Cost Pricing of Private versus Government Biochemistry Laboratory Tests in Sri Lanka

Abstract

Introduction : Previous studies have shown that laboratory services play a major role in the health care and that laboratory services account for about 10% of the total expenditure on the health care (Mouseli et. al., 2017). Presently, total health care expenditure is continually increasing around the world as well as Sri Lanka. From the ever increasing total expenditure about 10% of it will always be for laboratory services. In this context, it is a timely need to determine the true cost of government and private laboratory tests in Sri Lanka. Therefore, this study will primarily study the cost pricing of private versus government biochemistry laboratory tests in Sri Lanka.

According to the 2018, Annual Report of the Central Bank of Sri Lanka, the total expenditure on government health services is 13.7% of the total government consumption expenditure and the private sector expenditure on health services is 2.5% of the total private consumption expenditure. Furthermore, the National Health Report (2013) states that the 2013 total health expenditure of Sri Lanka was Rs.260 billion, which is 3.24% as a percentage of Gross Domestic Production and per capita health expenditure was Rs.12,636. According to the Sri Lanka Health Account, National Health Expenditure Report 1990-2016, the total health expenditure in 2016 was Rs. 398 billion and the per capita health expenditure was Rs.18,880 (Institute for health policy, 2018). This data reveals that over time health expenditure on healthcare in Sri Lanka has been steadily increasing.

As noted earlier, many foreign studies have identified that laboratory services play a major role in a health care and about 10% of the total health care expenditure is spent on laboratory services. Furthermore, 70% or more of medical decisions are based on the result of laboratory tests (Mouseli et. al., 2017). As a result, there is a trend of increasing demand for laboratory services in future. Especially, when a pandemic like Covid-19 necessitates continuous laboratory testing which are highly expensive. In the United State alone, over 7 billion laboratory tests are performed annually (Jackson, 2015).

When the price of a product is determined by balancing the demand and supply of the product, one of the ways that a producer sets the price by determining the price based on the cost of production. Therefore, it is important to identify the cost of laboratory tests. Barker and Huang (1983) identify the importance of the true cost of a laboratory service as “A better knowledge of the actual costs is required for the promotion of more rational utilization and better appreciation of health laboratory services by medical and public health workers”.

The above statement shows the importance by determining the true cost of laboratory tests. The cost of production of a good or service is calculated by adding the cost of inputs required to produce the goods or services. But from an economic point of view, costs should include opportunity costs such as time cost of patients, in addition to direct and indirect costs for inputs. Therefore, there is a timely need to determine the true cost of government and private laboratory tests in Sri Lanka.