Improving Hospital Profitability through Cost of Quality

Abstract

The Stella Maris Hospital of Makassar, Indonesia has made various efforts in improving the quality of services to maximize profitability through the increasing of market share and cost containment. The financial cash flow within the year 2008-2010 indicates that the operating costs increased which is in contrast to the rate of bed utilization that decreased for the same period, that subsequently give impact to profitability. This paper is intended to analyze the relationship between cost of quality with profitability. The result indicates that the cost of quality has a significant relationship to the profitability. Partially, prevention and appraisal cost have a significant relationship to improve profitability, while the external failure costs have a significant relationship to lower profitability. Internal failure costs, on the other hand, have no significant relationship to the profitability. In conclusion, improving the allocation of prevention and appraisal costs will subsequently increase the profitability.

Keywords: cost of quality, prevention costs, appraisal costs, internal failure costs, external failure costs, and profitability.