1. SHOPS is funded by the U.S. Agency for International Development. Abt Associates leads the project in collaboration with Banyan Global Jhpiego Marie Stopes International Monitor Group O’Hanlon Health Consulting WHAT IS THE ACTUAL COST OF TRAINING A MEDICAL STUDENT? John Mthetwa and Shoshana Hecker Banyan Global March 20, 2013

2. Objectives of the session To enable participants to: Understand the steps required to determine the actual cost of training one medical student Understand how to use costing to make better informed decisions for setting student tuition fees

3. The importance of costing for private medical training institutions Helps to know what resources are required to provide the training Enables the identification of costs that need to be better controlled/reduced in the training process Allows each institution to better determine a sustainable fee to charge students

4. Benefits of Costing The training institute is able to come up with a tuition fee that will ensure they make a profit Allows the training institute to reduce and control costs Helps the training institute to adapt to changing environments

5. Cost Elements used for Costing Three categories of cost elements Direct Materials – costs of consumable goods which are used to train a medical student Direct Labour – all labour costs which arise from the employment of people directly related to the process of training the medical student Indirect Expenses – other costs that are not directly related to the training but form part of it

6. Steps in Costing for a training institution – Traditional Method Identify all the elements that make up the total requirement for training the student Cost these elements Calculate how much has been spent (it costs) to train a medical student Arrive at the tuition fee to be charged, which includes a profit

7. Determining the cost of training a medical student Identify the elements that make up the total cost. Compute the direct material costs for training a medical student Compute the direct labour costs for training the medical student Compute proportion of overhead that make up part of the training of the medical student

8. Group Exercise - Direct Material Costs List the direct materials required to train a medical student Stationery used by tutor and students Uniforms and other protective clothing Teaching materials such as skills laboratory kits … … …

9. Group Exercise - Direct Labour Costs List the labour costs that are directly involved in student training Principal Tutor Tutors/lecturers Clinical Instructors … … …

10. Group Exercise – Overhead Costs List the overhead costs the training institute incurs Utilities Rent Transport Salaries for support staff Wear and tear of fixed assets … … …

11. Costing Exercise Case study of Flamboyant Nursing College Group Exercise Read the Case Study Discuss their situation - in small groups Respond to the questions at the end of the case Remember: Everyone should participate

12. Costing Exercise - Debrief What did you learn from this exercise? What worked well? What would you do differently next time? What information do you feel you still need in order you complete this exercise? How could you use this information to help you better determine the price you charge for student tuition?

13. Alternative Costing Methods Transparent Approach to Costing (TRAC) Marginal Costing Techniques for Higher Learning Activity Based Costing (ABC) Method

14. Alternative Costing Method: Transparent Approach to Costing (TRAC) Provides information on the income and expenditure of universities to relevant authorities. Has been a common methodology used by UK training institutes for costing their main activities (teaching, research and other core activities). Allows you to understand where academic staff effort is being directed and to plan how the costs can be funded.

15. Alternative Costing Method: Marginal Costing Method Defines the change in total cost of training medical students associated with including one additional student. This is a critical concern in higher education, because so much of funding and resource allocation is directly or indirectly related to enrollment numbers. Marginal costing provides a sensitivity to enrollment change that is usually missing in calculations of average cost.

16. Alternative Costing Method: Activity Based Costing Method Analyzes costs at an activity level (what is done) rather than at a unit level (the department that does the activity). Assigns more indirect costs (overhead) into direct costs compared to traditional conventional costing Requires significant planning and a commitment because it is time and resources intensive process 1.Determine which activities are necessary for the service 2.Determine the elements of each activity that cost money Attention to detail is very important, as many of these costs may be hidden and not entirely obvious.

17. SUMMARY AND CONCLUSION Benefits of conducting a costing exercise: Enables you to understand what resources are needed to train a medical student Enables you to make better informed financial and business management decisions Develop appropriate tuition fees/pricing for students in your programs Decide if you must make some strategic decisions to improve cash flow, such as: Cutting costs/Increasing tuition fees/Diversifying revenue, etc. Things to remember when analyzing costs: There are several costing methodologies and you need to understand which works best for your institution

18. What should I do now that I better understand costing? Next steps…

19. SHOPS is funded by the U.S. Agency for International Development. Abt Associates leads the project in collaboration with Banyan Global Jhpiego Marie Stopes International Monitor Group O’Hanlon Health Consulting Presenter Contact Information John Mthetwa – Training and Banking Consultant SHOPS Zambia Project Lusaka, Zambia Email: jmthetwa@banyanglobal.comjmthetwa@banyanglobal.com Tel: +260 211 261614, Mobile: +260 977 120076 www.shopsproject.org Shoshana Hecker - Associate Banyan Global USA Email: shecker@banyanglobal.comshecker@banyanglobal.com Tel: +1 202 684-9375