Cost Accounting · Operating Costing - Transport, Hotel and Healthcare

Hospital and Healthcare Costing: Cost per Patient Day

Updated 10 October 2026 · Fact-checked

Hospital costing is a form of operating costing. You group a hospital's costs under headings such as ward, pharmacy and laboratory, prepare a cost statement, and divide by a service unit such as patient-days or tests. Cost per patient-day = total cost of the service ÷ total patient-days for the period.

Understand Hospital and Healthcare Costing

A hospital sells a service, not a product. There is no stock of finished goods and no material that becomes part of an output. So hospitals use operating costing (service costing). You collect the cost of running the service for a period and divide by the number of service units.

The first step is to split the hospital into cost centres. Common ones are: patient care (wards, ICU, operation theatre), diagnostic services (laboratory, radiology), pharmacy, and support services (kitchen, laundry, ambulance, administration). Service centres are usually costed on their own, then charged to patient-care centres if the question asks for it.

The next step is the cost unit. It must match what the service does. Typical units are: patient-day (one patient staying for one day, based on actual occupancy), bed-day (one bed available for one day, whether occupied or not), per test or per X-ray for diagnostics, per operation for the theatre, and per kilometre for an ambulance. Choose the unit that fits the cost centre.

Costs are then listed in a cost statement, usually under heads such as: medical staff costs, nursing costs, medicines and consumables, food and linen, repairs and maintenance, power and water, administration, and depreciation. Many hospital costs are fixed, such as staff salaries, building depreciation and equipment depreciation. Some vary with patients, such as medicines and food. This is why cost per patient-day changes sharply when occupancy changes.

The key calculation is the number of units. Patient-days = number of beds × days in the period × occupancy %. Bed-days available = beds × days. If a question gives separate patient categories (general ward, private room), compute the days for each and cost each separately.

Key rules to remember

Bed-days available: Bed-days available = Number of beds × Number of days in the period; Counts every bed whether occupied or empty. Check whether the question gives a 30-day month or a 365-day year.
Patient-days (occupied bed-days): Patient-days = Bed-days available × Occupancy %; Use for cost per patient-day. If beds differ by ward, calculate ward by ward.
Cost per patient-day: Cost per patient-day = Total cost of the service ÷ Total patient-days; Total cost includes fixed and variable items allocated to the service.
Cost per bed-day: Cost per bed-day = Total cost ÷ Bed-days available; Always lower than or equal to cost per patient-day, as the divisor is larger or equal.
Cost per test or per procedure: Cost per test = Cost of the diagnostic centre ÷ Number of tests; Use the same logic for X-rays, scans, operations.
Charge with profit: Charge per unit = Cost per unit + Profit per unit, or Cost per unit ÷ (1 − profit % on charge); Read whether profit is on cost or on charge.

How to solve Hospital and Healthcare Costing questions

Use this order for any hospital or healthcare costing question. It keeps the statement clean and earns step marks.

1Read the question and note the period (month or year), number of beds and occupancy. Note the cost unit asked for.
2Calculate the units first: bed-days available and patient-days. Show the working.
3Group the costs under proper heads or cost centres. Separate fixed and variable only if the question asks for it or needs it.
4Convert all costs to the same period. Divide annual figures by 12 for a month, and apportion shared items as the question directs.
5Prepare the cost statement with columns for total cost and cost per unit, with a clear total.
6Divide total cost by the correct unit (patient-days, bed-days, tests). Show the division.
7If a charge or profit is asked, add the profit on the stated base, cost or charge.
8Write a one-line conclusion or interpretation, for example the effect of low occupancy on cost per day.

Quickest way: Units first, then a two-column statement

When to use it: Use this when time is short, especially in a 14-mark numerical with many cost items.

Write patient-days at the top of your page in a box. Most errors start here.
List each cost item with its amount for the period in one column. Cross out annual figures and rewrite them for the period.
Add the column and divide the total by the units.
Compute cost per unit for each item only if asked. Otherwise give the overall figure.
Check: the per-unit costs of the individual items should add up to the total cost per unit.

Common mistakes in Hospital and Healthcare Costing

Using bed-days available instead of patient-days (or the reverse).
The two terms sound alike and students skip reading the unit asked for.
Fix: Underline the unit in the question. Bed-day uses all beds; patient-day uses occupied beds only. State the unit in your answer line.
Ignoring occupancy when beds and days are given.
Students rush to multiply beds by days and divide.
Fix: Always check for an occupancy % or number of patients. Patient-days = beds × days × occupancy.
Mixing annual and monthly figures.
Salaries are given monthly, depreciation and insurance yearly.
Fix: Convert every item to the same period before adding. Write the period at the top of the statement.
Leaving out depreciation or including non-cost items.
Students treat depreciation as non-cash and drop it, or add interest and donations.
Fix: Include depreciation on building and equipment as a cost. Exclude financial charges and items the question marks as not part of cost.
Calculating profit on the wrong base.
Words like 'profit of 20% on charges' are read as profit on cost.
Fix: If profit is on charge, charge = cost ÷ 0.80 for a 20% margin. If on cost, charge = cost × 1.20.
Costing all wards at one rate when the question gives different bed types.
Students average everything to save time.
Fix: Compute patient-days per ward type and apportion cost on the basis given, such as bed-days or rent weights, then cost each separately.

Worked examples

Example 1

A hospital has 50 beds. For a 30-day month the occupancy is 80%. The costs for the month are: doctors and nurses ₹6,00,000; medicines and consumables ₹3,60,000; food and linen ₹1,80,000; repairs and power ₹1,20,000; administration ₹1,00,000; depreciation ₹60,000. Find (a) the cost per patient-day and (b) the charge per patient-day if the hospital wants a profit of 20% on cost.

Show the solution

Bed-days available = 50 × 30 = 1,500.
Patient-days = 1,500 × 80% = 1,200.
Total cost = 6,00,000 + 3,60,000 + 1,80,000 + 1,20,000 + 1,00,000 + 60,000 = ₹14,20,000.
Cost per patient-day = 14,20,000 ÷ 1,200 = ₹1,183.33 (approx).
Profit at 20% on cost = 1,183.33 × 20% = ₹236.67.
Charge per patient-day = 1,183.33 + 236.67 = ₹1,420.

Answer: (a) Cost per patient-day ≈ ₹1,183.33. (b) Charge per patient-day = ₹1,420.

Example 2

A diagnostic centre of a hospital performs 2,500 tests in a month. Its monthly costs are: technician salaries ₹1,50,000; reagents and consumables ₹2,00,000; equipment depreciation ₹50,000; power ₹25,000; share of administration ₹25,000. Prepare a cost statement and find the cost per test. If the centre charges ₹250 per test, find the profit for the month and the profit as a percentage of the charge.

Show the solution

Total cost = 1,50,000 + 2,00,000 + 50,000 + 25,000 + 25,000 = ₹4,50,000.
Cost per test = 4,50,000 ÷ 2,500 = ₹180.
Cost per test by item: salaries ₹60; reagents ₹80; depreciation ₹20; power ₹10; administration ₹10. Sum = ₹180.
Revenue = 2,500 × 250 = ₹6,25,000.
Profit = 6,25,000 − 4,50,000 = ₹1,75,000.
Profit % on charge = 1,75,000 ÷ 6,25,000 × 100 = 28%.

Answer: Cost per test = ₹180. Monthly profit = ₹1,75,000, which is 28% of the charge.

Exam tips

Show bed-days and patient-days as separate working lines. Examiners give marks for the unit calculation even if a later figure is wrong.
Present the answer as a cost statement with heads and a total, not as scattered calculations.
Check whether the question wants the cost per patient-day, per bed-day or per test, and write the unit next to your final answer.
For the 2-mark MCQs, remember the quick links: patient-day uses occupancy, bed-day does not. Cost per bed-day is never more than cost per patient-day.
If profit is mentioned, circle whether it is on cost or on charge before calculating.

Practice questions from Operating Costing - Transport, Hotel and Healthcare

Hospital and Healthcare Costing in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Hospital and Healthcare Costing: frequently asked questions

What is the difference between a patient-day and a bed-day?

A bed-day is one bed available for one day, used or not. A patient-day is one occupied bed for one day. Patient-days equal bed-days multiplied by the occupancy percentage.

Why is hospital costing treated as operating costing?

A hospital provides a service and has no physical output or finished stock. Operating costing collects the cost of running the service and divides it by a service unit such as a patient-day or a test.

Which cost unit should I use in a hospital question?

Use the unit the question names. If none is named, use patient-day for wards, per test for the laboratory and radiology, and per operation for the theatre.

Is depreciation included in a hospital cost statement?

Yes. Depreciation on building and medical equipment is part of the cost of providing the service. Exclude items such as interest or donations unless the question tells you to include them.