataract, Hernia, Sinusitis, Hemorrhoids, Fistula
& Fissures, Hysterectomy due to fibroids, BPH & other few conditions.
• Pre Existing Diseases & Complications arising from PED are not covered.
• Maternity is not covered.
• OPD treatment is not covered
Other General conditions which are not covered under Insurance policy
• Routine medical examinations, General check-up, Screening,
Convalescence or rest care.
• Any treatment or test which is not related to a specific symptom and/or
disease.
• Professional charges for second opinion of a doctor not in the hospital's
panel of doctors.
• Pregnancy, Miscarriage and Childbirth if “Maternity is not covered.
• Voluntary medical termination of pregnancy during the first 12 weeks
from the date of conception.
• Eye surgeries for the sole purpose of correcting refractive errors.
• Cosmetic dental treatment.
• Treatment with alternative medicines and pathies like acupuncture,
acupressure, homeopathy, osteopathy, naturopathy, chiropractic,
reflexology, aromatherapy and like.
• Overseas Treatment outside the geographical area of coverage.
• Diseases, illness, accident or injuries directly or indirectly caused by or
contributed to by nuclear weapons/materials or contributed to by or
arising from ionizing radiation or contamination by radioactivity by any
nuclear fuel or from any nuclear waste or from the combustion of nuclear
fuel.
• War, whether declared or undeclared, strikes, riots, civil commotion,
hostilities, mutiny, terrorist activities (including biological weapons &
chemical warfare), rebellion, insurrection, conspiracy, civil war,
revolutions or any warlike operation.
• Companion Charges and Expenses and other Non- Medical expenses.
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