A cost function analysis of child health services in four districts in Malawi

BACKGROUND Recent analyses show that donor funding for child health is increasing, but little information is available on actual costs to deliver child health care services. Understanding how unit costs scale with service volume in Malawi can help planners allocate budgets as health services expand. METHODS Data on facility level inputs and outputs were collected at 24 health centres in four districts of Malawi visiting a random sample of government and a convenience sample of Christian Health Association of Malawi (CHAM) health centres. In the cost function, total outputs, quality, facility ownership, average salaries and case mix are used to predict total cost. Regression analysis identifies marginal cost as the coefficient relating cost to service volume intensity. RESULTS The marginal cost per patient seen for all health centres surveyed was US$ 0.82 per additional patient visit. Average cost was US$ 7.16 (95% CI: 5.24 to 9.08) at government facilities and US$ 10.36 (95% CI: 4.92 to 15.80) at CHAM facilities per child seen for any service. The first-line anti-malarial drug accounted for over 30% of costs, on average, at government health centres. Donors directly financed 40% and 21% of costs at government and CHAM health centres, respectively. The regression models indicate higher total costs are associated with a greater number of outpatient visits but that many health centres are not providing services at optimal volume given their inputs. They also indicate that CHAM facilities have higher costs than government facilities for similar levels of utilization. CONCLUSIONS We conclude by discussing ways in which efficiency may be improved at health centres. The first option, increasing the total number of patients seen, appears difficult given existing high levels of child utilization; increasing the volume of adult patients may help spread fixed and semi-fixed costs. A second option, improving the quality of services, also presents difficulties but could also usefully improve performance.