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 Table of Contents  
Year : 2017  |  Volume : 61  |  Issue : 4  |  Page : 243-247  

Economic burden of managing Type 2 diabetes mellitus: Analysis from a Teaching Hospital in Malaysia

1 Associate Professor and Dr, Department of Community Health, Universiti Kebangsaan , Selangor, Malaysia
2 Dr, Discipline of Population Health and Preventive Medicine, Faculty of Medicine, Universiti Teknologi MARA, Selangor, Malaysia
3 Associate Professor and Dr, Department of Health Information, Universiti Kebangsaan , Selangor, Malaysia
4 Associate Professor and Dr, Department of Community Medicine and Public Health, Universiti Sarawak, Sarawak, Malaysia
5 Professor, Department of Medicine, Universiti Kebangsaan , Selangor, Malaysia

Date of Web Publication6-Dec-2017

Correspondence Address:
Aniza Ismail
1st Floor, Department of Community Health, Faculty of Medicine UKM, Jalan Yaacob Latiff, 56000 Cheras, Kuala Lumpur
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Source of Support: None, Conflict of Interest: None

DOI: 10.4103/ijph.IJPH_24_16

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Background: Type 2 diabetes mellitus (T2DM) is a chronic disease that consumes a large amount of health-care resources. It is essential to estimate the cost of managing T2DM to the society, especially in developing countries. Economic studies of T2DM as a primary diagnosis would assist efficient health-care resource allocation for disease management. Objective: This study aims to measure the economic burden of T2DM as the primary diagnosis for hospitalization from provider's perspective. Methods: A retrospective prevalence-based costing study was conducted in a teaching hospital. Financial administrative data and inpatient medical records of patients with primary diagnosis (International Classification Disease-10 coding) E11 in the year 2013 were included in costing analysis. Average cost per episode of care and average cost per outpatient visit were calculated using gross direct costing allocation approach. Results: Total admissions for T2DM as primary diagnosis in 2013 were 217 with total outpatient visits of 3214. Average cost per episode of care was RM 901.51 (US$ 286.20) and the average cost per outpatient visit was RM 641.02 (US$ 203.50) from provider's perspective. The annual economic burden of T2DM for hospitalized patients was RM 195,627.67 (US$ 62,104) and RM 2,061,520.32 (US$ 654,450) for those being treated in the outpatient setting.Conclusions: Economic burden to provide T2DM care was higher in the outpatient setting due to the higher utilization of the health-care service in this setting. Thus, more focus toward improving T2DM outpatient service could mitigate further increase in health-care cost from this chronic disease.

Keywords: Annual cost, cost of illness, diabetes mellitus type, economic burden, teaching hospital

How to cite this article:
Ismail A, Suddin LS, Sulong S, Ahmed Z, Kamaruddin NA, Sukor N. Economic burden of managing Type 2 diabetes mellitus: Analysis from a Teaching Hospital in Malaysia. Indian J Public Health 2017;61:243-7

How to cite this URL:
Ismail A, Suddin LS, Sulong S, Ahmed Z, Kamaruddin NA, Sukor N. Economic burden of managing Type 2 diabetes mellitus: Analysis from a Teaching Hospital in Malaysia. Indian J Public Health [serial online] 2017 [cited 2022 Aug 12];61:243-7. Available from:

   Introduction Top

Diabetes mellitus is one of the most rapidly rising chronic diseases in the country and world, leading it to be labeled as a noncommunicable epidemic by the World Health Organization.[1] Updated statistics of diabetes in 2014 revealed that the total worldwide prevalence was 8.3%, which mean that up to 387 million people in the world live with diabetes and from this figure, the Western Pacific region showed the highest prevalence compared to other regions at 8.5%, giving the total number of people with diabetes in the Western Pacific region at 138 million.[2] In Malaysia, the disease is growing at an alarming rate, with the prevalence rates calculated under the National Health and Morbidity Survey ranging from 6.3% in 1986,[3] 8.2% in 1996, 14.9% in 2006,[4] to 15.2% in 2011.[5] Malaysia is expected to have about 2.48 million diabetics in 2030 compared to 0.94 million in 2000, a tremendous increase of almost 164%.[6]

In Malaysia, the International Diabetes Federation [7] had estimated that the cost for each diabetes patient in 2014 was about USD 565.40 (RM 1848.85, exchange rate 1 US$ = RM 3.27). In local settings, several health economic studies in term of cost-effectiveness [8],[9] and cost-of-illness [10] studies had contributed invaluable knowledge of diabetes economics in Malaysia. The main aim of the present study was to measure the economic burden of managing type 2 diabetes mellitus (T2DM) among patients who were admitted with the primary diagnosis and who were seen in the outpatient clinics from the provider's perspective. We focused on provider's perspective with a rationale that in Malaysia, public health care is heavily subsidized with very low user fee, and revenue collection was estimated to be around 2% against its spending. Hence, it was appropriate that the economic burden of the disease should be assessed from provider's perspective.[11] Additionally, to the best of authors' knowledge, this is the first study conducted in Malaysia to calculate the economic burden of T2DM as a primary diagnosis.

   Materials and Methods Top

This study was done in Universiti Kebangsaan Malaysia Medical Centre (UKMMC) which is among the largest referral hospitals in Malaysia which managed a large number of diabetic patients. It is a teaching hospital with a maximum of 845 beds and bed occupancy rate of 64.76% in the year 2013. In the same year, the total number of hospital admissions was 35,263 and admissions into wards managed by the department of internal medicine were approximately 7768. Meanwhile, the total number of outpatient visits for this hospital was 543,505 and about 45% were visits to the specialist clinics.

Study design

This cost-of-illness study utilized the top-down approach, gross-costing technique from provider's perspective to calculate the direct cost of T2DM.


This study was conducted for 1 year from January 2013 to December 2013. Population sample was all patients admitted with the primary diagnosis of T2DM and outpatients diagnosed with T2DM attending medical specialist clinics. Universal sampling method was used, whereby all patients fulfilling the eligibility criteria were sampled retrospectively for 1 calendar year of 2013.

Eligibility criteria

Inclusion criteria were patients admitted with the primary diagnosis of E11 in International Classification of Disease (ICD-10) coding;[12] patients who have discharged themselves at their own risk or left the hospital without completion of treatment were excluded.

Data collection

Data were collected from documents provided by relevant departments and patients' medical records for the calendar year of 2013. Departments involved were Health Information, Financial, and Human Resource and Building Management departments. Validity and quality of data from relevant departments were ensured based on the fact that UKMMC was audited by the National Audit Department Malaysia and had obtained MS ISO 9001:2008 Certificate for Service Quality Management System (SPKP) during this study period. Direct accounting data were sent with official cover letter by relevant head of departments. Data collection involved two processes where medical records which contained information on demographic characteristics and clinical characteristics of the patients were transferred into case report forms. At the same time, documents by different departments on costs related to T2DM were recorded in the macro-costing forms. Macro-costing form is an evaluation form at the macro level. Cost component investigated using this form is the cost of buildings, equipment costs, utility costs, maintenance costs, transport costs, tax costs, insurance costs, drug costs, and consumable costs.

Cost analysis

Cost analysis was done from a provider's perspective. Therefore, the costs calculated were those borne by the provider (hospital) and were based on the information given by the Financial, Human Resource, Building Management, and Health Information departments. In addition, only direct costs were considered in this study. The costs were categorized based on capital cost and recurrent cost classification.

Capital costs

Building costs were calculated according to life span of the building estimated at 20 years with annual depreciation value of 5%/year based on original costs documented in historical accounting record. Equipment costs were calculated using the historical cost value to equip the whole hospital during its opening and according to a life span of 5 years with an annual depreciation value of 5%/year.

Recurrent costs

Staff costs were calculated for all clinical staff in the hospital. The annual income of the staff was based on the estimated salary received for at least 5 years of service in the current positions.[13] Administration costs were calculated using the cost of staff in the General Administration Unit (internal) in UKMMC. Radiology and laboratory service costs were calculated as the total floor space costs based on the calculated building costs. Other costs included utility costs, maintenance costs, security costs, transportation costs, tax costs, insurance costs, and drugs or disposable items costs. All these costs were taken directly from documents provided by the Financial Department.

Data analysis for cost calculation of type 2 diabetes mellitus economic burden using gross costing, top-down, and direct allocation methods

Cost data were entered in the computer using Microsoft Excel 2010 software. Gross costing [14] approach had enabled identification of only few cost components, which was more feasible compared to micro-costing approach due to limited access to financial data in the study setting. Calculation steps involved the following:

Step 1

Determination of perspective of the cost study; provider's perspective was used because the costs were incurred by the health-care provider in this study. This perspective appropriately relates to the resource requirements of providing T2DM curative care in the hospital.

Step 2

Unit of analysis was determined; Internal Medicine department was chosen as the unit of analysis because T2DM curative care is under their specialties.

Step 3

Valuation of cost item was done using the top-down [15] approach; here financial data collection relies on a comprehensive resource which was the financial accounting data from relevant departments. A total of three departments were included; Financial, Human Resource and Building Facilities Management departments.

Step 4

Relevant cost center was chosen to be included in the analysis. Three levels of cost centers were identified. The indirect cost center was the center that concerned with general services and formed the overhead cost.[16] For the outpatient calculation, the indirect costs for transportation were not included and the administration costs were assumed to account for about half of the inpatient cost. This approach was taken based on the findings from previous study on the ratio of cost for in- and out-patients.[17] The second cost center was the intermediate cost center which provides diagnostic and departmental support to the final center and for this study consisted of radiology and laboratory departments. The final cost center is where the actual services were delivered and where all the calculated costs were allocated. In this analysis, the direct allocation [15] was applied in the analysis meaning that the cost was allocated based on departmental share of indirect cost. Though it is been criticized for being crude estimates, the method was recommended when data are not available for allocating direct cost which was the case with this study. The sum of the costs from the indirect and intermediate cost centers were allocated to the final cost center and taken as the operating costs.

Step 6

Unit costs were calculated using the total operating cost and unit of outputs.[16] The unit of output for the inpatient was the total episodes of care while for the outpatients it was total outpatient visits. Therefore, the reported cost will be the average cost per episode of care and average cost per outpatient visit.

Step 7

Finally, economic burden of T2DM was calculated by multiplying the costs with the number of the inpatient episodes of E11 and number of T2DM outpatient visits in the year 2013.

   Results Top

The total number of patients for T2DM (ICD-10 E11) in the year 2013 was 4954 patients. The proportion coded as the primary diagnosis was only about 4.4% which was equal to 217 patients with an average length of stay of 13 days. Meanwhile, the total outpatient visits for DM were estimated to be at 3216 visits in the year 2013.

Total operating costs for the year 2013

The total operating costs for inpatients and outpatients of UKMMC in the year 2013 after summing up all the relevant costs were estimated at RM 350,145,422.48 (US$ 111,157,276, exchange rate 1US$ = RM 3.15) and RM 348,395,317.47 (US$ 110,601,688), respectively. The major contributors to the total operating costs were the cost of drugs and disposable items at about 42% of the total operating costs followed by the building costs at 17%. The third major contributor was the costs of clinical staff at salary at about 16% of the total costs.

T2DM patients' costs from a provider's perspective

The cost of a T2DM inpatient per episode of care was calculated as the average cost per episode of care in the year 2013 was equal to RM 901.51. Meanwhile, the average cost per outpatient visit using was about RM 641.02. The economic burden of these T2DM inpatients and outpatients in this study were RM 195,627.67 (US$ 62,104, exchange rate 1US$ = RM 3.15) and RM 2,061,520.32 (US$ 654,450), respectively. Thus, economic burden to provide care for the outpatients was more compared to inpatient care even though the average cost was higher for the inpatient care.

   Discussion Top

Provider cost analysis

Provider's cost of treating T2DM patients was calculated as an average cost per episode of inpatient care which equaled to RM 901.51 (US$ 286.20) while the average cost per outpatient visit was RM 641.02 (US$ 203.50). For the former cost in 2002, previous local study findings were higher than this study which revealed that provider's cost of T2DM hospitalizations was about RM 2635.34 (USD 693.51, exchange rate 1US$ = RM 3.80) per patient per admission.[18] Similarly, another local study [10] in 2009 had found that average cost per diabetic admission was also higher at RM 1951 (US$ 514.80, exchange rate 1US$ = RM 3.79). Unfortunately, these cost figures were not quite comparable due to time, settings, and costing methodology differences. Nonetheless, it might imply that costs to treat T2DM patients were less expensive at present for the inpatients' care. In contrast, their cost per outpatient visit was only about RM 194.47 (US$ 51.30) which was cheaper than in this study. Apart from using different costing methodologies, this could also be due to the reason that, in top-down macro-costing approach, the higher the burden of the outpatients' visits, the lower the average costs would be calculated when economics of scale was achieved. This present study location was right in the capital city of Malaysia, which might contribute to higher prevalence of diabetes patients, therefore would have resulted in a lower average cost being calculated.

When comparing different costing approaches between studies in more detail, it was found that, in the 2009[10] study, the apportion stage of cost calculations was based on specific ratio of 60:40 to calculate diabetes patients' days as in- and out-patients. In contrast, this present study used the gross-costing direct allocation technique and did not follow this step, instead the in- and out-patients split was done during the step of allocating the direct cost to the final cost center. This technique was worthwhile because in- and out-patient costs were measured in different units (days versus visits), thus they should be costed separately.[19] Nonetheless, some researchers might prefer the earlier study approach depending on their study setting and data availability.

Arguably, the comparison between the above studies might not be considered to be a good approach for making cost comparison because none of the studies used similar costing methodology despite exhaustive search strategies used by us to locate any similar studies in neighboring regions. These results lead to one important fact which emerged after undertaking the cost finding analysis in this study location; costing methodology could not be standardized for every country or disease because each country or disease would have its own values and limitation which in turn need to be addressed and solved by the researchers based on their preferences, belief, and limitations. In fact, this is supported by findings from a systematic review done in 2013 on cost of illness for diabetes mellitus which revealed that none of the thirty studies included in the review were done in Southeast Asia and none shared similar costing methodologies and moreover, the perspectives, data sources, and outcome vary across all the studies.[20] Additionally, in Malaysian health-care setting, in one isolated study, an almost similar costing method was used in measuring the cost of inpatient medical care for stroke patients in the year 2005. Nonetheless, it was done by utilizing the case-mix system which was not done in our study, again making the study not comparable to the present study.[21]

Other than that, in the present study, it was found that the highest proportion of costs for the total operating costs was for the drug and consumable cost followed by the cost of the building. This is in contrast to the proportion reported in an earlier economic study [10] where the highest proportion of costs at 41% was for building cost followed by the staff salary at about 17% from the total provider's cost. Nonetheless, the present study supported an earlier study in Thailand [22] in terms of pharmacy services contributed to a major portion (45%) of cost for the care of diabetic patients. Nevertheless, when the major portion of the costs in the present study is attributed to drugs and consumables, this actually might indicate that an efficient use of hospital financial budget was applied by the health-care provider. This was because it was suggested that, by increasing the budget for drugs and medical supplies, it would likely increase the quality of care and utilization rate (number of admissions) and this in turn will decrease the total cost per admission.[23]

Cost data analysis and perspectives

Costing analysis for this study was done using providers' perspective. Although societal perspective is often favored because it allows a complete analysis of all opportunity costs attributable to a disease, it however also requires a lot of data, making it difficult to use in certain cases.[24] Nonetheless, the use of provider's perspective in the present study was still appropriate because it aims to quantify the medical cost of the illness.

Interestingly, the diabetes cost from this study which represented the costs in a single tertiary care center was found to be at a lower figure when compared to previous studies done in Malaysia. The reason for this might be due to the different costing principles adopted across the studies. Apart from that, the differences in cost and costing methodology of the aforementioned studies emphasized the point that there is a need to develop a standardized costing method to measure the disease burden at national level.

The strength of this study is that it managed to capture the cost driver that contributes to the cost of providing the in- and out-patient service to T2DM population. This information could be used as reference for hospital manager to do cost optimization strategy in the future. For example, when drug and consumable expenditure represented the highest proportion for hospital budget expenditures, strategy such as exploring alternative of less expensive consumable items or generic medications should be considered. In other words, although this cost analysis will not be adequate to justify expenditure adjustment, it will provide baseline information for more complex economic evaluation in the future.

   Conclusions Top

Economic burden of T2DM in- and out-patients' care in a single teaching hospital was calculated to be at 5.6% of the GDP for health in the year 2013 (Malaysian [25] Health GDP in 2013 was 4.0%). The average cost per episode of care appeared to be showing a relatively downward trend compared to studies done in the previous years with the average cost per episode of care at RM 901.51 and average cost per visit at RM 641.02. The reason for this reducing trend might be due to increasing efficiency in managing the T2DM population at the provider's level. In other words, the economics of scale have been achieved. Nonetheless, this fact was arguable because, with the high rate of medical inflation in the study setting of about 10.3%, the cost should be increasing instead of reducing. Again, it is worthwhile to highlight that difference in costing methodology and external factors that could influence the economic cost of disease should be taken into consideration when making cost comparison between different studies. Nevertheless, it was undeniable that T2DM was indeed a costly disease and contributes to a huge portion of the increasing economic burden of the noncommunicable diseases. Therefore, efforts to identify the cost-effective way to handle these issues should be made one of the priority agenda in setting the national health policy on noncommunicable diseases, specifically on T2DM.

Financial support and sponsorship

This study was financially supported by Universiti Kebangsaan Malaysia Fundamental Grant.

Conflicts of interest

There are no conflicts of interest.

   References Top

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