CA
Tax Tutor
A

Hospital Costing — Cost per Patient-day

Hospital Costing is about measuring and controlling the cost of running a hospital — an organisation that delivers healthcare services, not physical goods. Think of a hospital like Max or Fortis: wards, OPDs, operation theatres, ICUs, and labs all consuming resources without producing anything you can stack in a warehouse. That's what makes this topic different from manufacturing cost sheets.

The first concept to nail is the Cost Unit — the yardstick against which total cost is measured. For hospitals, the most exam-relevant cost units are per patient day (most common in ICAI numericals), per bed per day, per outpatient visit, or per operation (for specialist departments like the OT). For May 2026, expect a 4–6 mark numerical where you compute cost per patient day — this is the bread-and-butter question. Next, understand Cost Centres — the departments that accumulate costs. ICAI classifies these into two groups: Main (Revenue) Centres such as OPD, IPD wards, Operation Theatre, and ICU (these directly serve patients) and Service (Support) Centres such as Laundry, Kitchen, Housekeeping, and Administration (these support the main centres). In exam problems, service centre costs are always apportioned to main centres first — using a basis like area, number of patients, or usage percentage — before you compute the final cost per patient day. Forgetting this apportionment step loses marks every time.

Hospital costs split into fixed costs (depreciation on building and equipment, permanent staff salaries, rent, insurance — unaffected by occupancy), variable costs (medicines, surgical consumables, patient diet, laundry materials), and semi-variable costs (electricity, water). The formula that ties everything together is: Actual Patient Days = Available Bed Days × Bed Occupancy Rate, where Available Bed Days = Number of Beds × Number of Days in the period. Examiners love asking you to derive patient days from the occupancy rate before computing cost per patient day — always show this calculation explicitly, as it often carries a standalone mark. A 200-bed hospital running for 90 days has 18,000 available bed days; at 75% occupancy, actual patient days = 13,500. Know this cold.

📊 Worked example

Example 1 — Cost per Patient Day

City Care Hospital is a 150-bed facility. Data for March (31 days):

| Item | ₹ |

|---|---|

| Doctors' & Nurses' Salaries | 12,40,000 |

| Medicines & Consumables | 6,20,000 |

| Dietary Expenses (patients' food) | 3,10,000 |

| Laundry & Housekeeping | 1,55,000 |

| Depreciation — Building & Equipment | 2,48,000 |

| Administration Overheads | 93,000 |

| Total Cost | 26,66,000 |

Bed Occupancy Rate: 80%

Step 1 — Available Bed Days

150 beds × 31 days = 4,650 bed days

Step 2 — Actual Patient Days

4,650 × 80% = 3,720 patient days

Step 3 — Cost per Patient Day

₹26,66,000 ÷ 3,720 = ₹716.67 per patient day

---

Example 2 — Service Centre Apportionment

Using the same hospital, the Laundry & Housekeeping cost of ₹1,55,000 is a service centre cost to be split between General Ward (60% usage) and Surgical Ward (40% usage) before computing ward-level cost per patient day.

Apportionment to General Ward = ₹1,55,000 × 60% = ₹93,000

Apportionment to Surgical Ward = ₹1,55,000 × 40% = ₹62,000

If General Ward had 2,200 patient days and Surgical Ward had 1,520 patient days, the laundry cost per patient day would be:

  • General Ward: ₹93,000 ÷ 2,200 = ₹42.27
  • Surgical Ward: ₹62,000 ÷ 1,520 = ₹40.79

These amounts are added to each ward's direct costs before arriving at total cost per patient day for that ward.

⚠️ Common exam mistakes

  • Dividing by available bed days instead of actual patient days: Students use (beds × days) as the denominator and ignore the occupancy rate entirely. Always apply: Actual Patient Days = Available Bed Days × Occupancy Rate. The cost per patient day will be wrong — and lower than it should be — if you skip this.
  • Skipping service centre apportionment: Laundry, Kitchen, and Admin costs don't disappear — they must be apportioned to main departments first. Adding them directly to the grand total without allocation loses the departmental cost structure the examiner is testing.
  • Classifying permanent staff salaries as variable costs: Doctors' and nurses' fixed salaries are a fixed cost regardless of how many beds are occupied. Only consumable-linked items like medicines and patient food are variable. Getting this wrong in theory questions drops easy marks.
  • Confusing cost per bed per day with cost per patient day: If the question asks for cost per bed per day, divide by available bed days (beds × days). If it asks for cost per patient day, divide by actual patient days (after applying occupancy rate). These are different denominators — read the question carefully.
  • Not showing the Bed Occupancy Rate calculation separately: Even when the rate is given directly (e.g., "80%"), examiners award a mark for writing out the formula: (Actual Patient Days ÷ Available Bed Days) × 100. Write it out — don't assume showing the final number is enough.
📖 Reference: Hospital — Institute of Chartered Accountants of India
Test yourself
Practice questions on this section, AI-graded with citations.
⚡ Practice now →