The present study was carried out in the four diverse states of Himachal Pradesh (HP), Tamil Nadu (TN), Kerala and Odisha. These states were selected based on health system performance, availability of health system infrastructure/human resources and service utilisation in addition to geographic location. The states of Kerala and TN represented the southern region as well as the states with the best health indicators and well-developed health infrastructure . In comparison to these states, Odisha represented a state with poor health infrastructure and below average health indicators . HP represented a hilly state in North India with population coverage norms, government spending, availability of healthcare infrastructure and utilisation rates different from those in the rest of India . HP is the state with the highest government health spending per capita in India  and has one of the highest utilisation levels of public healthcare facilities for inpatient care compared with the rest of India . A normal CHC caters to a population of 0.12 million, whereas in hilly areas a CHC caters to a population of 80,000 . Furthermore, HP is one of the states with surplus availability of human resources, i.e. medical and paramedical staff, at the DH level .
A multistage stratified random sampling was followed for the selection of the health facilities across the four states. In the first stage, districts within each of the states were divided into three strata based on a ranking matrix, considering various socioeconomic and demographic indicators, developed by International Institute of Population Sciences (IIPS) in Mumbai in 2006. A district was then selected for the present study based on simple random sampling from each strata . In case of TN and Odisha, however, the overall districts were divided into 2 strata, from which the districts were randomly selected. In the second stage, as each district consisted of one DH, that DH was selected for the study. In addition, 15% of the CHCs in each of the selected districts were selected randomly. Finally, a total of 19 CHCs (HP = 3, Odisha = 7, TN = 3 and Kerala = 6) and ten DHs (three each in HP and Kerala and two each in Odisha and TN) were selected across the four states.
As per Indian Public Health Standards (IPHS), CHCs cater to a population of 80,000–120,000 (depending on the region and terrain), have 30 beds and have at least four medical specialists in medicine, surgery, paediatrics and gynaecology, along with other medical and paramedical staff. CHCs have an operating theatre, an X-ray, a labour room and laboratory facilities and serve as a referral centre for primary health centres (PHCs) within the block and also provide healthcare facilities for obstetric care and specialist consultations .
DHs have a bed capacity of 75–500 beds, and serve as a main hub for the provision of secondary care for a district of a defined geographical area containing a defined population. Specialists from the fields of medicine, surgery, orthopaedics, paediatrics, ear nose throat (ENT), ophthalmology, gynaecology and obstetrics, pulmonary medicine, dentistry, dermatology, etc. provide outdoor patient department (OPD), indoor patient department (IPD) and emergency care. A DH also provides specialist services for specific areas such as accident and trauma care, dialysis, antiretroviral therapy, newborn intensive care and psychiatry. It is also supported by diagnostic, laboratory and radiological testing facilities .
A bottom-up costing method was used to assess the economic cost of health services [27, 28]. The first step for the cost assessment was identification of cost centres and their classification into primary/patient and secondary/supportive cost centres . After this, data on both the capital and recurrent resource use incurred when delivering health services for each of the cost centres were collected for the financial year of 2014–2015.
A facility survey along with a review of facility maps and stock registers was undertaken to assess the space and the quantity of various items of capital equipment (and furniture items) present in the facility. Data on the quantity of drugs and consumables were assessed by reviewing the respective stock registers, vouchers and pharmacy records. Further, data on incentives paid to the beneficiaries (conditional cash transfers) under the various health schemes, untied funds, annual maintenance grants, etc. were obtained from the district health administration office (Civil Surgeon Office) of each district. Monthly expenditures relating to electricity, water, telephone, internet, petrol/diesel, etc. were obtained from the accounts office of each facility. Similarly, expenses related to the maintenance of equipment, laundry and dietetics were obtained from the routine account reports for the reference year. After identification of all inputs, data on service utilisation in the form of the number of outpatient consultations, hospitalisations, operations, etc. were captured by reviewing the routine records of the facility (such as outpatient registers, inpatient registers and other monthly reports). The data were collected by postgraduate-level qualified field investigators who were specifically trained for the cost data collection.
The prices of the equipment, drugs and consumables were obtained from the rate contract/procurement list of each State Government. In case of non-availability of the procurement price for any of these items, prices charged by local distributors or reported on relevant websites were considered. For estimating space costs, the current market rental price was assessed by interviewing the key informants. Due to non-availability of procurement prices for furniture and stationary items, market prices were used. Salary slips obtained from the accounts department were reviewed for data on annual wages paid to the staff. All prices reported in the paper are for the year 2014–2015.
Staff members both at the CHC and DH level were interviewed with a semi-structured interview schedule to assess the time being spent on various activities [18, 19]. Specifically, they were asked about the time spent on both regular activities (outpatient consultation, inpatient care, operating theatre, etc.) and other activities (administration, meetings, etc.) carried out in a fixed time interval (weekly, monthly, annually, etc.). In case of a CHC, all of the doctors and 50% of the nursing and paramedical staff were interviewed. For DHs, at least one specialist doctor and a medical officer were interviewed in each of the departments. In the case of there being more than one specialist or medical officer, one of each was randomly selected and interviewed. Further, one staff nurse (selected randomly) for each of a day and night shift in each of the functional cost centres was interviewed. The average life of the equipment was determined based on interviews with the staff members involved in working with that equipment.
The expenditure on capital items (equipment, furniture, etc.) was annualised to arrive at the equivalent annual cost, taking into consideration the discount rate (to account for time preference for money, and inflation in future years) and the lifespan of the respective item . A 3% discount rate was used as per standard guidelines [31, 32]. Space costs were calculated by multiplying estimates of the floor size of rooms by local commercial rental prices for a similar space. The cost of the recurrent resources was estimated by multiplying the unit price with the quantity of respective resource. Proportional time spent by staff members in each of their joint activities was used as a statistic for apportioning their salaries towards particular activities. The cost of other resources (such as equipment, furniture, room space and expenditure on overheads) that were used to provide more than one service were also apportioned for specific services using appropriate apportioning statistics, as shown in Electronic Supplementary Material Table 1.
The mean annual cost at the CHC and DH level was estimated for the four states, along with its distribution among various inputs, levels of service and various specific services. The activities included under the each of the service classification levels, i.e. curative, indirect, preventive and promotive care, is provided in the Electronic Supplementary Material (appendices III and IV).
In addition to the total cost, the unit cost of specific services was also estimated. Calculation of the unit cost required combining all of the costs incurred for the provision of a particular service during a year divided by the total number of clients/patients who used the respective service in that year. The estimates of unit cost were simulated 999 times using the bootstrap method to calculate its 95% confidence limits. Unit costs were adjusted for capacity utilisation . Since the utilisation varied across the health facilities, standardisation of the unit cost was carried out by using bed occupancy as the indicator for capacity utilisation. Bed occupancy rates both at the current of levels of utilisation and at 100% capacity utilisation were calculated based on actual data on the number of beds, average length of stay and patients admitted during the particular year. The costs incurred on recurrent resources, i.e. drugs, consumables, stationary and overheads, were adjusted for capacity utilisation, while keeping the expenditure incurred on fixed assets, i.e. human resources, space, equipment and furniture, constant.
The study was approved by the Institutional Ethics Committee, Post-Graduate Institute of Medical Education and Research, Chandigarh (reference number PGI/IEC/2015/854). Administrative approval from the Department of Health of the respective State Governments and the Civil Surgeons of selected districts was obtained. Written informed consent was also obtained from each staff member for time allocation interviews.