Implementing

Hospital
Autonomy in
Jordan: An
Economic Cost
Analysis of Al
Karak Hospital
June 2002

Prepared by:

Ayyoub S.K. As-Sayaideh, MD

Ministry of Health, Jordan

Abdel Razzaq S.H. Shafei, MD

Ministry of Health, Jordan

Dwayne A. Banks, PhD

Abt Associates Inc.

Alia Muhtaseb, BS
Abt Associates Inc.
 Partners for Health Reformplus

Abt Associates Inc. „ 4800 Montgomery Lane, Suite 600

Bethesda, Maryland 20814 „ Tel: 301/913-0500 „ Fax: 301/652-3916

In collaboration with:
Development Associates, Inc. „ Emory University Rollins School of Public
Health „ Philoxenia International Travel, Inc. „ Program for Appropriate
Training in Health „ SAG Corporation „ Social Sectors Development
Strategies, Inc. „ Training Resource Group „ Tulane University School of
Public Health and Tropical Medicine „ University Research Co., LLC.

Funded by:
U.S. Agency for International Development Order No. TE 014

Contributors

The following persons are members of workgroups established at the Al Karak hospital to
assist with the hospital decentralization effort. Their contributions to data gathering made this
report possible.
Dr. Sultan Ma`ad Allah El Tarawneh
Dr. Youssef Mostafa El Sararyeh
Dr. Ali Mansi El Hamaideh
Dr. Ibrahim Ahmad El Adaileh
Dr. Abd El Khader Msarkfm
ahmoud El Habashneh
Dr. Zakaria Hassan El Nawaiseh
Pharmacist Zeena Atallah El Halaseh
Engineer Rashad Taha Kassasbeh
Mr. Naser Ghadeer El Sareireh
Mr. Amjad Khalil El Ma`dnat
Mr. Wajdi Ayed El Ma`jali
Mr. Radi Hasan El Ja`afreh
Mrs. Rehab Micha`eel El Halaseh
Mrs. Mahdeyeh Ibraheem Aka`wei
Miss Fayzeh Yakoub El Houra`ni
Mr. Nabeel Hasan El Houra`ni
Mrs. Hya`at Yaseen El Nawaiseh
Miss Fawzayeh Abd El Mahdi El Bou`toush
Mrs. Enshra`h Hamoud El Nawaiseh
Mr. Sakher Loutfi El Ha`addin
Mrs. Em`an Ali Mo`uafi
Mr. Amjad Kame`l El Majali
Mr. Falah Za`al El Tarawneh
Mr. Isma`el Hassan El Jara`ah
Mr. Noor El Deen Salem El Maiyt`eh
Mission

Partners for Health Reformplus is USAID’s flagship project for health policy and health
system strengthening in developing and transitional countries. The five-year project (2000-2005)
builds on the predecessor Partnerships for Health Reform Project, continuing PHR’s focus on
health policy, financing, and organization, with new emphasis on community participation,
infectious disease surveillance, and information systems that support the management and delivery
of appropriate health services. PHRplus will focus on the following results:

▲ Implementation of appropriate health system reform.

▲ Generation of new financing for health care, as well as more effective use of existing
funds.

▲ Design and implementation of health information systems for disease surveillance.

▲ Delivery of quality services by health workers.

▲ Availability and appropriate use of health commodities.

June 2002

Recommended Citation

Ayyoub S.K. As-Sayaideh, Abdel Razzaq S.H. Shafei, Banks, Dwayne A., and Alia Muhtaseb. June
2002. Implementing Hospital Autonomy in Jordan : An Economic Cost Analysis of Al –Karak Hospital
, Bethesda , MD : The Partners for Health Reform Plus Project , Abt Associates Inc.

For additional copies of this report, contact the PHRplus Resource Center at PHR-
InfoCenter@abtassoc.com or visit our website at www.phrproject.com.

Contract/Project No.: HRN-C-00-00-00019-

00

Submitted to: USAID/Amman

and: Karen Cavanaugh, CTO

Policy and Sector Reform Division
Office of Health and Nutrition
Center for Population, Health and Nutrition
Bureau for Global Programs, Field Support and Research
 United States Agency for International Development

The opinions stated in this document are solely those of the authors and do
not necessarily reflect the views of USAID USAID.
Abstract

Faced with limited resources and increased demands being placed upon its health care
sector due to the changing pattern of diseases and rising consumer expectations, the Ministry of
Health (MOH) of the Hashemite Kingdom of Jordan is seeking ways to improve the operating
efficiency of its 23 public hospitals. One way to achieve the objective is to provide hospital
directors with greater managerial control over their daily decision-making. As such, the
government of Jordan has been engaged during the past three years in a hospital autonomy
(hospital decentralization) pilot project with Princess Raya and Al Karak hospitals. To date the
MOH has completed the first three phases of that project: Phase 1 (the pilot site selection
process), Phase 2 (the implementation of short-run changes in operating procedures), and Phase
3 (estimating the costs of services at the hospitals). This document details Phase 3 activities,
presenting the first-ever detailed cost analysis of Al Karak hospital. This analysis is of import,
given that the MOH is considering the allocation of a partial or complete operating budget to
the hospital director, at a later date.
 Table of Contents

Acronyms ...........................................................................................................................................xiii
Acknowledgments............................................................................................................................... xv
Executive Summary .........................................................................................................................xvii
1. Background ................................................................................................................................... 1
1.1 Decentralization of Jordan’s Public Hospitals..................................................................1
1.2 Al Karak Hospital................................................................................................................2
1.3 Organization of This Report...............................................................................................3
2. Background on Hospital Cost Analysis ...................................................................................... 5
2.1 Basic Concepts of Hospital Costing ...................................................................................5
2.2 Basic Methodology...............................................................................................................8
3. Accounting for Variable Input Costs........................................................................................ 11
3.1 Labor Costs Estimations...................................................................................................11
3.2 Labor Costs per Unit Output ...........................................................................................17
3.3 Nonlabor Variable Factors of Production.......................................................................23
3.4 Nonlabor Variable Factors by Cost Center ....................................................................26
3.5 Estimations of Per Unit Variable Cost ............................................................................28
3.6 Distribution of Variable Drug Costs................................................................................31
4. Accounting for Fixed Input Costs ............................................................................................. 33
4.1 Estimating Costs of Fixed Inputs .....................................................................................33
4.2 Distribution of Fixed Costs by Cost Center ....................................................................35
4.3 Estimating Per Unit Fixed Cost........................................................................................36
5. Estimating Total Hospital Costs................................................................................................ 41
5.1 Distribution of Total Costs by Cost Center.....................................................................41
5.2 Total Costs Per Unit of Output ........................................................................................43
6. Policy Implications and Conclusion .......................................................................................... 47
Annex A: Summary Tables of Allocation Rules .............................................................................. 49
Annex B: Service Inventory of Al Karak Hospital.......................................................................... 53
Annex C: Fixed Assets (Equipment and Furniture Inventory) of Al Karak ................................ 57
Annex D: Bibliography ...................................................................................................................... 77

List of Tables

Table ES-1: Total Labor Costs per Patient Day and Adjusted Patient Day ................................xix
Table 1. Snapshot of Al Karak Hospital............................................................................................. 2
Table 2: Labor Costs, by Employee Category (in JD) .................................................................... 12

Table of Contents ix
Table 3: Labor Costs in Full-time Equivalents, by Employee Category ....................................... 12
Table 4: Percent Distribution of Labor Costs, by Employee Category ......................................... 13
Table 5: Labor Distribution by Cost Center.................................................................................... 14
Table 6: Labor Costs by Cost Center ............................................................................................... 15
Table 7: Total Labor Costs by Cost Center, Patient Days, Patients, and Adjusted Patient Days
17
Table 8: Total Labor Costs by Cost Center, Bed Days, and Occupancy Rate.............................. 18
Table 9: Labor Costs by Cost Center, Admissions, and Adjusted Admissions ............................ 18
Table 10: Distribution of Total Physician Labor Cost, by Cost Center ........................................ 19
Table 11: Distribution of Physician Labor Cost by Cost Center, Patients, Patient Days, and
Adjusted Patient Days........................................................................................................................ 20
Table 12: Distribution of Nursing/Midwives Labor Costs, by Cost Center .................................. 20
Table 13: Distribution of Nurses/Midwives Labor Cost by Cost Center, Patients, Patient Days
and Adjusted Patient Days ................................................................................................................ 21
Table 14: Distribution of Physician and Nurse/Midwife Labor Cost (Lpn) by Cost Center,
Patients, Patient Days, and Adjusted Patient Days ......................................................................... 22
Table 15: Average Product of Labor Estimations, by Hospital Cost Center................................ 22
Table 16: Utility Costs Estimates ...................................................................................................... 23
Table 17: Variable Structure and Equipment Estimates................................................................ 23
Table 18: Variable Hospital Consumables....................................................................................... 25
Table 19: Contracted Services........................................................................................................... 25
Table 20: Non-clinical Supplies......................................................................................................... 25
Table 21: Distribution of Utility Cost, by Cost Center ................................................................... 26
Table 22: Distribution of Non-utility Variable Cost (Nc), by Cost Center .................................... 27
Table 23: Distribution of Total Variable Costs (Vc), by Cost Center ............................................ 28
Table 24: Distribution of Total Variable Costs, by Cost Center, Patient Days, and Adjusted
Patient Days ............................................................................................................................................
30
Table 25: Distribution of Total Variable Costs, by Cost Center, Admissions, and Adjusted
Admissions .......................................................................................................................................... 30
Table 26: Distribution of Total Variable Costs, by Emergency Room and Outpatient Visits .... 31
Table 27: Distribution of Drug Costs, by Cost Center, Patient Days, Adjusted Patient Days,
and Patients......................................................................................................................................... 32
Table 28: Distribution of Drug Costs by Emergency Room and Outpatient Clinic Visit............ 32
Table 29: Annualized Economic Costs of Fixed Hospital Structures ............................................ 34
Table 30: Annualized Economic Costs of Hospital Vehicles .......................................................... 34
Table 31: Annualized Economic Costs of Equipment and Furniture............................................ 35

Table of Contents
 Table 32: Distribution of Fixed Costs (Fc), by Cost Center ............................................................ 36
Table 33: Distribution of Total Fixed Costs, by Cost Center, Patient Days, and Adjusted
Patient Days ............................................................................................................................................
..................................................................................................................................................... 37
Table 34: Distribution of Total Fixed Costs, by Cost Center, Admissions, and Adjusted
Admissions .......................................................................................................................................... 37
Table 35: Distribution of Total Fixed Costs, by Emergency Room Visits..................................... 39
Table 36: Distribution of Total Costs, by Cost Center.................................................................... 41
Table 37: Percent Distribution of Total Costs, by Cost Center...................................................... 42
Table 38: Distribution of Total Costs, by Cost Center, Patient Days, and Adjusted Patient Days
43
Table 39: Distribution of Total Costs, by Cost Center, Admissions and Adjusted Admissions.. 44
Table 40: Distribution of Total Costs, by Emergency Room and Outpatient Visits .................... 44
Table 41: Per Unit Daily Hospital Services Loaded With Admin/Finance Costs......................... 44

Table of Contents xi
 Acronyms

AFC Average Fixed Costs

ALOS Average Length of Stay
ATC Average Total Cost
AVC Average Variable Cost
DGFA Director General of Finance and Administration
ER Emergency Room
FC Fixed Costs
FTE Full-time Equivalent
ICU/CCU Intensive Care/Critical Care Unit
JD Jordanian Dinar
Lc Labor Costs
Ln Labor [Cost of] Nurses
Lp Labor [Cost of] Physicians
Lpn Labor [Cost of] Physicians and Nurses
MOF Ministry of Finance
MOH Ministry of Health
MOP Ministry of Planning
Nc Nonutility Cost
OB/GYN Obstetrics and Gynecology
OR Operating Room
PHR Partnerships for Health Reform
PHRplus Partners for Health Reformplus Project (USAID)
RMS Royal Medical Service
TC Total Costs
Uc Utility Costs
USAID United States Agency for International Development
Vc Variable Costs

Currency Conversion
JD 1 = US$ 1.41

Acronyms xiii
 Acknowledgments

The United States Agency for International Development has made this study possible. We
express our sincerest gratitude to the Minister of Health, His Excellency Dr. Faleh Al Nasser, as
well as his predecessors, for supporting and sustaining the hospital decentralization effort in
Jordan. In addition, we express our sincerest gratitude to the Ministry of Health’s Hospital
Decentralization Steering Committee members (Chairman Dr. Ismail Saedi, Dr. Abdullah Al-
Shawawreh, Dr. Suleiman Oweiss, Dr. Taher Abu Samen, Dr. Hani Brosk, Dr. Ahmad
Shugran, and Dr. Sultan Tarawneh) for their dedication and efforts during this third phase of
implementing hospital decentralization in Jordan. In addition, we would like to thank Dr. Salah
Dhiyab, Dr. Osamah Samawi, Dr. Saif Al-Din Al-Irani, Mr. Bassam Al-Muneir, and Mr.
Mohammed Ismail for their ongoing assistance with this activity. Furthermore, the level of
dedication and effort during this phase of implementation, as exhibited by the personnel at Al
Karak hospital, cannot be overstated. For the past three years, the personnel at this hospital
have worked relentlessly towards achieving their goals of enhanced quality of care for their
patients and increased operating efficiency for their hospital.

Finally, we would like to acknowledge the participation and support of our Ministry of
Health and PHRplus colleagues in Jordan and the United States.

nowledgments xv
 Executive Summary

The Ministry of Health (MOH) of the Hashemite Kingdom of Jordan has expressed keen
interest in granting at least partial autonomy to its MOH-owned and -operated hospitals. The
Partnerships for Health Reform (PHR), a United States Agency for International Development
(USAID)-sponsored project and predecessor to Partners for Health Reformplus, began
providing ongoing technical assistance during Phase 1 of the Ministry’s short-run hospital
decentralization effort. Initial assistance was the sponsorship of a national workshop entitled
“Hospital Autonomy in Jordan,” held in Amman on 4 October 1998, at the behest of then-
Minister of Health, His Excellency Dr. Na’el Al-Ajlouni. The directors general of the 12 health
governorates, as well as the directors of all MOH hospitals, attended the workshop (Sindaha-
Muna, 1998). During subsequent meetings between PHR and the Minister of Health, it was
decided that the MOH would proceed with Phase 1 of its decentralization efforts. This entailed
the selection of two MOH facilities for piloting hospital autonomy in Jordan. The hospitals
selected were Princess Raya, in the Irbid governorate, and Al Karak, in the Al Karak
governorate. Their selection in April 1999 concluded Phase 1 (Banks, 1999).

During Phase 2, PHR engaged in several activities to achieve the following set of objectives:
(1) to establish “Reference Committees” and “Workgroups” within each pilot hospital; (2) to
guide each pilot hospital toward achieving its targeted short-run decentralization objectives; (3)
to facilitate the implementation of a detailed training plan, consistent with the expected needs of
each pilot hospital; and (4) to facilitate the overall implementation of the short-run
recommendations, as explicated by the hospital-based workgroups. This information, as well as
the short-run procedural changes that were approved and implemented by the MOH, was
detailed in a document entitled Implementing Hospital Autonomy in Jordan: Changing MOH
Operating Procedures (Banks, As-Sayaideh, Shafei, and Ghanoum, 2000).

Finally, Phase 3 of the Ministry of Health’s short-run decentralization activities entailed

working closely with PHRplus to conduct a detailed cost analysis of hospital services at both
Princess Raya and Al Karak hospitals. This document details the results of the study that was
conducted at Al Karak hospital during the period 2000-2001. All data reported in this study are
for the year 1 January 1999 to 31 January 1999. A similar study was conducted at Princess
Raya hospital and is presented in a separate document (Banks, As-Sayaideh, Shafei, and
Muhtaseb, 2002).

Background

In Jordan, the governance of MOH hospitals is highly centralized. All significant

managerial, budgetary, and procurement matters are ultimately decided by senior-level
executives at the MOH headquarters in Amman. This has created a system in which the needs
of hospitals and their patients frequently conflict with the policies of the central ministry. This
has led many to speculate that MOH hospitals could be more efficiently operated, and the level
of quality enhanced, if greater independence were granted to these institutions. In fact, hospital
directors have overwhelmingly stated that greater independence over personnel, financial, and
procurement matters is necessary for achieving MOH cost-containment objectives. A well-
planned, carefully designed policy can take as long as 10 years to fully implement. Hence, the
government of Jordan has divided its implementation plan into short-run and long-run
objectives. The country is now completing Phase 3 of its short-run decentralization objectives:

mmary xvii
 that is, identifying the existing cost structure at MOH hospitals, and the establishment of a
Hospital Policy Forum to coordinate and disseminate information among various MOH hospital
directors.

Phase 3 Activities

The Hospital Decentralization Implementation Team worked closely with the staff at Al
Karak hospital, visiting the site weekly throughout the period of this study. In addition to
educating hospital staff on the theory and applications of hospital costing, the team guided
hospital personnel through the following activities:

▲ Establishing workgroups with specific assignments for compiling and analyzing

hospital-based data, to include comparisons of hospital-based statistics with those being
compiled at the central ministry. This included the development and validation of
equipment and drug inventory lists.

▲ Building capacity to understand the theoretical aspects of hospital costing. Personnel

were provided information on the differences between accounting principles and
economic principles in estimating the total economic costs of operating Al Karak
hospital.

▲ Guiding workgroups on the principles of data validation and various allocation rules
for distributing costs among various hospital cost centers. Working with the
Implementation Team members, hospital personnel devised allocation rules to
distribute various input costs among cost centers.

Once these steps had taken place, the Implementation Team cooperated with the
workgroups to develop a strategy for compiling ongoing hospital economic data. For example, a
strategy was developed such that the staff at Al Karak hospital is better able to track the flow of
drug consumption throughout the hospital, by cost centers.

Hospital Cost Study Major Findings

Among the most important accomplishments of Phase 3 were the findings of this first-ever
detailed cost analysis of Al Karak hospital, as well as the policy implications of such findings.
Below are highlights of the findings:

▲ The total 1999 operating costs for Al Karak hospital amounted to JD 3,360,523
($4,738,337).

▲ Total variable costs including labor amounted to JD 2,403,434 ($3,388,842) and total
fixed costs were JD 957,089 ($1,349,495).

▲ Administrative costs within the hospital are JD 438,989 ($618,974). This amounts to
more than 13 percent of the hospital’s total operating costs.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 ▲ The major proportion of total hospital costs, 72 percent, are consumed by variable
input factors, the largest of which are the labor costs that are associated with the
distribution of administrative/financial services, JD 186,085 ($262,380), roughly 55
percent of total variable administrative/financial costs.

▲ In terms of total costs per patient day, which is a proxy for average total costs, the
Intensive Care/Critical Care Unit (ICU/CCU) department exhibited the highest, JD 173
($244). This is in contrast to the amounts estimated for Surgery, JD 37; Obstetrics and
Gynecology (OB/GYN), JD 25; Internal Medicine, JD 27; and Pediatrics, JD 49.

▲ The ICU/CCU also exhibited the highest total costs per admission, JD 467 ($658). This
is in contrast to Surgery, JD 107; OB/GYN, JD 47; Internal Medicine, JD 78; and
Pediatrics, JD 162.

▲ Total labor costs at Al Karak hospital were JD 1,069,288 ($1,507,696). Of this amount,
JD 1,009,940 ($1,424,015) was for salaries, JD 53,108 ($74,882) for incentives (bonuses),
and JD 6,240 ($8,798) for transportation allowances—the three largest components of
employee compensation within the hospital.

▲ The lowest adjusted labor costs per unit are found within the OB/GYN department,
which also had one of the highest estimated average products of labor (a proxy for
labor productivity), as illustrated by Table ES-1.

Table ES-1: Total Labor Costs per Patient Day and Adjusted Patient Day

Unit Total labor costs Total days per Total costs per
per patient day unit of labor adjusted patient
day
Internal JD 9 284 JD 42
Medicine
Surgery 19 154 52
OB/GYN 11 248 40
ICU/CCU 27 88 187
Pediatrics 22 133 64
Total 16 180 JD 55

▲ There is a need for greater communication between the MOH Accounting Department
and Al Karak hospital on the issue of payroll-related expenses. Oftentimes, the
personnel files at the hospital do not match the personnel payment records of the
Accounting Department. A management information system that provides systematic
updates concerning the placement of personnel throughout the MOH is warranted.

▲ The average variable cost of an ER and clinic visit is JD 4.76 and JD 3.71, respectively.
The implications are that under existing cost-sharing rules the MOH is not recovering
its average variable cost for each ER and clinic encounter. In fact, for a certain
category of patients, the MOH can recover its average variable costs by increasing its
ER co-payment by JD 3.11, and its clinic co-payment for clinic visits by JD 2.06.
However, without a more detailed study of the relative productivity of Al Karak

mmary xix
 hospital, one cannot rule out that the higher average variable costs estimates are the
result of production inefficiencies. Hence, any attempt to recover average variable costs
based upon the findings in this study would be premature.

▲ Total drug costs for Al Karak inpatient services were JD 128,230 ($180,804). This
amounted to roughly JD 4 per inpatient day, and more than JD 12 per patient.

▲ Once daily hospital services, such as Surgery, OB/GYN, Internal Medicine, ICU/CCU,
and Pediatrics are loaded with their administrative overhead, the total costs per
adjusted patient day is JD 54, JD 38, JD 85, JD 131, and JD 65, respectively.

Conclusions

With the completion of Phase 3, the MOH has taken another step forward in its efforts to
decentralize its network of publicly owned and operated hospitals. Hospital workgroups, in
collaboration with the Hospital Decentralization Implementation Team, have provided the
MOH with detailed information on the costs of operating each pilot hospital. This information
will provide the MOH with its first information on the cost structure of each hospital and the
distribution of such costs across hospital costs centers. Moreover, this study highlights various
areas for policy intervention, such as the establishment of a cost-reporting system that tracks
and coordinates hospital expenditures throughout the MOH.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

1. Background

The Hashemite Kingdom of Jordan is experiencing discouraging economic conditions that

include recessionary growth rates, high unemployment, and declining real wages. Such factors
place enormous strain on the provision of public services, particularly health care services. As a
result, policymakers within the Ministry of Health (MOH) are seeking ways to contain health
care costs, while maintaining access to and sustained quality of care, at the country’s 23 public
hospitals.

1.1 Decentralization of Jordan’s Public Hospitals

In Jordan the governance of MOH hospitals is highly centralized. All significant

managerial, budgetary, and procurement matters are ultimately determined by senior-level
executives, located at the MOH headquarters in Amman. This has created a system in which
the needs of individual hospitals and their patients frequently conflict with the policies of the
central ministry. This has led many to speculate that MOH hospitals could be more efficiently
operated, and the level of quality enhanced, if greater independence were granted to these
institutions. In fact, hospital directors have overwhelmingly stated that greater independence in
personnel, financial, and procurement matters is a necessary condition for achieving targeted
MOH cost-containment objectives. However, they also stress that the poor must be protected
from any adverse effects in the drive towards improved efficiency. One method by which the
government may reconcile these ends is to grant to hospital directors limited autonomy over
managerial, budgetary, and procurement matters. As a result, the MOH through its Hospital
Decentralization Implementation Team has engaged in a systematic move towards hospital
decentralization over the past three and one-half years. Phase 1 of that policy was completed in
April 1999, with the selection of Princess Raya and Al Karak hospitals as pilot institutions for
the hospital decentralization effort (Banks, 1999).

During Phase 2, the directors of Princess Raya and Al Karak hospitals were provided
limited authority over certain aspects of their daily decision making through changes in MOH
operating procedures (Banks, As-Sayaideh, Shafei, and Ghanoum, 2000); this included the
establishment of workgroups and committees at each hospital, as well as the training of
administrative and technical personnel in various aspects of hospital management and finance.

Over the long run the MOH seeks to provide Princess Raya and Al Karak hospitals with
additional limited authority over aspects of their budgetary, planning, and procurement
matters. To achieve this, however, the MOH, as well as the hospital directors, need to
understand in detail the cost structures at the two hospitals.

During autumn 2000, the Implementation Team initiated Phase 3 of the decentralization
effort. Phase 3 had two primary components. The first was the development of an
organizational development plan for each hospital. The plan provided the MOH with a detailed
understanding of the governance structure of each hospital, based upon their short-run
decentralization objectives. The second was the aforementioned look at the cost structures at
each hospital. Hence, an essential activity of Phase 3 was a detailed cost analysis at each
hospital. This document details the results of that analysis for Al Karak hospital.

1
1.2 Al Karak Hospital

Al Karak hospital was established in 1996. The hospital is located approximately 145
kilometers south of Amman, in the governorate of Al Karak. The hospital was originally
established in 1956 on another site. During the period of this study, the hospital’s outpatient
facilities were located at that site, which is approximately 7 kilometers from the present location.
However, as of spring 2002, a significant share of outpatient care is being provided at a newly
established facility that is adjacent to the hospital. Construction of what is currently Al Karak
hospital was completed in 1996, as part of a Jordanian and Italian government cooperative. The
hospital has a nursing training facility sponsored by the Italian government. Table 1 provides a
snapshot of the hospital, as well as a few summary statistics of the governorate.
Table 1. Snapshot of Al Karak Hospital

Al Karak Governorate

Total population in governorate: 188,600

Unemployment rate: 32.3%
Insured workers: 69.9%
Comprehensive clinics: 5
Primary health clinics: 34
Peripheral clinics: 36
Maternal and child clinics: 38

Hospital Statistics
Hospital director: Dr. Sultan
Tarawneh
Physical size (m2): 8,500m2
2
Land area (m ): 60,000m2
Occupancy rate: 74%
Bed size: 110
Admissions: 11,066
Outpatient visits1: 63,514
Emergency room visits: 36,366
Average length of stay: 2.7 days
Inpatient days: 29,543
Patient coverage:
Percent MOH (Civil Insurance Program): 45.7%
Percent RMS: 4.2%
Percent uninsured 33.0%
Staff:
Administrative/Finance: 32
Physicians: 57
Nurses/Midwives: 173
Pharmacists: 7
Technical: 48
Other: 35
1
These are outpatient visits that Al Karak physicians are responsible for at the speciality
clinic.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

1.3 Organization of This Report

This document is divided into six chapters. Chapter 2 provides an overview of the basic
concepts and methodology of hospital costing. Chapter 3 describes the methods for estimating
variable input costs as well as the cost estimates themselves. Chapter 4 presents Al Karak
hospital’s fixed costs estimates, and Chapter 5 contains the estimation of total hospital costs.
Chapter 6 provides policy implications and conclusions.

3
 2. Background on Hospital Cost Analysis

2.1 Basic Concepts of Hospital Costing

Over the past 30 years a vast literature has described theoretical and empirical aspects of
methodologies for conducting economic analyses of hospital costs. Prominent among these
studies is the seminal work that was conducted by Feldstein (1967), and Carr and Feldstein
(1967), which describes the production process of the hospital in terms of the economic
behavior of a multi-product firm. More recent work in this area includes that of Breyer (1987),
Cowing and Holtmann (1983), Granneman, Brown, and Pauly (1986), and Vita (1990). While
the vast majority of this work over the past 30 years focused on the economic behavior of
hospitals in developed economies, a more recent work by Barnum and Kutzin (1993) examined
the developing country context. The hospital costing work that was conducted at Al Karak
hospital emanates from this rich body of literature.

Economists define the economic costs of an institution in two ways. In the first, economic
costs are defined as the “market value” of all inputs (both variable and fixed) that are utilized
during the production process. Alternatively, economic costs are defined as the market value of
inputs in their next best alternative use (Binger and Hoffman, 1988). This latter definition is
most often associated with contemporary approaches to economic cost analysis in that it
directly associates with the concept of opportunity costs. For example, when economists
estimate the cost of fixed capital inputs, they consider not only the cash outlay, but also the fact
that those funds alternatively could have been invested in an interest-earning bank account. In
Jordan, anecdotal evidence suggests that current MOH procurement policies provide some
MOH hospitals with equipment for which they have no use. Such idle equipment imposes a cost
to the government in that the money used to purchase the equipment might have been invested
in an interest-bearing account, or used to purchase needed equipment. Hence, the total cost to
the hospital for the purchase of the unneeded equipment is the sum of the explicit costs (i.e., the
cash payment) and the implicit costs (e.g., the forgone interest payment). It is this distinction
between explicit and implicit costs that differentiates an economic cost analysis from an
accounting or financial cost analysis, which would consider only the explicit costs.

To estimate the total economic costs of operating Al Karak hospital, the various inputs
utilized to produce the array of hospital services were divided into two categories: variable
inputs and fixed inputs (see also Annex B). Economists refer to each of these inputs as “factors
of production.” Each is described below:

▲ Variable Inputs (Variable Factors of Production): Variable inputs are those factors of
production whose quantity varies with the level of output. For a hospital, the most
common variable input is the labor it employs, i.e., the numbers of nurses, doctors, and
ancillary personnel that are optimal for the size of their patient populations. Other
variable factors are butane gas, electricity, and medical consumables, which also vary
with the number of patients treated. However, it is not uncommon for hospitals in
developing economies, such as Jordan, to have labor categories that are constrained by
government regulatory policies. In Jordan, MOH and Civil Service rules allow certain
labor categories in MOH facilities to be more variable (flexible) than others. For

pital Cost Analysis 5

 example, MOH hospital directors have greater freedom to alter nursing labor input
than they do physician labor input. In still other systems, i.e., command economies such
as many of the former Soviet Republics, labor assumes the economic behavior of a
fixed factor of production. In other words, various categories of labor may be variable,
semi-variable, or quasi-variable.

▲ Fixed Inputs (Fixed Factors of Production): Fixed inputs are those factors of production
that cannot be readily changed as the quantity of service production increases or
decreases. Examples are capital inputs such as large medical equipment and the
hospital structure itself. Costs that are associated with such fixed factors are often
referred to as “sunk costs.”

Economic costs are estimated according to two “temporal” dimensions: the long run and
the short run. These dimensions, however, refer less to a defined period of time and more to the
way a hospital can treat the various factors of production. For example, long-run cost
estimations assume that all factors of production are variable; hence, the hospital has
significant flexibility in altering its labor/capital mix. Alternatively, short-run cost estimates
assume that at least one factor of production remains fixed throughout the production process.
The current study—a single case, Al Karak hospital, for a defined period of time, 1999—is a
short-run cost estimation.1 Such short-run estimations adhere to the following set of economic
principles:

▲ Total Variable Costs (VC): Total variable costs are the sum of the costs of variable
factors of production. A few examples are labor, utility, structure and equipment, and
nonclinical supplies. Chapter 3 discusses these costs at Al Karak hospital.

▲ Total Fixed Costs (FC): Total fixed costs are the sum of the costs of the various fixed
factors of production. Chapter 4 estimates the total costs of such factors, examples of
which are structure, vehicle, equipment, and furniture.

▲ Total Cost (TC): Total costs are the summation of total variable costs and total fixed
costs. Unlike variable factors of production, the costs of fixed factors must be
considered in terms of their annualized depreciation costs as well. As stated previously,
this report estimates short-run total costs, given the existence of fixed factors of
production.

▲ Average Variable Costs (AVC): Average variable cost is the ratio of total variable costs
to a particular output category. Several AVC combinations can be estimated for
hospitals, because a hospital can be viewed as a multi-product institution. Several
standard output proxies capture this multi-product nature of hospital services
production. The output proxies that were utilized in this study are inpatient days (both
adjusted and unadjusted), admissions (both adjusted and unadjusted), bed-days,
patients, and visits. The most commonly estimated AVC is the ratio of total variable
costs to total inpatient days.

▲ Average Fixed Costs (AFC): Average fixed cost is the ratio of total fixed costs to a
particular output category. The hospital as a multi-product institution is relevant to

1
Long-run cost functions are typically estimated through the employment of time-series data for a statistically
significant sample of facilities.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 AFCs as well as to AVCs. Hence, AFC estimations can be considered within the context
of the various output proxies mentioned above.

pital Cost Analysis 7

 ▲ Average Total Costs (ATC): Average total cost is the ratio of total costs to a particular
output category. Again, the multi-product nature of the hospital allows for various
ATC estimates to be obtained, depending upon the category of output utilized in the
numerator.

There is one additional common and most important category of cost: marginal cost.
Marginal cost is the change in total costs over a defined time period, relative to a particular
output category. Estimating marginal costs of a particular output requires data on unit costs
from at least two time periods. In cross-sectional studies, such as the current study, which uses
data from a single period of time, marginal costs estimates are unobtainable.

2.2 Basic Methodology

With the oversight of the Hospital Decentralization Implementation Team and using a
detailed list of all services offered by Al Karak hospital (see Annex A for an inventory of
services), the hospital workgroups divided the services into two major “cost center” categories:
Daily Hospital Services and Ancillary and Support Services. Once agreement was reached on
the two broad classifications, the workgroups further divided the services into cost center
subcategories. Under Daily Hospital Services, services that require similar labor and capital
inputs and that treat patients with similar maladies were grouped into a single cost
subcategory; those that require distinctly different inputs and treatment patterns were
classified separately. For example, the Surgery cost center includes urological, gastrointestinal,
ophthalmic, and other categories of general surgery, as well as its subspecialties. Intensive care
surgical, coronary, and burn services were placed in the Intensive Care Unit/Critical Care Unit
(ICU/CCU) cost center. Other cost centers include Obstetrics/Gynecology (OB/GYN), Internal
Medicine, Operating Room (OR), Pediatrics, Emergency Room (ER), and Outpatient Clinic
departments.

Ancillary and Support Services comprises Administration/Finance, Rehabilitation, X-ray,

Laboratory, Pharmacy, and Food and Beverage departments. As with Daily Hospital Services,
cost center subcategories were determined based upon their inputs, as well as the outputs
(services) that they perform in support of the hospital’s overall function.

Once the cost centers were defined, the workgroups and Implementation Team created a
detailed list of variable and fixed factors that the hospital utilizes. The variable factors, and the
methodology employed to estimate these costs, are summarized below and detailed in Chapter
3.

▲ Labor: This includes compensation paid to medical doctors, nurses/midwives,

pharmacists, and administrative, finance, technical/medical, technical/nonmedical, and
other personnel. An accurate list of employees who worked at the hospital was matched
against MOH personnel records, which detailed the level of compensation for each
employee. Chapter 3 details the allocation rule used to distribute the employees labor
costs among various hospital “cost centers.”

▲ Nonlabor Variable Factors: This variable input was divided into five specific
categories: utility inputs, structure and equipment inputs, consumable inputs,
contracted services, and nonclinical supplies. Utility inputs include fuel, butane gas,
telephone services, electricity, and water. Structure and equipment inputs include
building renovations, rental unit for technicians’ quarters, building maintenance and
renewal, equipment maintenance, and supplies. Consumable inputs include drugs and

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 medications, gases, medical consumables, and laboratory and radiological
consumables. Contracted services include food services, housekeeping services, laundry
services, and other contracted services. Nonclinical supplies include stationeries,
textiles and linens, and perishables. Chapter 3 details the allocation rule employed to
distribute such costs across the various hospital cost centers. For example, butane gas
use was distributed among cost centers according to the proportion of square meters of
physical space that the cost center occupies, based on hospital blueprints and
construction documents obtained from the MOH Department of Buildings.

The fixed factors and the methodology employed to estimate and distribute their costs
among the cost centers are contained in Chapter 4. The fixed factors employed by Al Karak
hospital during the period of this study are listed below:

▲ Fixed Hospital Structure: the hospital building, electrical structures, sewage and
plumbing structures, and CT-Scan facility

▲ Hospital Vehicles: hearse, buses, sedans, ambulances, and pickup trucks

▲ Equipment and Furniture: medical equipment and hospital furniture. Equipment and
furniture costing JD 100 (US$140) are listed in annexes A and B.

Variable and fixed factors were distributed among the various hospital cost centers
according to the allocation rules that are summarized in Tables A1–A3 of Annex A.

pital Cost Analysis 9

 3. Accounting for Variable Input Costs

This chapter presents cost estimates for the various labor and nonlabor cost categories at
Al Karak hospital. It also discusses the rules utilized for dispersing the costs to the various
hospital cost centers.

3.1 Labor Costs Estimations

As discussed in Chapter 2, the cost of labor is the major contributor to hospitals’ variable
costs. At Al Karak hospital, labor was grouped into eight categories: medical doctors,
nurses/midwives, pharmacists, administrative, finance, technical/medical, technical/nonmedical,
and “other.”

In Jordan, employee remuneration, paid in cash by the Ministry of Health, consists of three
identifiable components: wages, incentives (bonuses), and transportation.2 The distribution of
these components varies by employee classification and entitlements. For example, all physician
personnel within the MOH are eligible for “incentive” payments, which are largely determined
by category and class.

The study took the following steps to derive the cost of labor at Al Karak hospital:

▲ It first obtained from the hospital an accurate list of all employees in 1999.

▲ Using employee ID numbers, it then checked the hospital list against monthly
compensation records obtained from the MOH Division of Accounting and Finance.

▲ Total annual compensation paid to employees for work directly related to Al Karak
hospital was obtained from the division and checked against the hospital’s records, and
used in the analysis.

As shown in Table 2, the hospital’s labor costs for 1999 totaled JD 1,069,288. In nominal
terms the most costly labor input was the nursing staff (registered nurses, nurse assistants, and
midwives) at JD 409,470 ($577,353), followed by physician labor, JD 392,034 ($552,768).

2
Under optimal costing rules, payroll-related employee benefits—sick leave, paid holidays, paid vacations, and
maternity leave—would be accounted for. However, given the existing system of documentation within the
MOH, estimating the costs of these benefits would have necessitated the study to exceed its time constraints.

nput Costs 11
 Table 2: Labor Costs, by Employee Category (in JD)

Labor Categories Salaries Incentives Transportation Total Lc

Medical Doctors JD 333,082 JD 52,712 JD 6,240 JD 392,034
Nurses/Midwives 409,470 -- -- 409,470
Pharmacists 14,800 396 -- 15,196
Administrative 46,792 -- -- 46,792
Finance 18,494 -- -- 18,494
Technical/Medical 102.493 -- -- 102.493
Technical/Nonmedical 4,278 -- -- 4,278
Other 80,531 -- -- 80,531
Total JD JD 53,108 JD 6,240 JD 1,069,288
1,009,940
Note: Administration includes medical records personnel, administrative assistants, personnel,
and photocopying staff; technical/medical includes laboratory technicians, x-ray technicians,
nutrition technicians, physical therapists, and anesthesiology technicians; technical/nonmedical
includes maintenance personnel; “other” includes telephone operators, drivers, security, and
tailors.

Table 3 lists the total number of Al Karak personnel and their per-unit labor costs. In
addition, it converts the total number of employees into full-time equivalent (FTE) estimates.
The MOH does not compile information on the productive and nonproductive hours worked by
employees. The FTEs here (hypothetical-FTEs, or h-FTEs) begin to allow for nonproductive
hours by looking at paid holidays per year to which all hospital employees are entitled.

Table 3: Labor Costs in Full-time Equivalents, by Employee Category

Labor Categories Numbers FTE Hours h-FTE Total Costs Lc per Unit (per FTE)
Medical Doctors 57 136,344 51 JD 392,034 JD 6,878
(JD 7,687)
Nurses/Midwives 173 323,856 156 409,470 2,367
(2,625)
Pharmacists 7 13,104 6 15,196 2,171
(2,533)
Administrative 24 44,928 22 46,792 1,956
(2,127)
Finance 8 14,976 7 18,494 2,312
(2,642)
Technical/Medical 46 86,112 41 102,493 2,228
(2,500)
Technical/Nonmedical 2 3,744 2 4,278 2,139
(2,139)
Other 35 65,520 32 80,531 2,301

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 (2,517)
Total 353 690,456 318 JD 1,069,288
JD 3,029
(JD 3,363)
As illustrated in Table 3, when one accounts for the “nonproductive” holiday hours, it
appears that Al Karak hospital is operating with no more than 318 FTE employees, instead of
the 353 noted in the employee list. One physician FTE puts in 2,392 hours per year; for other
worker categories, one FTE is 1,872 hours per year. Study estimates are based on these FTE
numbers. 3

It should be noted that even this FTE number fails to account for the additional
nonproductive hours of employee sick leave and vacation time. A more accurate FTE estimate
would take each of these into account; however, such an effort was outside the scope of this
study. In short, it is important that Al Karak hospital begin to implement an effective system of
compiling employee work hours that differentiates productive from nonproductive time. A
follow-on study of hospital worker productivity would form an excellent forum for such an
analysis.

Table 4 depicts the percent distribution of employees in each labor category and the
proportion of labor costs consumed by each category. As the table shows, each category’s labor
costs are quite proportionate to their input distribution. Approximately 49 percent of all
employees are classified as nurses (both registered nurses and nursing assistants) or midwives.
Their share of labor costs amounts to approximately 38.3 percent of the total. The next largest
category is that of physician personnel, at 16.2 percent of labor input and 36.6 percent of labor
costs. Pharmacists and their assistants account for roughly 2 percent of hospital-based
personnel and 1.4 percent of labor costs. Administrative/ finance and technical personnel
represent 4.4 percent and 10 percent of input, and 0.6 percent and 0.4 percent of costs,
respectively.

Table 4: Percent Distribution of Labor Costs, by Employee Category

Labor Categories Percent of Personnel Percent of Lc

Medical Doctors 16.2% 36.6%
Nurses/Midwives 49.0% 38.3%
Pharmacists 2.0% 1.4%
Administrative 6.8% 4.4%
Finance 2.3% 1.7%
Technical/Medical 13.0% 9.6%
Technical/NonMedical 0.6% 0.4%
Other 9.9% 7.5%
Total 100.0% 100.0%

3
Once the FTE hours were calculated, the total number of hours of paid government holidays per year were
subtracted from the FTE hours for each labor category. The net figure obtained was then divided by the total
number of FTE hours to obtain the FTE estimate.

nput Costs 13
 Table 5 presents the distribution of personnel by hospital cost center. Of the two broad
categories (Daily Hospital Services and Ancillary and Support Services), the larger share, 64
percent, is employed by cost centers that are directly involved in the provision of daily hospital
services. Four of these cost centers account for 70 percent of daily hospital services costs:
Pediatrics, 21 percent; Surgery, 19 percent; Obstetrics/Gynecology, 15 percent; and Emergency
Room, 14 percent. Thirty-six percent of hospital personnel provide ancillary and support
services, with approximately 61 percent of them assigned full time to administrative tasks.

Table 5: Labor Distribution by Cost Center

Cost Center Physicians Nurses/Midwives Other Personnel Total Personnel

Daily Hospital Services
Surgery 20 23 -- 43
OB/GYN 8 27 -- 35
1
Internal Medicine 3 20 -- 23
Emergency Room 12 20 -- 32
2
ICU/CCU -- 15 -- 15
Operating Room 3 20 8 31
Pediatrics 7 41 -- 48
Outpatient Clinics NB -- -- --
Subtotal 53 166 8 227
Ancillary & Support Services
Admin/Finance NB 7 70 77
Rehabilitation 1 -- 5 6
X-ray Services 3 -- 14 17
Laboratory Services -- -- 8 8
Pharmacy Services -- -- 7 7
Food & Beverage -- -- 6 6
Medical Instruments -- -- 5 5
Subtotal 4 7 115 126
Total 57 173 123 353
1
Internal Medicine includes physician time spent doing rounds of patients in the ICU
(researchers were unable to disaggregate this component of physician time).
2
Al Karak ICU is staffed by full-time nursing staff only.
3
NB indicates that this is a secondary task that is covered by physician staff. For example, all
physician staff must spend a small number of hours per week in the Outpatient Clinics that are
located 7 kilometers from the hospital. These clinics are under the management of the General
Directorate of Health and do not enter into the overall hospital budget. Furthermore, to avoid
double counting, such part-time assignments are not counted as the physician’s primary task.

Table 6 allocates labor costs by cost center. To be consistent with hospital costing rules, all
payroll-related expenses incurred by employees must be charged to the relevant cost centers.
Incentives (bonuses), severance pay, and benefits are typically charged to such centers.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 However, as was previously stated, due to data constraints and MOH accounting rules, this
study was unable to provide a reasonable estimate of severance pay and other benefits. Hence, a
simple allocation rule was employed to allocate labor costs among intermediate and direct
services, according to staffing patterns and employees’ responsibilities. The following allocation
rule was employed:

▲ Employees were categorized by the cost center in which they worked.

▲ If an employee worked in more than one center, his/her labor remuneration was
apportioned among each center as determined by the percentage of time allocated to
each. Hence, employees conducting outpatient, inpatient, and administrative services
for the hospital would have their salaries apportioned among categories, according to
the percentage of hours dedicated to each service category.

Table 6: Labor Costs by Cost Center

Cost Center Salaries Incentives Transportation Total Costs

Daily Hospital Services
Surgery JD 111,722 JD 11,339 JD 1,260 JD 124,321
OB/GYN 93,486 4,117 1,200 98,803
1
Internal Medicine 56,826 3,382 667 60,876
Emergency Room 97,335 957 -- 98,292
2
ICU/CCU 35,917 -- -- 35,917
Operating Room 118,886 8,835 640 128,361
Pediatrics 131,224 6,687 320 138,231
Outpatient Clinics 49,879 9,834 1,440 61,153
Subtotal 695,275 45,152 5,527 745,954
Ancillary & Support Services
Admin/Finance 182,160 3,212 713 186,085
Rehabilitation 16,945 1,739 -- 18,684
X-ray Services 51,822 2,609 -- 54,431
Laboratory Services 18,832 -- -- 18,832
Pharmacy Services 14,800 396 -- 15,196
Food & Beverage 17,093 -- -- 17,093
Other 13,013 -- -- 13,013
Subtotal 314,665 7,956 713 323,334
Total JD 1,009,940 JD 53,108 JD 6,240 JD 1,069,288
1
Includes physician time spent doing ICU rounds (researchers were unable to disaggregate this
component of physician time).
2
Al Karak Hospital ICU is staffed by full-time nursing staff only.

Al Karak hospital incurred JD 1,069,288 in payroll expenses in 1999. As indicated in Table

6, 70 percent of that amount was allocated to the provision of daily hospital services. Thirty
percent was for the provision of ancillary and support services. Surgery, OR, and Outpatient

nput Costs 15
Clinics4 accounted for approximately 17 percent of the labor costs associated with the delivery
of those services. OB/GYN, Pediatrics, and ER accounted for 13 percent, 19 percent, and 13
percent, respectively. Of the 30 percent (JD 323,334) of labor cost allocated to ancillary and
support services, 58 percent was consumed by administrative and financial services. In fact,
these services account for the single largest component of overall hospital labor expenses,
roughly 17 percent.

4
It is important to note that Al Karak hospital provides physician labor to the outpatient clinics that are located 7
kilometers from the hospitals. Hence, the time that physicians spend outside the hospital is viewed as the
opportunity cost that is imposed upon the hospital as a result of their absence. Hence, this cost must be
factored into the hospital’s economic costs even though the clinics are not under the hospital director’s
management.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 3.2 Labor Costs per Unit Output

Table 7 lists labor costs per unit of output (patient days), one of several flow variables
employed in this study. As is typically the case, a patient (census) day includes the day of
admission but not the day of discharge or death. Other information contained within this
section is number of bed days,5 visits,6 and hospital occupancy rates,7 by cost center. In
addition, the total number of adjusted patient days8 was estimated by employing a case-mix
proxy to account for variations in patients treated across hospital cost centers. This allows for a
more accurate comparison of per-unit labor costs across centers. As illustrated in Table 7, the
highest adjusted and unadjusted labor cost per patient days is in the ICU/CCU Department of
the hospital, JD 27 for each. A more informative comparison, across centers, is conducted later
in this section as per-unit costs in terms of total variable costs.

Table 7: Total Labor Costs by Cost Center, Patient Days, Patients, and Adjusted Patient Days

Cost Center Patient Patients Adjusted Labor Lc per Patient Day

Days Patient Costs (Per Adj. Patient
Days Day)
Daily Hospital Services
Surgery 7,180 2,483 6,627 JD 124,321 JD 17
(JD 19)
OB/GYN 5,987 3,234 8,676 98,803 17
(11)
Internal Medicine1 7,091 2,446 6,527 60,876 9
(9)
ICU/CCU2 1,340 496 1,327 35,917 27
(27)
Pediatrics 7,945 2,407 6,407 138,231 17
(22)
Total 29,543 11,066 29,564 JD 458,148 JD 16
(JD 16)
1
Includes physician time spent doing ICU rounds.
2
Only includes nursing staff labor expenditures.

Table 8 distributes labor costs by bed days across the various hospital cost centers. Surgery
exhibits the highest cost per bed day. Table 8 also provides information on the overall hospital
occupancy rate (74 percent), as well as the occupancy rate for each inpatient department. It is
of import to note that the occupancy rates for the Surgery and OB/GYN departments include
patients that are categorized as “day service” patients. Such patients may occupy an inpatient
bed for up to 23 hours from their time of admission. These patients are categorized as

5
Bed day = [(number of licensed beds x number of days in the reporting period)]. Number of licensed beds is
the official number of MOH-approved beds; the reporting period is the period of this study 1 January 1999 to 31
December 1999.
6
A “visit” is defined as the appearance of a patient at the hospital for ancillary or ambulatory treatment.
7
Occupancy rate = [(patient days/bed days)]
8
Adjusted Patient Day = [(patient days)/(group-average length of stay (alos)/population-alos)]

nput Costs 17
 inpatients by the hospital; however, a more appropriate classification would be “outpatient,
day-surgical” or “outpatient, day-obstetrics/gynecology” patients.

Table 8: Total Labor Costs by Cost Center, Bed Days, and Occupancy Rate

Cost Center Bed Days Patient Days Lc per Bed Day Occupancy Rate
Daily Hospital Services
Surgery 10,220 7,180 JD 12 70%
OB/GYN 7,665 5,987 13 78%
1
Internal Medicine 8,760 7,091 7 81%
2
ICU/CCU 1,460 1,340 25 92%
Pediatrics 12,045 7,945 11 66%
Total 40,150 29,543 JD 11 74%
1
Includes physician time spent doing ICU rounds.
2
Only includes nursing staff labor expenditures.

Table 9 list labor costs per admissions and adjusted admissions.9 Unlike a patient day,
which typically pertains to a full day of hospitalization, a patient may be admitted and then
discharged prior to completing a full day of treatment. Hence, this variable is often considered
a flow variable that captures the input costs associated with treating an average case,
irrespective of the patient’s hospital stay. Moreover, patients may be admitted into a particular
cost center and then transferred to another.

Table 9: Labor Costs by Cost Center, Admissions, and Adjusted Admissions

Cost Center Admissions Adjusted Labor Costs Lc per Lc per Adj.

Admissions (Lc) Admission Admission
Daily Hospital Services
Surgery 2,483 2,299 JD 124,32 JD 50 JD 54
OB/GYN 3,234 4,687 98,803 31 21
1
Internal Medicine 2,446 2,244 60,876 25 27
2
ICU/CCU 496 491 35,917 72 73
Pediatrics 2,407 1,941 138,231 57 71
Total 11,066 11,662 JD 458,148 JD 41 JD 39
1
Includes physician time spent doing ICU rounds.

As illustrated in Table 9, the highest labor cost per admission, unadjusted and adjusted, is
within the ICU/CCU Department (JD 72 and JD 73, respectively). However, as previously
mentioned, considering labor cost within this context is primarily for illustrative purposes,
given that labor costs are only one component of variable inputs. Other variable inputs include
utilities, gases, renovations, and contracted services. Hence, a more informative method of

9
Adjusted Admission = [(admissions)/(group-alos/population-alos)]

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 comparing costs across centers is the total variable costs of production, and the relevant per-
unit costs, which is done later in this report.

Table 10 allocates physician labor costs among hospital cost centers according to physician
labor distribution throughout the inpatient, outpatient, and ancillary departments. It is not
unusual for a physician’s work hours to be allocated to more than one cost center. For example,
the hospital director at Al Kara hospital may also be a hospital-based pediatrician. As a result,
his total labor cost to the hospital is allocated to both administrative and clinical cost centers.
As is true throughout this study, the costs in Table 10 include the three major components of
physician remuneration: salaries, incentives, and transportation.

Table 10: Distribution of Total Physician Labor Cost, by Cost Center

Cost Center Salaries Incentives Transportation Lc

Daily Hospital Services
Surgery JD 62,902 JD 11,339 JD 1,260 JD 75,501
OB/GYN 28,156 4,117 1,200 33,473
1
Internal Medicine 12,491 3,383 667 16,541
Emergency Room 48,303 957 -- 49,260
Operating Room 51,655 8,835 640 61,130
Pediatrics 36,065 6,687 320 43,072
2
Outpatient Clinics 49,879 9,834 1,440 61,153
Subtotal 289,451 45,152 5,527 340,130
Ancillary & Support Services
Administration/ Finance 16,793 3,212 713 20,718
Rehabilitation 7,035 1,739 -- 8,774
X-ray Services 19,803 2,609 -- 22,412
Subtotal 43,631 7,560 713 51,904
Total JD 333,082 JD 52,712 JD 6,240 JD 392,034
1
Includes physician time spent doing ICU rounds.
2
During the period of this study, Al Karak hospital did not have outpatient clinic facilities.
However, Al Karak physicians were required to cover the outpatient clinics for the Health
Directorate.

As Table 10 shows, in nominal terms, physician labor costs that are associated with the
provision of surgical services (JD 75,501) constitute the largest category of physician
remuneration (19 percent), as a function of the amount of time allocated towards the provision
of a particular service category. This is followed by OR and the Outpatient Clinics10, each of
which accounts for 15 percent of total physician costs. Roughly 5 percent of physician labor

10
During the period of this study, Al Karak hospital did not have outpatient clinic facilities. The outpatient clinic
services were provided at the MOH clinics that are located 7 kilometers from the hospital. Al Karak physicians’
are required to send part of their work hours at these facilities. Hence, their time spent must be counted as cost
imposed upon the hospital (i.e., opportunity costs).

nput Costs 19
 costs is associated with the provision of administrative and financial services, primarily with the
duties of hospital director.

Table 11 shows the allocation of physician labor costs to the various cost centers that are
engaged in the delivery of daily hospital services. Labor cost per patient day and adjusted
patient day were estimated. The highest physician labor cost (both adjusted and unadjusted) is
found within the Internal Medicine department. Anecdotal evidence suggests that this
department is overstaffed; hence, it is suspected this result is driven by the staffing patterns at
the hospital. However, this cannot be substantiated until further studies of labor productivity
within the hospital are performed.

Table 11: Distribution of Physician Labor Cost by Cost Center, Patients, Patient Days, and
Adjusted Patient Days

Cost Center Patient Patients Lc Lc Per Lc Per Adj.

Days Patient Day Patient Day
Daily Hospital Services
Surgery 7,180 2,483 JD 75,501 JD 11 JD 11
OB/GYN 5,987 3,234 33,473 6 4
1
Internal Medicine 7,091 2,446 16,541 2 3
Pediatrics 7,945 2,407 43,072 5 7
Total 28,203 10,570 JD 168,587 JD 6 JD 6
1
Includes physician time spent doing ICU rounds.

Table 12 allocates the largest labor costs component—nursing costs—among the various
hospital cost centers. As noted above, the cost estimates include all nursing categories:
registered nurses, nursing assistants, and nurse midwives. Nurses are currently ineligible for
MOH incentives (bonuses), and they received no transportation allowances during the period of
this study. Hence, the sole component of nursing labor remunerations in 1999 was salary
compensation. The highest category of nursing labor cost is that associated with the delivery of
Pediatrics services, JD 94,310, or 23 percent of total nursing remuneration. The second largest
category of nursing labor is found in the OB/GYN department at 16 percent.

Table 12: Distribution of Nursing/Midwives Labor Costs, by Cost Center

Cost Center Salaries Number Nurses/Midwives Cost per Unit of Nursing

Labor
Daily Hospital Services
Surgery JD 47,531 23 JD 2,067
OB/GYN 65,330 27 2,420
Internal Medicine 46,354 20 2,318
Emergency Room 49,032 20 2,457
ICU/CCU 34,845 15 2,323
Operating Room 45,734 20 2,287
Pediatrics 94,310 41 2,300

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Outpatient Clinics NB -- --
Subtotal 383,136 166 2,308
Ancillary & Support Services
Administration 26,334 7 3,762
Other -- -- --
Subtotal 26,334 7 3,762
Total JD 409,470 173 JD 2,367
NB: Al Karak hospital nurses, unlike physicians, are not required to spend time at the MOH
clinic that is located 7 kilometers from the hospital.

Table 12 also considers the per-unit cost of nursing labor that is involved in the delivery of
daily hospital services. The highest per-unit nursing cost is found within the Emergency Room
(JD 2,457), followed OB/GYN, ICU/CCU, Internal Medicine, and Pediatrics.

Table 13 allocates nursing labor costs by cost center, patient days, and adjusted patient
days. The highest nursing labor costs per adjusted inpatient day are found in the ICU/CCU
departments. This is expected, given that ICU/CCU patients are the most ill of all patients
within the hospital. As such, they require more intensive nursing labor inputs per patient
treated.

Table 13: Distribution of Nurses/Midwives Labor Cost by Cost Center, Patients, Patient Days and
Adjusted Patient Days

Cost Center Patient Patients Lc Lc Per Lc Per Adj.

Days Patient Day Patient Days
Daily Hospital Services
Surgery 7,180 2,483 JD 47,531 JD 7 JD 7
OB/GYN 5,987 3,234 65,330 11 8
Internal Medicine 7,091 2,446 46,354 7 7
ICU /CCU 1,340 496 34,845 26 26
Pediatrics 7,945 2,407 94,310 12 15
Total 29,543 11,066 JD 288,370 JD 10 JD 10

Table 14 estimates combined total physician and nursing labor costs, and looks at them
relative to the hospital’s patient days and adjusted patient days. The highest labor cost center
per adjusted patient day is the Pediatrics department. This is due primarily to the higher
number of health care personnel (physicians and nurses) that are assigned to this department,
relative to others. For example, when one considers the information contained in Tables 5 and
14, the number of patients per health care worker in non-ICU/CCU departments, the Pediatrics
department exhibits the lowest rate (50 patients per health care worker), indicating a higher

nput Costs 21
 concentration of labor. Conversely, Internal Medicine, Surgery, and OB/GYN exhibit ratios of
106, 104, and 92 patients per health care worker, respectively.11

Table 14: Distribution of Physician and Nurse/Midwife Labor Cost (Lpn) by Cost Center, Patients,
Patient Days, and Adjusted Patient Days

Cost Center Patient Patients Lpn Lpn Per Lpn Per Adj.
Days (Lp+ Ln) Patient Day Patient Day
Daily Hospital Services
Surgery 7,180 4,483 JD 123,032 JD 17 JD 19
OB/GYN 5,987 3,234 98,803 17 11
Internal Medicine 7,091 2,446 62,895 9 10
Pediatrics 7,945 2,407 137,382 17 21
Total 28,203 10,570 JD 422,112 JD 15 JD 15

As illustrated in Table 15, the average product of labor for Internal Medicine is
significantly higher than other departments: 284 adjusted patient days per labor input.12 Hence,
taking into account the information contained in Tables 7 and 15, it appears that the Internal
Medicine department is a low-cost and high-product department, relative to others. Conversely,
ICU/CCU represents a high-cost and low-product department, relative to others. Its labor cost
of JD 27 per adjusted patient day, coupled with its relatively low average product of labor (88
adjusted patient days per unit) suggest that further research into the hospital’s labor policies
within this department be conducted.

Table 15: Average Product of Labor Estimations, by Hospital Cost Center

Cost Center Patient Adjusted Labor Average Product Average Product

Days Patient Days Units (Days/Unit) (Adj.Days/Unit)
Daily Hospital Services
Surgery 7,180 6,630 43 167 154
OB/GYN 5,987 8,676 35 171 248
Internal Medicine 7,091 6,529 23 308 284
ICU/CCU 1,340 1,327 15 89 88
Pediatrics 7,945 6,407 48 166 133
Total 29,543 29,569 164 180 180

11
This difference is likely due to case-mix differences among cost centers.
12
Given that the capital input of the hospital is assumed fixed in the short run, it is possible to estimate a point
on the hospital’s short-run expansion path for its variable factor (labor). Hence, the ratio of its total product of
labor to the number of labor units employed yields the hospital’s average product of labor. A more
comprehensive estimate would have entailed the calculation of total productive hours. This would have yielded
a more precise estimate of average product by department. However, as explained above, study researchers
were precluded from such estimations given the lack of data on productive and nonproductive hours.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Finally, when one considers that Al Karak hospital delivered 2,249 newborns during the
period examined by this study, the OB/GYN labor cost was roughly JD 44 per delivery.

The next section will consider additional variable factors that are utilized in the production
of hospital services. These factors, coupled with the hospital’s labor input, provide a
comprehensive estimate of the total variable cost for producing hospital services at Al Karak in
1999.

3.3 Nonlabor Variable Factors of Production

Nonlabor variable factors of production include utilities (fuel, butane gas, telephone,
electricity, and water); structure and equipment (building renovations, housing quarters,
building maintenance and renewal, equipment maintenance and supplies); consumables (drugs
and medications, gases, medical consumables, laboratory and X-ray consumables); contracted
services (food services, housekeeping, laundry, other); and other (stationeries, textiles and linen,
perishables). Expenditure information on each was obtained from the MOH Directorates of
Supplies and Procurement and Building Maintenance and other agencies.

Table 16 lists the utility cost estimates. Total utility costs were obtained from the MOH
Accounting Division, as well as the hospital’s accounting department. Using hospital blueprints
obtained from the Ministry of Planning (MOP) and the MOH Department of Buildings, a step-
down method was employed to distribute fuel, butane, electrical, and water expenses among
costs centers within the hospital, relative to their proportion of the structure’s square meters.
Telephone expenditures were estimated similarly; however, the allocation rule entailed
distributing costs based upon the proportion of telephone lines available within a given cost
center.

Table 16: Utility Costs Estimates

Utilities Total Costs

Fuel JD 49,341
Butane Gas 1,100
Telephone Services 7,578
Electricity 36,960
Water 26,400
Total Utility Costs JD 121,379

Table 17 lists the variable structure and equipment estimates. The costs of building
renovations and building maintenance were obtained from the MOH Directorate of Building
Maintenance and the Directorate of Planning and Projects. Other building maintenance costs
and costs of building supplies were obtained from the hospital’s accounting records and the
MOH Accounting Division.

Table 17: Variable Structure and Equipment Estimates

Structure and Equipment Total Costs

Rental Unit for Nurse’s Quarters 4,739

nput Costs 23
 Building Maintenance and Renewal 40,000
Equipment Maintenance and Supplies 97,300
Vehicles maintenance & supplies 15,725
Total Structure and Equipment JD 157,764

Table 18 lists the various medical consumables. The costs of drugs, gases, and other
medical consumables, as well as laboratory and radiological consumables, were obtained from
the MOH Directorate of Supplies and Procurement and the MOH Central Drug Directorate.
Drugs and other consumable prices were estimated according to price per unit. Drugs and
medical consumables consumption was allocated across cost centers using a survey designed by
the Hospital Decentralization Implementation Team. Al Karak hospital did not employ a drug
consumption tracking system prior to the implementation of this study. The survey tracked the
distribution of drugs from the pharmaceutical department to the various costs centers over a
period of 60 days. The costs of gases were distributed across each cost center based upon the
proportion of cylinder connections operating within each center.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Table 18: Variable Hospital Consumables

Consumables Total Costs

Drugs and Medications JD 358,110
Gases 12,000
Medical Consumables 190,725
Laboratory and Radiology 66,617
Consumables
Total Consumables JD 627,452

Table 19 lists the various hospital-based services contracted to the private sector.
Contracted services are negotiated at the central ministry level, and a single contractor is
responsible for providing the indicated services to all 23 MOH hospitals. MOH records of
payment for Al Karak hospital were obtained from the MOH Accounting Division, and
compared to those of the contractor, for data verification.

Table 19: Contracted Services

Contracted Services Total Costs

Food services , Cleaning and Security JD 203, 770

Maintenance 81,342
Total Contracted Services JD 285,112

Table 20 lists nonclinical supplies. Estimates for nonclinical supplies were obtained from
the Accounting Department at the hospital and the MOH Accounting and Finance Division.
They include total expenditure for stationeries, textiles and linen, and perishable items. During
the period of this study, the single largest nonclinical supply was perishable items, primarily
foodstuffs (JD 116,970).

Table 20: Non-clinical Supplies

Non-clinical Supplies Total Costs

Stationeries JD 8,643
Textiles and Linen 15,726
Perishables 116,970
Total Non-clinical Supplies JD 141,339

nput Costs 25
3.4 Nonlabor Variable Factors by Cost Center

Employing the aforementioned allocation rules, Table 21 distributes utility costs across
hospital cost centers. During the period of this study, the Pediatric department exhibited the
highest nominal utility costs, JD 9,394, followed by OB/GYN with total utility costs of JD 9,338.
The relatively low OR utility costs are unexpected, given the high voltage equipment that an OR
typically utilizes. In addition, the OR, with its relatively large and open space, typically
consumes significant amounts of fuel. In 1999, the Al Karak OR consumed fuel cost of
approximately JD 3,526. This is far less than what one would expect, relative to other cost
centers. This finding requires further investigation.

Table 21: Distribution of Utility Cost, by Cost Center

Cost Center Fuel Telephone Electricity Water Total Utilities

Daily Hospital Services
Surgery JD 2,785 JD 292 JD 2,544 JD 1,817 JD 7,438
OB/GYN 3,526 292 3,220 2,300 9,338
Internal Medicine 2,576 146 2,352 1,680 6,754
Emergency Room 2,342 437 2,138 1,527 6,444
ICU 1,436 437 1,311 937 4,121
Operating Room 1,513 292 1,382 987 4,174
Pediatrics 3,492 437 3,188 2277 9,394
Outpatient Clinics -- -- -- -- --
Subtotal 17,670 2,333 16,135 11,525 47,663
Ancillary & Support Services
Administration 19,896 2,771 9,698 6,927 39,292
Rehabilitation 551 -- 467 333 1,351
X-ray 2,172 292 1,984 1,417 5,865
Laboratory 710 292 602 430 2,034
Pharmacy 772 437 705 503 2,417
Food & Beverage 6,554 1,015 5,437 3,884 16,890
Legal Medicine 624 146 570 407 1,747
Medical Instruments 1,492 292 1,362 974 4,120
Subtotal 32,771 5,245 20,825 14,875 73,716
Total JD JD 7,578 JD 36,960 JD JD 121,379
50,441 26,400

Table 22 lists other nonlabor variable inputs across hospital costs centers. Even though Al
Karak hospital did not have Outpatient Clinic facilities during the period of this study, it was
responsible for the dispensation of drugs to the outpatient clinics that are located 7 kilometers
from the hospital. Hence, the only nonlabor entry for Outpatient Clinic expenditures is the drug
expenditures that were realized by the hospital for such services during the period of this study.
That amounted to roughly JD 174,800, approximately 2.75 JD per visit.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Table 22: Distribution of Non-utility Variable Cost (Nc), by Cost Center

Cost Center Eq. Maint Bldg Maint Contract Drugs Other Total
& Supplies & Renewal Services Nonutility Nonutility
Daily Hosp Services
Surgery JD 2,639 JD 2,800 JD 19,713 JD 32,682 JD 4,097 JD 61,931
OB/GYN 3,731 3,200 24,268 11,006 4,095 46,300
Internal Medicine 677 2,400 17,874 36,176 3,441 60,568
Emergency Room 4,810 2,400 16,657 41,094 2,433 67,394
ICU/CCU 4,792 1,600 10,483 9,247 1,572 27,694
Operating Room 36,762 1,600 10,870 13,986 6,012 69,230
Pediatrics 5,140 3,200 24,088 39,119 5,691 77,238
Outpatient Clinics -- -- -- 174,800 -- 174,800
Subtotal 58,551 17,200 123,953 358,110 27,341 585,155
Ancillary & Support Services
Administration -- 10,400 74,610 -- 28,729 113,739
Rehabilitation 1,532 400 3,386 -- 534 5,852
X-ray 31,463 2,000 15,002 -- 30,106 78,571
Laboratory 4,615 800 4,946 -- 36,715 47,076
Pharmacy -- 800 5,513 -- 190,750 197,063
Food & Beverage -- 6,000 42,170 -- 118,070 166,240
Legal Medicine 1,139 800 4,766 -- -- 6,705
Medical Instruments -- 1,600 10,766 -- -- 12,366
Subtotal 38,749 22,800 161,159 -- 404,904 627,612

Total JD 97,300 JD 40,000 JD 285,112 JD 358,110 JD 432,245 JD 1,212,767

Table 23 represents the total variable costs of operating Al Karak hospital. This amount
includes the sum of total labor cost (Lc), total utility cost (Uc) and total nonutility costs (Nc).
During the period of this study the total variable costs for Al Karak amounted to JD 2,403,434.
The next section will consider the distribution of this cost in terms of per-unit output. Al
Karak’s support of physician and drug inputs for the MOH outpatient clinics that are not
under its management have resulted in that support leading to the single highest variable cost
for the hospital in the delivery of daily hospital services. In fact, roughly 26 percent of the
variable costs associated with the provision of clinic services is the result of the hospital’s
expenditures on the labor input13 that is employed to provide such services. What is most
significant, however, is the amount of variable costs incurred for administrative/financial
services (JD 339,116), the largest of any service category. Approximately 55 percent of these

13
It must be noted that the Al Karak hospital only supplies labor to the outpatient clinics that are located 7
kilometers away. The structural costs and utilities are funded and maintained by the General Directorate of
Health.

nput Costs 27
 costs are due to labor expenditures. The implications of this will become more apparent in
Chapter 6, which considers administrative/financial costs as a proportion of total hospital costs.

Table 23: Distribution of Total Variable Costs (Vc), by Cost Center

Cost Center Lc Uc Nc Vc = Lc+Uc+Nc

Daily Hospital Services
Surgery JD 124,321 JD 7,438 JD 61,931 JD 193,690
OB/GYN 98,803 9,338 46,300 154,441
1
Internal Medicine 60,876 6,754 60,568 128,198
Emergency Room 98,292 6,444 67,394 172,130
2
ICU/CCU 35,917 4,121 27,694 67,732
Operating Room 128,361 4,174 69,230 201,765
Pediatrics 138,231 9,394 77,238 224,863
Outpatient Clinics 61,153 -- 174,800 235,953
Subtotal 745,954 47,663 585,155 1,378,772
Ancillary & Support Services
Admin/Finance 186,085 39,292 113,739 339,116
Rehabilitation 18,684 1,351 5,852 25,887
X-ray Services 54,431 5,865 78,571 138,867
Laboratory Services 18,832 2,034 47,076 67,942
Pharmacy Services 15,196 2,417 197,063 214,676
Food & Beverage 17,093 16,890 166,240 200,223
Legal Medicine -- 1,747 6,705 8,452
Medical Instruments 13,013 4,120 12,366 29,499
Subtotal 323,334 73,716 627,612 1,024,662
Total JD 1,069,288 JD 121,379 JD 1,212,767 JD 2,403,434
1
Includes physician time spent rounding on ICU patients (researchers were unable to
disaggregate this component of physician time).
2
Al Karak ICU is staffed by full-time nursing staff only.

3.5 Estimations of Per Unit Variable Cost

This section looks at total variable costs (labor and nonlabor) at Al Karak and at the
distribution of these costs relative to the number of patients, patient days, and adjusted patient
days.

The total variable costs Al Karak hospital incurred are the total costs of utilizing inputs
that vary according to the volume of hospital output. As previously explained, hospital output is
approximated through the use of various flow variables, typically the number of patient days
(adjusted or unadjusted), bed days, patients, admissions, and visits. When total variable costs

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 are considered relative to a particular flow variable, the result is the estimated average variable
cost of that variable. The number of hospital beds is occasionally utilized as a flow variable;
however, as has been observed in the literature, the use of beds is an inaccurate measure that
consistently fails to accurately capture costs effects (Banks, 1993).

nput Costs 29
 Table 24 shows AVCs for five departmental cost centers at Al Karak hospital. The AVC in
terms of an adjusted patient day in the ICU/CCU department is JD 51, the most expensive
service in the hospital. However, this amount is not surprising, given the patient population
treated within the ICU/CCU. The second highest AVC occurs in the provision of Pediatric
services (JD 35), followed by Surgery, OB/GYN, and Internal Medicine, which incur AVCs of
JD 29, JD 18, and JD 19, respectively.

Table 24: Distribution of Total Variable Costs, by Cost Center, Patient Days,
and Adjusted Patient Days

Cost Center Patient Adjusted Total Average Adjusted

Days Patient Variable Variable Average
Days Costs Cost Variable Costs
Daily Hospital Services
Surgery 7,180 6,630 JD 193,690 JD 27 JD 29
OB/GYN 5,987 8,676 154,441 26 18
Internal Medicine 7,091 6,529 128,198 18 19
ICU/CCU 1,340 1,327 67,732 51 51
Pediatrics 7,945 6,407 224,863 28 35
Total 29,543 29,569 JD 768,924 JD 26 JD 26

Additional information can be extrapolated from the variable cost data in Table 24. For
example, of particular concern to the central ministry are the variable costs associated with the
delivery of inpatient care within the OB/GYN department, in particular such costs relative to
the number of births that have taken place within that department. It is known that Al Karak
hospital delivered 2,249 newborns in 1999. Given its total variable OB/GYN costs of JD 154,441,
that amounted to an AVC of roughly JD 69 per delivery. This cost approximation may be
extrapolated to other MOH hospitals, which exhibit similar cost structures.

Table 25 estimates AVC in terms of hospital admissions, both adjusted and unadjusted.
The highest AVC is found in the ICU/CCU department. The lowest is in the OB/GYN
department.

Table 25: Distribution of Total Variable Costs, by Cost Center, Admissions,

and Adjusted Admissions

Cost Center Total Adjusted Total Variable Variable Cost

Admissions Admissions Variable Costs Per Per Adjusted
Costs Admission Admission
Daily Hospital Services
Surgery 2,483 2,299 JD 193,690 JD 78 JD 84
OB/GYN 3,234 4,687 154,441 48 33
Internal Medicine 2,446 2,244 128,198 52 57
ICU/CCU 496 491 67,732 137 138
Pediatrics 2,407 1,941 224,863 93 116
Total 11,066 11,662 JD 768,924 JD 69 JD 66

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Moreover, policymakers often utilize AVC estimates to assess existing cost-sharing rules,
relative to the hospital’s overall cost structure. For example, in the short run a hospital, like
other organizations, should be able to recover its AVCs of production, even if its average fixed
costs are “sunk.” Therefore, governments often estimate the AVC for a category of public
hospital services and from there, estimate the optimal cost-sharing amounts.

Table 26 shows the total number of Emergency Room and Outpatient Clinic visits to Al
Karak hospital in 1999. A visit is the appearance of a patient for ambulatory and/or ancillary
services. A clinic visit may consist of diagnostic, preventive, curative, and rehabilitative
services. An ER visit occurs with the provision of emergency treatment to an ill or injured
person, but may also include services to patients who utilize the ER for nonemergency reasons.

Table 26: Distribution of Total Variable Costs, by Emergency Room and Outpatient Visits

Cost Center Total Visits Total Variable Costs Variable Cost Per Visit
Daily Hospital Services
Emergency Room 36,366 JD 172,130 JD 4.76
1
Outpatient Clinics 63,514 235,953 3.71
Total 99,880 408,083 JD 4.09
1
clinic figures represent physician and drug cost only.

In 1999, there were 36,366 ER visits and 63,514 clinic visits to the hospital. The number of
clinic visits includes only those patients that were treated by full-time Al Karak physicians, with
part-time assignment to the outpatient clinic facilities located 7 kilometer from the hospital. The
AVC of an ER visit was JD 4.76 and of a clinic visit, JD 3.71. When one considers this
information in terms of the MOH patient cost-sharing rules for nonemergency ER patients and
clinic patients, the cost-sharing implications are quite interesting. For example, the MOH
requires ER patients to pay JD 1.65 at the point of services, while it requires clinic patients to
pay JD 1.65 and JD .55 for the first and consecutive visits, respectively.

3.6 Distribution of Variable Drug Costs

According to recent National Health Account estimates, Jordanians spent roughly JD 158
million on drugs. This represents approximately 35 percent of all expenditures on health care
services, a substantial amount for any country. In fact, total expenditures on drugs amounted to
more than 3 percent of the country’s Gross Domestic Product. This makes the cost of drugs
within MOH hospitals a paramount concern for policymakers.

Table 27 lists the distribution of drug costs among hospital costs centers. The ICU/CCU
department exhibits the highest drug costs per patient, JD 19, roughly 46 percent higher than
the cost per surgical patient. However, the costs per patient day for ICU/CCU and Pediatric
patients are the highest. The lowest drug costs, in terms of patients and patient days, is within
the OB/GYN department: JD 3 per patient and JD 1 per patient day. In fact, its drug costs per
patient is 425 percent less than the second lowest hospital cost center, Surgery. In terms of
overall patients treated, the hospital’s average drug costs amounted to JD 12 per patient, or JD
4 per adjusted patient day.

nput Costs 31
 Table 27: Distribution of Drug Costs, by Cost Center, Patient Days, Adjusted Patient Days,
and Patients

Cost Center Total Drug Number of Drug Drug Costs Drug

Costs Patient Costs Per Per Costs Per
Patient Adjusted Patient
Day Patient Day
Daily Hospital Services
Surgery1 JD 32,682 2,483 JD 5 JD 5 JD 13
OB/GYN 11,006 3,234 2 1 3
Internal Medicine 36,176 2,446 5 6 15
ICU/CCU 9,247 496 7 7 19
Pediatrics 39,119 2,407 5 6 16
Total JD 128,230 11,066 JD 4 JD 4 JD 12
1
Includes drugs used during surgical operations.

The outpatient clinics that are located 7 kilometers from the hospital and staffed part time
by Al Karak physicians were responsible for 60 percent (JD 215,894) of all drug costs incurred
by the hospital. The average drug costs amounted to JD 1.13 per ER visit and JD 2.75 per
outpatient visit. Under existing MOH cost-sharing rules, the outpatient co-payment for
prescription drugs at all MOH hospitals is 250 fils per prescription. Given that the hospital
lacks information on the average number of prescriptions per patient, it is impossible to draw
any substantive policy implications from the data presented in Table 28. However, anecdotal
evidence suggests that the cost-sharing rules are slightly lower than the hospital’s average drug
cost, warranting a more detailed study of drug consumption.

Table 28: Distribution of Drug Costs by Emergency Room and Outpatient Clinic Visit

Cost Center Total Drug Number of Drug Costs per

Costs Visits Visit
Daily Hospital Services
Emergency Room JD 41,094 36,366 JD 1.13
Outpatient Clinics JD 174.800 63,514 JD 2.75
Total JD 215,894 99,880 JD 2.16

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 4. Accounting for Fixed Input Costs

This chapter reports on the costs of fixed inputs at Al Karak hospital. As discussed in
Chapter 2, fixed inputs are those factors of production whose quantity does not vary according
to the volume of output. At Al Karak hospital, those inputs are hospital structure, vehicles,
equipment, and furniture. This chapter first determines the costs of the fixed inputs, then
discusses their distribution among hospital cost centers. It closes with a discussion of the unit
costs for fixed inputs.

4.1 Estimating Costs of Fixed Inputs

The structural components of Al Karak hospital are the hospital building, electrical
structures, plumbing and sewage system, and kidney dialysis unit. The replacement costs of the
structural components were estimated based on the original 1995 purchase prices, obtained
from the Ministry of Finance (MOF),14 which then were inflated over the 1996 to 1999 period.
The costs of other fixed factors, such as vehicles, equipment, and furniture were based upon
their replacement costs in 1999 Jordanian dinars.

The replacement cost of each fixed input then was annualized based on its useful working
life. To do this, a definition of working life of each input, along with its depreciation factor, was
obtained from the MOF, according to ministry rules for estimating the useful working life of
public sector capital inputs. The annualized economic costs of all fixed factors were estimated
as follows: an annualization factor was estimated according to Equation (1), using a real
interest rate of 3 percent and the relevant depreciation factor.15 The replacement cost of the
fixed factor was then divided by the annualization factor.16 This yields the base year capital
costs of employing the fixed factor (i.e., its 1999 economic costs).

Af = 1/(r+d) • [1-1/(1+r+d)T] (1)

where,
Af = annualization factor
r = average real interest rate
d = depreciation factor
T = total working life-years of fixed factor

The annualized economic costs of the hospital’s structural components are shown in Table
29. Assuming a total working life of 40 years, an average real interest rate of 3 percent, and a
depreciation factor of 2.5 percent, the table lists the annualized economic costs that must be
imputed onto the base year. The annualization factor calculated under this set of assumptions
equaled 16.05.

14
As is traditional, this study excludes land value from estimates about structural components, because land
values typically exhibit significant geographic variation and overstate the capital costs of operating a facility.
15
Real interest rates were obtained from the Export and Finance Bank, Research and Studies Investment
Banking Unit.
16
This procedure yields the discounted present value of the fixed factor during the base year.

osts 33
 Table 29: Annualized Economic Costs of Fixed Hospital Structures

Fixed Factor Replacement Costs (1999 JD) Annualized Capital Costs 1999

Infrastructure of Hospital JD 1,093,787 JD 68,149

Hospital Building & 6,176,177 384,809
Electrical structures &
Sewage & Plumbing
C.T Scan Building 80,156 4,994
Drivers Building 29,541 1,841
Total JD 7,379,661 JD 459,793

Table 30 presents the annualized economic costs of each hospital vehicle. Replacement
costs are based upon the 1999 insurance value of each vehicle model. Employing Equation (1),
and assuming the MOF working life of seven years for each vehicle and a depreciation factor of
14.28 percent, the estimated annualization factor was 3.89.

Table 30: Annualized Economic Costs of Hospital Vehicles

Vehicle Number Model Replacement Costs Annualized Capital

Costs

21074 Ambulance / Dodge JD 35,000 JD 8,997

19604 Ambulance / Chevy 35,000 8,997
18332 Renault / Hearst 12,000 3,085
22990 Mitsubishi Bus 23,000 5,913
8411 Coaster Bus 6,000 1,542
14131 Isusu Bus 6,000 1,542
18051 Ford Bus 12,000 3,085
14758 Isusu Salon 12,000 3,085
16343 Mitsubishi Pick up 10,000 2,571
19960 Isusu Bus / Turkish 15,000 3,856
Total JD 166,000 JD 42,673

Table 31 presents the estimated annualized economic costs of the hospital’s medical
equipment and furniture inputs. (Annex A contains a complete list of the hospital’s equipment
and furniture inputs.) Replacement cost was obtained from the MOH Directorate of
Procurement and Supplies. The MOF working life of both equipment and furniture is 10 years,
and each has a depreciation factor of 10 percent. Based upon this set of assumptions, the
annualization factor estimated equaled 5.43.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Table 31: Annualized Economic Costs of Equipment and Furniture

Fixed Input Replacement Costs Annualized Capital Costs

Medical Equipment JD 2,005,327 JD 369,305

Medical Furniture 102,719 18,917
Furniture 360,557 66,401
Total JD 2,468,603 JD 454,623

4.2 Distribution of Fixed Costs by Cost Center

Table 32 shows the distribution of fixed cost components by cost center. The distribution
was determined according to the following allocation rules:

▲ The hospital’s annualized structural costs were allocated to each cost center in
proportion to the total number of square meters occupied by each center according to
hospital blueprints obtained from the MOH Department of Buildings.

▲ The total annualized costs of the hospital’s vehicles were apportioned as follows: total
ambulance costs were allocated to departments, based upon their proportion of
patients transported. Hearse costs were allocated to the legal medicine department.
Costs of hospital buses, used primarily for transporting nursing personnel from their
residences to Al Karak hospital, were allocated based upon the proportion of nursing
personnel employed within each center. Costs of the pickup vehicle utilized for
transporting small equipment and supplies to various hospital cost centers were
distributed based upon the proportion of personnel assigned to a particular center, and
the same procedure was followed for the passenger vehicle that is utilized for
transporting administrative documents and small supplies.

▲ Medical equipment and furniture costs were apportioned to costs centers after an
inventory of all such items was conducted and their 1999 replacement cost obtained
from the MOH Directorate of Procurement and Supplies.

The rightmost column of Table 32 presents the total fixed costs, by cost center, of operating
Al Karak hospital: JD 957,089 ($1,349,495). The ICU/CCU exhibits the highest fixed costs of
any center directly involved in the delivery of daily hospital services, JD 161,369. This amount
is roughly 80 percent higher than that of the Pediatric department, the second highest cost
center in terms of fixed costs. The majority of the fixed costs (86 percent) for the ICU/CCU are
due to the hospital’s expenditures on the fixed medical equipment that is associated with this
center. With respect to ancillary and support services, the highest category of fixed costs is that
associated with the allocation of X-ray services, JD 110,196 ($155,376). Of such costs, nearly
three-fourths are allocated for the employment of medical equipment.

osts 35
 Table 32: Distribution of Fixed Costs (Fc), by Cost Center

Cost Center Structure Vehicles Medical Equipment Medical Furniture Total Fixed Cos
Furniture
Daily Hospital Services
Surgery JD 36,783 JD 6,642 JD 2,954 JD 511 JD 4,960 JD 51,850
OB/GYN 45,979 3,013 12,187 699 4,788 66,666
1
Internal Medicine 32,186 5,728 3,693 341 5,159 47,107
Emergency Room 32,186 10,576 9,602 2,346 3,201 57,911
2
ICU/CCU 18,392 2,617 138,859 605 896 161,369
Operating Room 18,392 2,479 38,777 13,847 644 74,139
Pediatrics 45,979 6,311 32,499 568 4,502 89,859
Outpatient Clinics N/A N/A N/A N/A N/A N/A
Subtotal JD JD 37,366 JD 238,571 JD 18,917 JD 24,150 JD 548,901
229,897
Ancillary & Support Services
Admin/Finance JD 78,164 JD 1,317 JD -- -- JD 20,392 JD 99,873
Rehabilitation --- 113 13,295 -- 425 13,833
X-ray Services 27,588 283 81,986 -- 339 110,196
Laboratory 9,196 170 18,096 -- 2,078 29,540
Services
Pharmacy Services 9,196 113 -- -- 558 9,867
Food & Beverage 78,164 113 -- -- 18,014 96,291
Legal Medicine 9,196 3,085 17,357 -- 40 29,678
Medical Instruments 18,392 113 -- -- 405 18,910
Subtotal JD 229,896 JD 5,307 JD 130,734 -- JD JD
142,251 408,188
Total JD 459,793 JD 42,673 JD 369,305 JD 18,917 JD 166,401 JD 957,089

4.3 Estimating Per Unit Fixed Cost

As discussed in the preceding chapter, hospital output is approximated through the

employment of various flow variables. The variables that have been utilized throughout this
study are those that are typically employed in hospital cost studies: patient days (adjusted and
unadjusted), bed days, patients, admissions, and visits. When total fixed costs are considered
relative to a particular flow variable, the result is equivalent to estimating the AFCs in terms of
that variable.

This section of the report distributes Al Karak hospital’s total fixed costs by cost center,
patient days, and adjusted patient days. Where appropriate, that information is presented as
the hospital’s AFC of producing a particular service category.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Table 33 shows the distribution of total fixed costs of hospital departments that deliver
daily hospital services, by cost center, patient day, and adjusted patient day. In terms of
adjusted patient days, the AFC of a patient day in the ICU/CCU amounted to JD 122. This
represents the highest AFC for the centers directly involved in the provision of daily hospital
services. Other cost centers involved in the distribution of daily hospitals services show
significantly lower AFCs: Pediatrics, Surgery, OB/GYN, and Internal Medicine exhibit AFCs of
JD 14, JD 8, JD 8, and JD 7, respectively.

Table 33: Distribution of Total Fixed Costs, by Cost Center, Patient Days,
and Adjusted Patient Days

Cost Center Patient Adjusted Total Fixed Average Adjusted

Days Patient Costs Fixed Cost Average
Days Fixed Costs
Daily Hospital Services
Surgery 7,180 6,627 JD 51,850 JD 7 JD 8
OB/GYN 5,987 8,676 66,666 11 8
Internal Medicine 7,091 6,527 47,107 7 7
ICU/CCU 1,340 1,327 161,369 120 122
Pediatrics 7,945 6,407 89,859 11 14
Total 29,543 29,564 JD 416,851 JD 14 JD 14

Table 34 shows AFCs in terms of hospital admissions, both adjusted and unadjusted.
Again, the highest AFC (JD 325) is found in the ICU/CCU department. As has been noted
throughout this report, the OB/GYN department consistently exhibits the lowest per-unit cost
of all centers that are involved in the allocation of daily hospital services.

Table 34: Distribution of Total Fixed Costs, by Cost Center, Admissions, and Adjusted Admissions

Cost Center Total Adjusted Total Fixed Fixed Fixed Cost

Admissions Admissions Costs Costs Per Per
Admission Adjusted
Admission
Daily Hospital Services
Surgery 2,483 2,299 JD 51,850 JD 21 JD 23
OB/GYN 3,234 4,687 66,666 21 14
Internal Medicine 2,446 2,244 47,107 19 21
ICU/CCU 496 491 161369 325 329
Pediatrics 2,407 1,941 89,859 37 46
Total 11,066 11,662 JD 416,851 JD 38 JD 36

Table 35 provides information on AFCs in terms of variables that are associated with the
distribution of ER services. As noted earlier, Al Karak hospital did not have outpatient clinic
facilities on its premises during the period of this study. Clinic services were provided by the

osts 37
Health Directorate of Al Karak, and were managed and financed by the same source. However,
Al Karak hospital provided physician labor to the facilities, which were located 7 kilometers
from the hospital.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Table 35: Distribution of Total Fixed Costs, by Emergency Room Visits

Cost Center Total Total Fixed Fixed Cost Per

Visits Costs Visit
Daily Hospital Services
Emergency Room 36,366 JD 57,911 JD 1.59

osts 39
5. Estimating Total Hospital Costs

This chapter estimates the total costs of providing services at Al Karak hospital. As was
illustrated in Chapter 2, total economic cost is the sum of the total variable costs and total fixed
costs of operating an institution. Chapter 3 provided a detailed estimation of Al Karak
hospital’s total variable costs, based on the hospital’s labor and nonlabor variable inputs.
Chapter 4 estimated the hospital’s total fixed costs by considering the costs of its fixed
structure, vehicle, furniture, and equipment inputs.

5.1 Distribution of Total Costs by Cost Center

Table 36 summarizes the total variable costs, total fixed costs, and total operating costs of
Al Karak hospital in 1999, by cost center. Table 37 shows the percent distribution of those same
costs.

Table 36: Distribution of Total Costs, by Cost Center

Cost Center Total Variable Total Fixed Cost Total Cost

Costs
Daily Hospital Services
Surgery JD 193,690 JD 51,850 JD 245,540
OB/GYN 154,441 66,666 221,107
1
Internal Medicine 128,198 47,107 175,305
Emergency Room 172,130 57,911 230,041
2
ICU/CCU 67,732 161,369 229,101
Operating Room 201,765 74,139 275,904
Pediatrics 224,863 89,859 314,722
Outpatient Clinics 235,953 N/A 235,953
Subtotal JD 1,378,772 JD 548,901 JD 1,927,673
Ancillary & Support Services
Admin/Finance JD 339,116 JD 99,873 JD 438,989
Rehabilitation 25,887 13,833 39,720
X-ray Services 138,867 110,196 249,063
Laboratory Services 67,942 29,540 97,482
Pharmacy Services 214,676 9,867 224,543
Food & Beverage 200,223 96,291 296,514
Legal Medicine 8,452 29,678 38,130
Medical Instruments 29,499 18,910 48,409
Subtotal 1,024,662 408,188 1,432,850
Total JD 2,403,434 JD 957,089 JD 3,360,523

41
 Table 37: Percent Distribution of Total Costs, by Cost Center

Cost Center Total Variable Total Fixed Cost Total Cost

Costs
Daily Hospital Services
Surgery 8.1% 5.4% 7.3%
OB/GYN 6.4 7.0 6.6
1
Internal Medicine 5.3 4.9 5.2
Emergency Room 7.2 6.1 6.8
2
ICU/CCU 2.8 16.9 6.8
Operating Room 8.4 7.7 8.2
Pediatrics 9.4 9.4 9.4
Outpatient Clinics 9.8 N/A 7.0
Subtotal 57.4% 57.4% 57.3%
Ancillary & Support Services
Admin/Finance 14.1% 10.4% 13.1%
Rehabilitation 1.1 1.4 1.2
X-ray Services 5.7 11.5 7.4
Laboratory Services 2.8 3.1 2.9
Pharmacy Services 8.9 1.0 6.7
Food & Beverage 8.3 10.1 8.8
Legal Medicine 0.4 3.1 1.1
Medical Instruments 1.2 2.0 1.5
Subtotal 42.6 % 42.6 % 42.7 %
Total 100% 100% 100%

As the tables show, nearly two-thirds of the hospital’s operating costs—whether variable,
fixed, or total—is consumed by centers directly engaged in the delivery of daily hospital
services. This finding is not surprising. Also unsurprising is that the highest percent of variable
and fixed costs are those allocated to the distribution of administrative/financial and operating
room services, respectively.

What is startling, however, is that the highest percentage (13.1 percent, or, in nominal
terms, JD 438,989, or $618,974) of total costs is allocated towards the distribution of
administrative/financial services.17 In fact, this represents a lower bound estimate, given that
this analysis excludes the proportion of administrative/financial services that are conducted by
the central ministry on behalf of Al Karak hospital. For example, the central ministry conducts
all procurement (e.g., drugs, devices, and equipment) and most administrative functions that
are associated with personnel issues. Under optimal circumstances, such costs would be

17
This amount is significantly lower than the national average of 25 percent for U.S. hospitals.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 included in the analysis. However, the lack of an effective budget tracking system within the
MOH precluded obtaining robust estimates of such central ministry expenditures.

5.2 Total Costs Per Unit of Output

This section discusses Al Karak operating costs per unit of output, using the flow variables
that have been employed throughout this study: patient days (adjusted and unadjusted), bed
days, patients, admissions, and visits. The result is equivalent to estimating the ATC in terms of
that variable. This section also considers various ATC estimates of operating Al Karak
hospitals in terms of the aforementioned flow variables.

As Table 38 shows, the costs of ICU/CCU services is the highest among all categories of
daily hospital services in terms of both unadjusted and adjusted patient days, JD 171 and JD
173, respectively. This is expected given the significant amounts of variable and fixed factors
that are used in the treatment of ICU/CCU patients. The lowest ATCs are found in the
treatment of OB/GYN patients, JD 25 for adjusted patient days. Additional information
concerning the hospital’s total costs may be extrapolated from the data. For example, as was
discussed in Section 3.5, Al Karak hospital delivered 2,249 newborns in its OB/GYN
department. Given total operating costs of JD 181,992 for this cost center, the ATC is roughly
JD 98 ($138) per delivery.18

Table 38: Distribution of Total Costs, by Cost Center, Patient Days, and Adjusted Patient Days

Cost Center Patient Adjusted Total Costs Average Adjusted

Days Patient Total Costs Average
Days Total Costs
Daily Hospital Services
Surgery 7,180 6,630 JD 245,540 JD 34 JD 37
OB/GYN 5,987 8,676 221,107 37 25
Internal Medicine 7,091 6,529 175,305 25 27
ICU/CCU 1,340 1,327 229,101 171 173
Pediatrics 7,945 6,407 314,722 40 49
Total 29,543 29,569 JD 1,185,775 JD 40 JD 40

Table 39 shows estimates of ATCs in terms of hospital admissions, both adjusted and
unadjusted. The highest ATC occurs in the production of ICU/CCU services. The lowest ATC
occurs during the production of OB/GYN services. In fact, with an adjusted ATC relative to the
number of admissions of roughly JD 47 ($66), OB/GYN service production is 66 percent lower
than that of Internal Medicine service production and 128 percent lower than that of surgery
service production.

18
Utilizing the data obtained in this document, the PHRplus Health Insurance Pilot project has estimated the
total costs per maternity case, including outpatient and inpatient treatment, as well as making adjustments for
vaginal and Caesarean cases, to be JD158 per case at Al Karak hospital. See Duffy, 2002.

43
 Table 39: Distribution of Total Costs, by Cost Center, Admissions and Adjusted Admissions

Cost Center Total Adjusted Total Costs Total Total Costs

Admissions Admissions Costs Per Per
Admission Adjusted
Admission
Daily Hospital Services
Surgery 2,483 2,299 JD 245,540 JD 99 JD 107
OB/GYN 3,234 4,687 221,107 68 47
Internal Medicine 2,446 2,244 175,305 72 78
ICU/CCU 496 491 229,101 462 467
Pediatrics 2,407 1,941 314,722 131 162
Total 11,066 11,662 JD JD 107 JD 102
1,185,775

Table 40 presents total costs per ER visits at Al Karak hospital. A visit is the appearance of
a patient in the hospital for ambulatory and/or ancillary services. As shown in Table 26, the
AVC of an ER visit is JD 4.76, and as illustrated in Table 40, the ATC of such services is JD
6.33. This information implies that 75 percent of the average costs that are associated with the
production of emergency room services are consumed by variable factor inputs.

Table 40: Distribution of Total Costs, by Emergency Room and Outpatient Visits

Cost Center Total Total Costs Total Cost Per

Visits Visit
Daily Hospital Services
Emergency Room 36,366 JD 230,041 JD 6.33

Table 41 contains the unit costs of hospital services, loaded with administrative/financial
costs. These administrative/financial costs represent an average of 38.5 percent of total costs of
daily hospital services.

Table 41: Per Unit Daily Hospital Services Loaded With Admin/Finance Costs

Cost Center Total Costs Admin/Finance Total Costs Loaded TC

(Loaded) Costs (TC) + (Loaded) per Adjusted
Patient Day
Daily Hospital Services
Surgery JD 245,540 JD 98,431 JD 343,971 JD 52
OB/GYN 221,107 128,806 349,913 40
Internal Medicine 175,305 96,931 272,236 42
ICU/CCU 229,101 19,701 248,802 187
Pediatrics 314,722 95,120 409,842 64
Total JD 1,185,775 JD 438,989 JD 1,624,764 JD 55

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

45
6. Policy Implications and Conclusion

This detailed economic analysis of the cost of producing hospital services at Al Karak
hospital marks completion of an additional step in the Ministry of Health’s decentralization of
its 23 publicly owned and operated hospitals. The first phase of this process began nearly four
years ago when the MOH, with the technical assistance of the Hospital Decentralization
Implementation Team, selected Princess Raya and Al Karak hospitals as its two pilot
institutions from which this process would begin. Since then, under Phase 2, the MOH has
made significant strides in this effort. In addition to implementing several short-run changes in
existing rules and regulations, the MOH has designed and approved the establishment of
hospital governing boards at each hospital, as well as supported the extensive training activities
that both PHR and PHRplus have provided to hospital personnel. The information contained in
this cost study will provide the MOH with needed information that will assist it in its future
design of an appropriate operating budget for each hospital. However, prior to implementing
such a budget, several key issues must be addressed.

First, an appropriate managerial cost accounting system does not exist at either hospital.
Having such a system in place is a necessary condition for keeping track of monetary flows
throughout the system, and it is an essential tool for assisting department managers, i.e., cost
center managers, to manage their resources efficiently. For example, currently the hospitals do
not effectively track the costs and amounts of drugs consumed by each department. As a result,
in order to estimate drug expenditures by costs center (department), the Implementation Team
had to design a survey instrument to track drug consumption. In tracking consumption, the
survey found that both hospitals have excess inventory of certain drug categories and a
shortage of others, which they attribute to the highly centralized MOH procurement and supply
process. An effective managerial cost accounting system and better coordination between the
hospital and the MOH Procurement and Supplies division should allow for more efficiency in
hospital drug inventories. PHRplus will assist Princess Raya and Al Karak hospitals in the
development of a managerial cost accounting system.

Secondly, because labor costs represent 32 percent of Al Karak hospital’s total operating
costs, the employment and distribution of labor throughout the hospital has significant overall
cost implications. As this study shows, the Internal Medicine department of the hospital
appears to be quite productive. While this finding cannot be substantiated without further
studies on the relative productivity of employees within each department, it implies that the
MOH should make a greater effort in tracking the total number of work hours, both productive
and nonproductive, for all hospital employees and develop a system to accurately estimate the
number of full-time equivalent hours that are worked by hospital employees, not only at Al
Karak, but at other MOH hospitals as well. In looking at labor costs the study also revealed
that, due to existing MOH and Civil Service rules, personnel records at the central ministry are
not updated and matched against the hospital’s personnel records on a regular basis. For
example, the study found that personnel reassigned from Al Karak hospital to other MOH
facilities often are still listed as Al Karak employees in central ministry records. This problem
can be eliminated through the development of a more effective system of communication and
reporting between the MOH personnel division and the hospital. In this study labor costs were
treated as a variable factor. The ability of a hospital manager to vary labor inputs is a matter of

47
MOH policy. The implementation of a managerial cost accounting system will provide MOH
policymakers and hospital managers with additional data to recommend hospital workforce
policies that increase efficiency within each cost center.

Finally, it would be inappropriate to use this study to make any conclusion about cost
sharing. More analysis of the hospital’s services production and the economic and demographic
profiles of its patients are needed prior to implementing changes in the existing policies.
However, implementation of managerial cost accounting systems, based on the framework
suggested by this study, is a logical next step that will add to the complete understanding of
hospital costs. This understanding is essential before accurate cost-sharing systems can be
designed and implemented.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Annex A: Summary Tables of Allocation Rules

Table A1: Allocation Rules for Utility Cost Estimates, and Variable Structure and Equipment
Estimates (See Tables 15 and 16)
Input Category Allocation Rule Note

Labor Cost Distributed according to Example, 20% of time

percent time assigned to implied 20% of labor
relevant cost center remuneration to the
particular cost center
Fuel, Butane Gas, Distributed according to the Example, 10% of occupied
Electricity, and Water percent of square meters of physical space implied
physical space occupied by a 10% allocation of total
respective cost center1 costs
Telephone Services Distributed according to the Example, 5% of hospital
percent of telephone lines telephone lines, entailed
that are distributed to the 5% distribution of total
relevant cost center costs to relevant center
Building Renovations, Distributed according to the Example, 10% of occupied
Maintenance percent of square meters of physical space implied
physical space occupied by a 10% allocation of total
respective cost center1 renovation costs
Rehabilitation, Physician Distributed according to the Quarters rentals are
and Technicans Quarters percent of nursing staff overnight facilities for
employed in a particular cost rehabilitation, physicians,
center and technicians
Building and Equipment Distributed based upon the
Maintenance, Renewa,l current costs of maintenance
and Supplies and renewal for a particular
cost center
1
Based upon blueprint estimates that were obtained from the MOH Department of Buildings

s 49
Table A2: Allocation Rules Variable Hospital Consumables, Contracted Services, and Nonclinical
Supplies (See Tables 17 thru 19)
Input Category Allocation Rule Note

Drugs and Distributed based upon the Based upon a survey of drug
Medications percent of medications consumption, by cost center,
allocated to a particular cost that was conducted over a two-
center month period
Gases Distributed based upon the Example, 10% of gas valve
percent of gas valve connections connectors implied 10% of total
that were available in a cost to be distributed to the
particular cost center relevant cost center
Medical Consumables Distributed based upon the Example, cost center that
percent of patient days represented 5% of patient days
received 5% of total costs
Laboratory and Distributed based upon the
Radiological percent of patient days
Consumables
Contracted Services Distributed based upon the
percent of patient days
Nonclinical Supplies Distributed based upon the
percent of patient days

Table A3: Allocation Rules for Fixed Hospital Structure, Vehicles, Equipment and Furniture (see
Tables 28 thru 30)
Input Category Allocation Rule Note

Hospital Building, Costs distributed based upon Blueprints obtained from the
Electrical Structures, the proportion of square MOH Department of Buildings
Sewage and Plumbing meters
Kidney Dialysis Unit Costs allocated to the Internal Kidney dialysis unit is located
Medicine cost center within the internal medicine
department
Ambulances Costs allocated to Emergency Emergency transport vehicle
Room cost center
Tanker Costs allocated based upon Vehicle used for waste disposal
inpatient days
Buses Costs allocated according to Buses are used for transporting
percent of nursing personnel nursing personnel from
assigned to a particular costs residences to hospital
center
Pickup and Isuzu Salon Costs allocated according to Vehicles are utilized for
the percent of total personnel transporting documents and
other small material from the

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 assigned to a given cost center central ministry to the hospital,
or within the governorate

s 51
Annex B: Service Inventory of Al-Karak Hospital

REPORTING REQUIREMENT
SERVICES INVENTORY
(“X” indicates that service is offered)
Offer Offer Offer
DAILY HOSPITAL LABORATORY CLINIC
SERVICE SERVICES SERVICES
INTENSIVE CARE Microbiology Dental
SERVICES
Burn Necropsy Dermatology X
Coronary Serology X Diabetes X
Medical X Surgical Pathology X Drug Abuse X
Neonatal X DIAGNOSTIC Family Therapy
IMAGING SERVICES
Neurosurgical Computed Tomography X Group Therapy
Pediatrics X Cystoscopy X Hypertension X
Pulmonary Magnetic Resonance Metabolic
Imaging
Surgical X Position Emission X Neurology
Tomography
Definitive X Ultrasonography X Neonatal X
Observation Care
ACUTE CARE X-Ray Radiology X Obesity
SERVICES
Alternate Birthing X DIAGNOSTIC Obstetrics X
Center (licensed THERAPEUTIC
beds) SERVICES
Geriatric Audiology X Ophthalmology X
Medical X Biofeedback therapy Orthopedic X
Neonatal X Cardiac Catheterization Otolaryngology X
Oncology Cohart Therapy Pediatrics X
Orthopedic X Diagnostic Radioisotope Pediatrics
Surgery
Pediatric X Echocardiology X Podiatry
Physical Electro cardiology X Psychiatric X
Rehabilitation
Post Partum X Electroencephalography Renal X
Surgical X Electromyography Rheumatic X
Transitional X
Inpatient care (
Acute beds )
NEWBORN CARE Endoscopy Rural Health
SERVICES
Developmentally X Gastro – Intestinal Surgery X
Disabled Nursery Laboratory

53
Care
New born Nursery X Hyperbaric Chamber
care Services
Premature Nursery X Lithotripsy HOME CARE
Care SERVICES
Hospice care X Nuclear Medicine Home Health Aids
Services
Inpatient care under Occupational Therapy Home Nursing
custody ( Jail ) Care (visiting
Nurse)
LONG –TERM Physical Therapy Home Physical
CARE Medicine Care
Behavioral disorder Peripheral Vascular Home Social
care Laboratory Service care
Developmentally Pulmonary Function Home dialysis
disabled care Services Training
Intermediate care Radiation Therapy Home Hospice
Care
Residential / Radium Therapy Home I.V
Custodial care Therapy Services
Self care Radioactive Implants Jail Care
Skilled nursing care Recreational Therapy Psychiatric Foster
Home Care
Sub –acute Care Respiratory Therapy
Services
Sub –acute care
Pediatric
Transitional
Inpatient Care (SNF
Beds)
CHEMICAL Speech –Language AMBULATORY
DEPENDENCY – Pathology SERVICES
DETOX
Alcohol Sports care Medicine Adult Day Health
Care Center
Drug Stress Testing Ambulatory
Surgery Services
CHEMICAL Therapeutic Comprehensive
DEPENCY – Radioisotope Outpatient
Rehabilitation Rehab. Facility

Offer Offer Off.

Alcohol X-ray Radiology Observation (short X
Therapy stay) care
Drug PSYCHIATRIC Satellite Ambulatory
SERVICES Surgery Services
PSYCHIATRIC Clinic Psychologist X Satellite Clinic
SERVICES Services Services
Psychiatric Acute – X Child Care Services

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

Adult
Pyschiatric – X Electro convulsive OTHER SERVICES
Adolescent and child Therapy ( shock )
Psychiatric Intensive ( Milieu Therapy Diabetic Training X
Isolation ) care class
Psychiatric long term Night care Diabetic Counseling X
care
Psychiatric Therapy Drug Reaction
Information
OBSTETRIC Psychopharmacological Family Planning X
SERVICES Therapy
Abortion Services X Sheltered Workshop Genetic Counseling X
Combined labor / X RENAL DIALYSIS Medical Research
Delivery birthing
Room
Delivery Room Service X Hemodialysis X Parent training Class
Infertility Services X Home dialysis support Patient Representative
services
Labor Room Service X Peritoneal X Public Health Class

SURGERY SERVICES Self –Dialysis Training Social Work Service

Dental Organ Acquisition Toxicology / Antidote

Information

General X Blood bank X Vocational Services

Gynecologic X Extracorporeal
Membrane
Oxygenation
Heart Pharmacy MEDICAL
EDUCATIONAL
PROGRAMS
Kidney Approved Residency

Neurosurgical EMERGENCY Approved Fellowship

SERVICES
Open heart Emergency X Non –Approved
Communication system Residency

Ophthalmologic Emergency Helicopter Associate Records

Service Technician

Organ transplant Emergency X Diagnostic Radiologist

Observation Service Technologist

Orthopedic Emergency Room X Dietetic Intern

Service Program

Otolaryngolic Heliport Emergency Medical

55
 Technician

Pediatric Medical transportation Hospital

Administration
Program

Plastic Mobile Cardiac Care Licensed Vocational X

Service Nurse

Podiatry Orthopedic Emergency Medical Technologist

Services Program

Thoracic Psychiatric Emergency Medical Records X

Services Administrator

Urologic Radioisotope Nurse Anesthetist

Decontamination
Room
Anesthesia Services X Trauma Treatment Nurse Practitioner X
E.R
Nurse Midwife X

LABORATORY CLINIC SERVICES Occupational

SERVICES therapist

Anatomical Pathology X Aids Pharmacy Intern X

Chemistry X Alcoholism Physician `s Assistant

Clinical pathology X Allergy Physical Therapist X

Cyto-genetics Cardiology Registered Nurse X

Cytology X Chest Medical Respiratory Therapist

Hematology X Child Diagnosis Social Worker

Program

Histocompatibility Child treatment

Immunology Communicable Disease

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Annex C: Fixed Assets (Equipment and Furniture Inventory) of Al Karak

Medical Equipment or Devices /Laboratory Department

Items with Replacement of JD 100 ($140) or more
Item No. Name of the Medical Equipment/ Number Cost otal cost Date of
Device receipt
Dinars Fils
1 Microscope 5 1000 5000
2 Spectrophotometer 2 2500 5000
3 Water bath 3 400 1200
4 Flame photometer 2 2000 4000
5 Autoclave 1 800 800
6 Oven 1 600 600
7 Incubator 1 600 600
8 Cell Count 2 4000 8000
9 Centrifuge Tube 5 1000 5000
10 Hematocrit Centrifuge 3 700 2100
11 Bilirubin Meter 2 600 1200
12 Paraffin Section 1 500 500
13 Tissue Check Procedure 1 600 600
14 Biochemistry Analyzer 1 3000 3000
15 Eliza Random (Device for 2 3000 6000
checking Aids)
16 Coagulometer 1 2000 2000
17 Bio–mixer 2 300 600
18 Tube sealer 1 200 200
19 Thermo–rack 2 200 400
20 Multi–channel 3 300 900
21 Distiller 1 1000 1000
22 Sensitive Balance 2 800 1600
23 Chair for taking blood for 2 1000 2000
checking
24 Lavofuge (like centrifuge) 1 5000 5000
25 Incubator shaker 1 500 500
26 Leuco-form apparatus 1 100 100
27 Laboratory hood 2 500 1000
28 Hot plate 1 100 100

ntory) of Al Karak 57
 Medical tools / Gynecology Department
Items with Replacement of JD 100($140) or more
Item Name of the Medical Tool Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Stretcher Trolley 1 200 200
2 Mayo table (Mayo tray) 1 300 300
3 Wheel chair 1 300 300

Medical Equipment / Gynecology Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment/ Device cost receipt
Dinars Fils
1 Defibrillator with DC Shock 1 3500 3500
2 Sphygmomanometer stand 1 200 200
3 Diagnostic set 1 150 150
4 Emergency trolley 1 1000 1000
5 E.C.G monitor with DC Shock 1 5000 5000
6 Manual suction 1 300 300

Medical Equipment / Men's Department ( Male Department )

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. equipment/ device cost receipt
Dinars Fils
1 Diagnostic set 1 150 150
2 DC Shock apparatus 1 3500 3500
3 Laryngoscope 1 120 120
4 Sphygmomanometer Stand 1 200 200
5 Infusion pump 1 800 800

Medical Tools / Men's Department (Male Department )

Items with Replacement of JD 100($140) or more
Item Name of the Medical Tool Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Hot air oven 2 400 800
2 Wheel chair 1 300 300

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Medical Tools / Post – Mortem Room ( Autopsy Room )
Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. equipment/ device cost receipt
Dinars Fils
1 Autopsy table 1 2000 2000 1996
2 Mortuary chambers (two 1 6000 6000 1996
place)
3 Incinerator 1 1000 1000 1996
4 Refrigerator deep freezer 1 2000 2000 1996
5 Mortuary chambers (four 1 10,000 10,000 1996
places)
6 Giant incinerator 1 64,130 64,130

Medical Equipment / Obstetrics Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. equipment/ device cost receipt
Dinars Fils
1 Obstetrics table 1 3000 3000
2 Fetal heart detector sonicaid 1 150 150
3 Fetal monitor 2 1500 3000
4 Sphygmomanometer stand 2 200 400
5 Sonicaid 2 150 300
6 Anesthesia apparatus 1 6000 6000
7 Suction theatre with bottle 1 300 300
8 Vacuum set 4 1500 6000
9 Resuscitation kit pediatric in 1 3000 3000
case
10 Infant resuscitation 1 3000 3000
11 U/S scanner 1 5000 5000
12 Hot air oven 1 400 400
13 Obstetric table 1 3000 3000
14 Operating table 1 2000 2000
15 Densometry 1 10,000 10,000

Medical Tools / Obstetrics Department

Items with Replacement of JD 100($140) or more
Item Name of Medical Tools Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Examination trolley 1 100 100
2 Structure trolley 2 200 400
3 Wheel chair 1 300 300

ntory) of Al Karak 59
Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital
 Medical Equipment / Physical Therapy Department
Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment/ Device cost receipt
Dinars Fils
1 Fixed bicycle 1 600 600
2 Hand finger table 1 2500 2500
3 Wall pulley 1 100 100
4 Quadriceps bench 1 1800 1800
5 Tilt table mobile 1 200 2000
6 Standing firm table 2 300 600
7 Suspension frame 1 2000 2000
8 Short wave 3 3000 9000
9 Akron- rythmatic traction 3 2000 6000
10 Hydro collator 3 3000 9000
11 Paraffin wax therapy 3 1000 3000
12 Parallel bar 2 200 400
13 Massage machine vibrator 2 500 1000
14 Dynatron 438 1 2000 2000
15 Therasonic five (US) 1 1500 1500
16 Interferential med frequency 2 2500 5000
(current with vacuum)
17 Combined US and ES 1 2800 2800
machine
18 Whirl pool 2 4000 8000
19 Cold pack machine 1 1000 1000
20 BR2 export pulse 1 2000 2000
21 Cervical traction machine- 1 2000 2000
Electra 471
22 Mobile traction firm for 1 1000 1000
retraction
23 Shoulder wheel 2 1000 2000

Medical Tools / Emergency Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Tool Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Stretcher on trolley 4 100 400
2 Drum holder 5 300 1500
3 Mayo table 3 300 900
4 Wheel chair 2 300 600

ntory) of Al Karak 61
 Medical Equipment / Emergency Department
Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment/ Device cost receipt
Dinars Fils
1 Hot air oven 1 400 400
2 Operating light 1 2000 2000
3 Minor operating table 1 2000 2000
4 Orthopedic plastering bed 2 2500 5000
5 Anesthetics apparatus 1 6000 6000
6 Electro surgical unit 1 3000 3000
7 Suction theater 2 bottle 1 300 300
8 Sphygmomanometer stand 4 200 800
9 Diagnostic set 2 150 300
10 E.C.G Machine 3 800 2400
11 Ventilator Nebulizer 1 300 300
12 DC Shock 1 3500 3500
13 Autoscope standard 1 250 250
14 Ophthalmoscope 1 10,000 10,000

Medical Equipment / Anesthesia Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment/ Device cost receipt
Dinars Fils
1 Anesthesia device (North 2 15,000 30,000
American dragger)
2 Anesthesia device (Tricomed) 1 15,000 15,000
3 Anesthesia device (Saire) 4 15,000 60,000
4 Royal anesthesia device 1 15,000 15,000
5 Laryngoscope 6 120 720
6 Sphygmomanometer monitor 2 1000 2000
7 E.C .G with DC Shock 1 3500 3500
8 E.C.G (Protascope) 1 800 800
9 Capnography (02 Monitor) 1 1500 1500
10 Pulse oximeter 3 1000 3000
11 Capno- check pulse oximeter 1 1000 1000
12 Capno- meter portable 1 1000 1000

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Medical Equipment / Operation Room
Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment/ Device cost receipt
Dinars Fils
1 Hot air oven 1 400 400
2 Formaline electro sterilizer 2 150 300
3 Operating sky light 4 2000 8000
4 Electro surgical unit 5 2000 10,000
5 Operating table 3 5000 15000
6 Suction theatre with two bottle 2 300 600
7 Plaster cast 2 300 600
8 Horizontal auto clave 1 6000 6000
9 Cryo- surgical unit 1 1000 1000
10 Gypoco-labrascope system 2 70 000 140 000
11 Chair for ophthalmic 1 4000 4000
12 Infant resuscitation table 1 2000 2000
13 Cystscope 1 150 150
14 Microscope 1 1000 1000
15 Esophagus-scope 2 300 600
16 Eleck- evacuator 2 100 200
17 Sterilizer device 5 50 000 250 000

Medical Tools / Operation Room

Items with Replacement of JD 100($140) or more
Item Name of the Medical Tool Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Drum holder 6 300 1800
2 Post mortem set 1 400 400
3 Sigmoid set 1 500 500
4 Suction bepools unit 10 1000 10000
5 Varicose 10 100 1000
6 Nail extractor 3 100 300
7 Compression tourniquet 1 200 200
8 Manual hand drill 3 200 600
9 Wire cutter double art 3 100 300
10 Counter sink 1 500 500
11 Blood infusion warmer 1 100 100
12 Infant resuscitation table 1 200 200
13 Head mirror 1 100 100
14 Side lamp 3 100 300
15 Head light 1 150 150
16 Oxygen cylinder 20 150 3000
17 Nitrous cylinder 20 150 3000

ntory) of Al Karak 63
 Medical Tools / Pediatrics Department
Items with Replacement of JD 100($140) or more
Item Name of the Medical Tool Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Stretcher trolley 1 100 100
2 Rectangular instrument 2 150 300
trolley
3 Hot air oven 1 400 400

Medical Equipment / Pediatrics Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment or device cost receipt
Dinars Fils
1 Hot air oven 1 400 400
2 Laryngoscope 1 120 120
3 Nebulizer 2 300 600
4 Infusion pump 1 775 775

Medical Equipment / I.C.U Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment or device cost receipt
Dinars Fils
1 Defibrillator with monitor 4 3500 14000
2 Intensive care bed 4 3000 12000
3 E.C.G Machine 2 800 1600
4 Infusion pump 5 600 3000
5 E.C.G Monitor 2 5000 10,000
6 Sphygmomanometer stand 2 200 400
7 Laryngoscope 3 150 450
8 Ventilator baby board 1 1300 1300
9 Ventilator 4 13000 52000
10 Blood gases machine 1 25000 25000
11 Mini -doplar 1 1000 1000
12 Echo cardiograph 1 20,000 20,000
13 Tridmil (stress test 1 15,000 15,000
machine)
14 Bedside E.C.G Monitor 2 17,500 35,000
15 Oxygen regular 4 100 400
16 Respirator and anesthesia 2 3000 6000

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

ntory) of Al Karak 65
 Medical Tools / I.C.U Department
Items with Replacement of JD 100($140) or more
Item Name of the Medical Tool Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Mayo table 2 300 600
2 Wheel chair 1 300 300

Medical Equipment / Premature Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Number Cost Total Date of
No. Equipment or device cost receipt
Dinars Fils
1 Laryngoscope 3 150 450
2 Photo-therapy 5 2500 12,500
3 Infant incubator 10 4000 40,000
4 Infant resuscitation 2 3000 6000
5 Portable suction 1 2000 2000
6 Portable infant incubator 3 2000 6000
7 Air compressor 1 3000 3000
8 Hot air oven 1 400 400
9 Defibrillator monitor 1 3500 3500
10 Respiratory monitor 1 300 300
11 Fetal monitor 1 1500 1500
12 Infant warmer 1 600 600
13 Infusion pump 1 500 500
14 Ventilator 4 13,000 52,000

Medical Tools / Premature Department

Items with Replacement of JD 100($140) or more
Item Name of the Medical Tools Number Cost Total Date of
No. cost receipt
Dinars Fils
1 Small heater 1 100 100

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Medical Equipment / X –Ray Department
Items with Replacement of JD 100($140) or more
Item Name of the Medical Device Number Cost Total Date of
No. cost receipt
Dinars Fils
1 C.T scan 1 250,000 250,000
2 Colored X-ray device 1 25,000 25,000
3 Non colored X-ray device 1 20,000 20,000
4 Ultra –sound 2 8000 16,000
5 Processor 3 10,000 30,000
6 Mammogram 1 15,000 15,000
7 Uterine X-ray device 1 600 600
8 Portable x-ray 5 10,000 50,000

Medical Gases (Tools and equipment)/Shared by Departments

Item with Replacement of JD 100 ($140) or more
No. Department Quantity Cost per Overall cost Date of
item receipt
1 Pediatrics 16849 16849
2 I.C.U 5751 5751
3 Obstetrics 11989 11989
4 Emergency 9928 9928
5 X-ray 372 372
6 Surgery 8045 8045
7 Internal medicine 7424 7424
8 Operation 18942 18942

Furniture / Physical Therapy Department

Items with Replacement of JD 100($140) or More
Item No. Item Name / Description Number Cost Total Cost
Dinars Fils Dinars Fils
1 Metallic table with four ١ 100 100
drawers
2 Refrigerator “8 feet “ ١ 175 175

ntory) of Al Karak 67
 Furniture / Laboratory Department
Items with Replacement of JD 100($140) or More
Item No. Item Name / Description Number Cost Total Cost
Dinars Fils Dinars Fils
1 Metallic office table (melanin ٣ 150 450
coated)
2 Metallic cabinet with two doors 3 150 450
and open shelves
٣ S.S Refrigerator (capacity of ٤ 1500 6000
700 liters)
٤ Deep stainless steel freezer ١ 2000 2000

Furniture / Male Surgery Department

Items with Replacement of JD 100($140) or More
Item No. Item Name / Description Number Cost Total Cost
Dinars Fils Dinars Fils
1 Large Metallic office table ٢ 150 300
(melanin coated)
2 Metallic closet with movable ٨ 150 1200
shelves
3 Wooden closet with two doors ٢ 250 500
4 Wooden closet with six doors 4 450 1800
5 Metallic locker located beside ٢٦ 100 2600
the patient bed
6 Opened metallic closet ٥ 150 750
(unclosed shelves and without a
door)
7 Wooden counter ١ 600 600
8 Patient bed ٢٦ 500 13,000

Furniture / Operation Room

Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Cost Total Cost
Dinars Fils Dinars Fils
1 Multi- purpose cabinet ٧ 100 700
2 Wooden closet with two doors 4 250 1000
3 Large office desk 1 150 150

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Furniture / Pharmacy Department
Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Cost Total Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 1 150 150
(melanin coated)
2 Medium size metallic office 1 100 100
desk (melanin coated)
٣ Electric refrigerator 1 650 650
4 Drugs refrigerator (for ١ 1200 1200
preserving drugs)
5 Metallic cabinet with two ١ 150 150
doors
6 Metallic closet with exposed 1 150 150
(non –closed) shelves

Furniture / Gynecology Department

Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 1 150 150
(melanin coated)
2 Medium size metallic office 1 100 100
desk (melanin coated)
3 Metallic closet with movable 8 150 1200
shelves
4 Opened metallic closet with ٦ 150 900
exposed opened shelves
5 Wooden closet with two doors 2 250 500
6 Wooden closet with six doors 4 450 1800
7 Metallic closet located beside ٢٦ 100 2600
the patient bed
8 Patient bed ٢٦ 500 13000
9 Electrical refrigerator “3 feet” ١ 110 110
10 Aluminum counter 1 280 280
11 Television set ٤ 250 250

ntory) of Al Karak 69
 Furniture / Emergency Department
Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 3 150 450
(melanin coated)
2 Medium size metallic office 1 100 100
desk (melanin coated)
3 Metallic closet with movable ٩ 150 1350
shelves
4 Metallic closet with two doors 2 150 300
and movable shelves
5 Wooden closet with 4 doors ٤ 450 1800
6 Metallic closet inserted beside 8 100 800
the patient bed
7 Laced metallic low back, fixed ٥ 300 1500
base chair
8 Metallic closet with opened 8 150 1200
shelves and without a door
9 Wooden counter ٣ 600 1800
10 Patient bed ٨ 500 4000
11 Electrical Refrigerator 3 feet ١ 110 110

Furniture / I.C.U Department

Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 3 150 450
(melanin coated)
2 Medium size metallic office 1 100 100
desk (melanin coated)
٣ Metallic closet with movable 5 150 750
shelves
٤ Metallic closet with two doors 5 150 750
and movable shelves
5 Metallic cabinet inserted beside 4 100 400
the patient bed
6 Electric Refrigerator "3 feet " 1 110 110
7 Television set 1 250 250

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Furniture / Obstetrics Department
Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 3 150 450
(melanin coated)
2 Metallic closet with movable 5 150 750
shelves
3 Multi- purpose cabinet 2 100 200
4 Metallic cabinet with opened 4 150 600
shelves ( without a door)
5 Wooden closet with two doors 3 250 750
6 Wooden closet with six doors 4 600 2400
7 Metallic closet inserted beside 21 100 2100
the patient bed
8 Wooden counter 1 600 600
9 Patient `s bed 21 500 10500
10 Television set 3 250 750
11 Aluminum counter 1 280 280

Furniture / Premature and Pediatrics Department

Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 3 150 450
(melanin coated)
2 Medium size metallic office 1 100 100
desk (melanin coated)
3 Metallic closet with movable ٨ 150 ١٢٠٠
shelves
4 Metallic closet (unlocked 1 150 150
opened shelves with two doors )
5 Metallic closet with opened 4 150 600
exposed shelves (without a
door)
6 Wooden closet with two doors 3 250 750
7 Wooden closet with six doors 3 450 1350
8 Locker inserted beside the 21 100 2100
patient bed
9 Wooden counter 1 600 600
10 Patient bed ( for adults ) 15 500 7500
11 Children `s bed 6 150 900
12 Newly born infant bed 12 100 1200
13 Electric refrigerator "3 feet " 1 110 110

ntory) of Al Karak 71
14 Television set 3 250 750

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 Furniture / X-Ray Department
Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Metallic large office desk 1 150 150
(melanin coated)
2 Medium size metallic office 3 100 300
desk (melanin coated)
3 Metallic closet with movable 5 150 750
shelves

Administrative Department / Kitchen Utensils

Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Cost Total Cost
Dinars Fils Dinars Fils
1 Filter or ventilator ( stainless 1 180 180
steel )
2 Refrigerator with freezer 1 1400 1400
(Italian type )
3 Electric refrigerator 4 350 1400
(capacity 32 liters “12 feet”)
4 Electric refrigerator (8 feet) 4 250 1000
5 Electric refrigerator (6 feet) 3 210 630
6 Electric refrigerator (12 feet) 2 350 700
7 Electric refrigerator ( ١٨feet) 1 700 700
8 Electric refrigerator (20 feet) 1 1500 1500
9 Gas stove (5 burners or hot 4 325 1300
plates with grill )
10 Electric Refrigerator (“8 3 230 690
feet” type National)
11 Tea heater or steamer 2 100 200
(stainless steel )
12 Electric refrigerator “12 1 350 350
feet”
13 Gas stove with oven or 1 270 270
furnace
14 Gas stove with four burners 1 140 140
or hot plates

ntory) of Al Karak 73
 Furniture (Non Medical Items) / Administration Department
Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Wooden counter 3 600 1800
2 Wardrobe for the employees 28 100 2800
with six drawers
3 Metallic closet with opened 21 150 3150
exposed shelves
4 Metallic large office desk 21 150 3150
(melanin coated)
5 Medium size metallic office 11 100 1100
desk (melanin coated)
6 Metallic closet with shelves 4 150 600
(without a door)
7 Fixed base, waiting metallic 7 250 1750
filigreed chair
8 Computer sets 7 500 3500
9 Electrical printer 4 450 1800
10 Photocopy machine (large – 2 750 1500
size)
11 Photocopy machine (small– 2 500 1000
size)
12 Fax machine 2 450 900
13 Electrical sewing machine 3 150 450
14 Large panel meeting room 1 250 250
table
15 Electrical washer (capacity 5 2 120 240
kilograms )
16 Iron sharp cutter 3 165 495
17 Aluminum closet 4 150 600
18 Wooden wardrobe with three 10 198 1980
drawers
19 Aluminum closet with glass 6 250 1500
facet
20 B.C .F fire extinguisher (12 12 100 1200
kgm)
21 Drug trolley 1 150 150
22 Loudspeaker 1 300 300
23 Air conditioner 3 2000 6000
24 Electronic switchboard 1 1800 1800
25 Stainless steel unit with four 3 200 600
drawers
26 Line for distributing food 1 6000 6000
consisting of (tray holder , fork
holder, knife holder, spoons,
bread keeper, cold and hot

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

 containers, etc.)
27 Steam iron with a base 4 750 3000
28 Iron for ironing the sheets (2 1 5000 5000 1996
meters)
29 Iron for ironing the sheets 1 4000 4000 1996
(measurement of 160 cms)
30 Stainless steel washing 1 5000 5000 1996
machine (capacity of 30 kgm)
31 Stainless steel washing 1 3000 3000 1996
machine (capacity of 10 kgm)
32 Electrical dryer (10-12 kgm) 2 1500 3000 1996
33 Electrical dryer (25 kgm) 1 3500 3500 1996
34 Trolley for holding the fire 1 100 100 1996
pipe extinguisher
35 Colored TV Set 6 250 1500
36 Computer set 1 400 400
37 Aluminum counter 4 250 1000
38 Aluminum file cabinet with 1 200 200
glass facet
39 Vacuum cleaner 1 120 120
40 Wooden closet with two doors 20 180 3600
41 Electrical washing machine 1 120 120
with two wash basins
(Capacity - 5 kgm)
42 Recorder and radio set 1 100 100

Furniture ( Non Medical Items ) / Administration Department / Kitchen Utensils

Items with Replacement of JD 100 ($140) Or more
Item No. Item Name / Description Number Item Total Cost
Cost
Dinars Fils Dinars Fils
1 Stainless steel kitchen table 3 300 900
with shelves (190x 70 )
2 Stainless steel kitchen table ١ ٢٥٠ ٢٥٠
with shelves (140x 70)
3 Multi-purpose table for 6 300 1800
preparing food equipped also
with shelves (stainless steel)
4 Stainless steel kitchen table 2 250 500
(140 x 70)
5 Steam ironing table 2 1300 2600
6 Potato peeler equipped with a 1 800 800
base (stainless steel)
7 A special vegetable washer and 1 800 800
dryer (stainless steel)
8 Vegetable chopper with 1 800 800
different blades (for chopping

ntory) of Al Karak 75
 with different shapes)
9 Meat slicer with two blades 1 750 750
10 Electrical meat slicer 1 800 800
11 Stainless steel dessert oven 1 850 850
1٢ Electrical oil fryer with grill( 1 150 150
stainless steel )
1٣ Electrical steak grill stainless 1 150 150
steel )
1٤ Electric oven with four hot 1 150 150
burners ( tainless steel )
1٥ Electrical cooking pan grilled 2 1000 2000
rice (stainless steel)
1٦ Deep electrical steamer for the 2 1200 2400
meat and soups
1٧ Ventilator or filter (stainless 1 2000 2000
steel with dimensional size 420
x 180)
1٨ Stainless steel refrigerator with 1 900 900
drawers and shelves
19 Multipurpose stainless steel 1 2000 2000
refrigerator with two doors (24
feet)
20 Electrical food heater trolley 2 400 800
with three trays (S.S)
21 Trolley for food distribution 2 250 500
(S.S)
22 Stainless steel ,dishwasher with 1 1000 1000
two shelves
23 Plates rack with three shelves 1 250 250
24 Large size central refrigerator 1 10,000 10,000
with deep freezer
25 Stereo and recorder 1 300 300
26 Small ventilator (filter) 1 1200 1200
27 Stainless steel two wash basins 1 500 500
28 Balance (300 kgm) 2 400 800
29 Stainless steel trolley for 1 250 250
holding food (with two shelves)
30 Wooden block for cutting and 1 250 250
slicing meat
31 Stainless steel trolley with two 1 250 250
shelves
32 Kitchen utensils rack (stainless 1 200 200
steel)

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital

Annex D: Bibliography

Banks, D. 1999. Implementing Hospital Autonomy in Jordan: The Selection Process. Amman:
Partnerships for Health Reform/Jordan. April.

Banks, D., A. As-Sayaideh., A. Shafei, and R. Ghanoum. 2000. Implementing Hospital Autonomy in
Jordan: Changing MOH Operating Procedures. Technical Report 44. Bethesda, MD:
Partnerships for Health Reform, Abt Associates Inc. March.

Banks, D., A.As-Sayaideh., A. Shafei, and A. Muhtaseb. 2002. Implementing Hospital Autonomy in
Jordan: An Economic Cost Analysis of Princess Raya Hospital. Technical Report 7. Bethesda, MD:
Partners for Health Reformplus, Abt Associates Inc. January.

Banks, D. 1993. Voluntary and Proprietary Hospital Behavioral Response to Socioeconomic Stimuli,
Applied Economics, 28, July: 853-868.

Barnum, H., and J. Kutzin. 1993. Public Hospitals in Developing Countries: Resource Use, Cost,
Financing. Baltimore, MD: Johns Hopkins University Press.

Binger, R., and E. Hoffman. 1988. Microeconomics with Calculus. Illinois: Scott, Foresman and
Company.

Breyer, F. 1987. “The Specification of a Hospital Cost Function: A Comment on the Recent
Literature.” Journal of Health Economics 6, 2:147-57.

Brown, R., D. Caves, and L. Christensen. 1979. “Modeling the Structure of Cost and Production for
Multiproduct Firms.” Southern Economic Journal 46, 1:256-273.

Carr, W., and P. Feldstein. 1967. “The Relationship of Cost to Hospital Sizes.” Inquiry 4, 6:45,65.

Cowing, T., and A. Holtman. 1983. “Multiproduct Short-run Hospital Cost Function: Empirical
Evidence and Policy Implication from Cross Section Data.” Southern Economic Journal
49:637-653.

Duffy, D. 2002. Health Insurance Pilot Project: Maternity Costs Estimates at Princess Raya Hospital.
Trip Report. Bethesda, MD: Partners for Health Reformplus, Abt Associates Inc.

Evans, R. 1971. “Behavioural Cost Functions for Hospitals.” Canadian Journal of Economics 4,
2:198-215.

Feldstein M. 1967. Economic Analysis for Health Service Efficiency. Amsterdam: North Holland
Press.

Grannemann, T., R. Brown, and M. Pauly. 1986. “Estimating Hospital Costs: A Multi-output
Analysis.” Journal of Health Economics 5, 2:107-127.

Lave, J., and L. Lave. 1970. “Hospital Cost Functions.” American Economic Review 60, 3:379-395.

77
Sindaha-Muna, Narmine. 1998. Summary Proceedings: Hospital Autonomy Workshop in Jordan.
Bethesda, MD: Partnerships for Health Reform, Abt Associates Inc. October.

Vita, M. 1990. “Exploring Hospital Production Relationships with Flexible Form Functions.”
Journal of Health Economics 9, 1:1-21.

Implementing Hospital Autonomy in Jordan: An Economic Cost Analysis of Al Karak Hospital