Abstract
The article describes a method for measuring and reporting the costs of quality management in 11 long-term care organizations (nursing homes, home health care organizations, and homes for the elderly) and a national survey in 489 organizations providing long-term care. Site visits and a questionnaire were used to measure the existence of quality management (QM) activities and investigate the costs per QM activity in more detail. Health care organizations differentiate between regular activities and QM activities. The costs of QM activities were found to vary between 0.3% and 3.5% of the budget in three nursing homes. An extrapolation of the costs of QM activities to the entire sector shows that the long-term care sector spent between 0.8% and 3.5% of the overall budget for QM in 1999. The costs of developing and implementing QM activities are higher than the costs of monitoring. Most long-term care organizations have no insight into failure costs (i.e. the costs of quality deviations). This makes it impossible for health care organizations to draw conclusions about the cost-effectiveness of QM.
In the Netherlands considerable effort is directed toward improving the quality of care through quality management systems (QMS). Since 1996, every health care organization in the Netherlands is obliged by law to have a QMS. These systems involve many extra activities and thus extra costs. However, insight into the cost-effectiveness of QMS is lacking. Even general information about the cost of QMS is scarce. One reason for this is most likely that in the health care sector there seems to be no available methods to measure quality costs and (even more challenging) the cost-effectiveness of quality management systems. To develop such methods, two resources are available: (1) the body of theory and the methods used for medical technology assessment and (2) the methods that have been developed to assess quality management systems in industry.
In studies focussing on medical technology assessment (MTA), considerable efforts have been made to measure and report the quality effects of (new) medical technology, and standards have been developed to allow comparisons between the results of different studies. However, although this is a valuable source, the information obtained from MTA studies is not compatible with the information obtained from quality of care programs in health care organizations. This incompatibility is not only because of a difference in the intrinsic concept of quality of care, but also because of the perspective of the investigation. In MTA studies, the quality of care is related to specific medical interventions, and the costs and effects of interventions are determined from a societal perspective. Health care organizations often consider quality of care as a broad concept. Not only the quality of specific interventions, but also the entire process of disease management is an object of quality improvement programs. The description of organizational processes, the training of staff, and peer review is also considered to be part of a quality improvement program in health care organizations. However, the perspective of health care organizations is limited in another way. If costs and effects are measured and reported, they are restricted to the health care organization itself, thus the societal perspective is almost always neglected.
The other source of information can be found in methods that have been developed for industry. These methods have even found their way into the guidelines of the American Institute of Management Accountants (IMA). The IMA has special guidelines for estimating and reporting the costs of quality measurement. In accordance with these guidelines, the cost of quality is defined by Campanella as: "It represents the difference between the actual costs of a product, and what the reduced costs would be if there were no possibilities of failure of the product nor defects in its manufacture."1(p.16) Feigenbaum, who distinguishes control costs and failure costs, gives a further refinement of the definition. Control costs are further divided into prevention costs and monitoring cost, and the costs of failure are split into internal and external failure costs.2 Prevention costs are incurred to prevent quality variations. Examples are developing and implementing procedures and guidelines for process control and quality education. Monitoring costs are incurred to detect quality deviations, such as input control, end-product inspection, and the collection, processing, and interpretation of control information. Prevention and monitoring costs are management-dependent costs and are incurred because they result from deliberate, planned actions to keep the risk of losses as low as possible. Internal failure costs are incurred when a deviation in quality is detected before the product or service is delivered to the client. Examples are waste, repair, double work, and inspection. External failure costs are incurred after the product or service is delivered to the client. Examples are costs of dealing with complaints, claims, and opportunity costs as a result of bad reputation with regard to quality.
The goal of this article is to demonstrate how the costs of quality management systems can be determined and to describe the measurement of these costs in three case studies involving long-term care organizations. These organizations developed a sector-specific framework for a QMS consisting of 58 activities and procedures. Some of these activities and procedures are new; others have already been in existence for years. Until now, long-term care institutions have not received more funding from the government because of the implementation of QMS. Because resources are scarce, insight is needed into the cost-effectiveness of these efforts. Furthermore, long-term care institutions are looking for ways to convince the government and health insurance companies that quality management implies greater costs. However, information about the costs of quality management in health care organizations is very scarce. This article discusses a method that can be used for measuring and reporting the cost of quality management systems in line with the guidelines issued by the IMA. Until now, these guidelines have rarely been used in the health care sector, but they are discussed here because they seem to be most relevant when measuring and reporting the costs of quality programs at organizational level. This method provides an opportunity to obtain insight into the cost of developing and implementing a quality management system for health care. This means that the costs of activities are measured and that is possible to compare costs between different organizations.
The following research questions are discussed:
1. Is it possible to differentiate between regular costs and the costs of implementing a quality management system?
2. Is it possible to measure the costs of developing, implementing, and monitoring a quality management system?
3. What are the costs of quality management systems in long-term care organizations?