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THE SAN LAZARO

VETERINARY TEACHING HOSPITAL:
A CASE STUDY
(Part 1)











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THE SAN LAZARO VETERINARY TEACHING HOSPITAL:
A CASE STUDY
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/
2

(Part 1)

The San Lazaro Veterinary Teaching Hospital (SLVTH) is an income-generating sub-
unit of the San Lazaro College of Veterinary Medicine (SLCVM). SLVTH serves as a
practicum laboratory for veterinary students under the subjects of Veterinary Clinic
(VClinics). Also, it attends to animals from the nearby communities that require veterinary
medicine needs and serves as a research station of SLCVM towards the advancement in
veterinary medicine. The SLVTH, as part of the SLCVM, is a pioneer on the veterinary
profession in the Philippines. It dates back to early 1900s although no formal classes were
then offered. The College currently has 2 stations/clinics: it maintained the SLVTH building
in Manila and opened a new station in Batangas.
The hospital adheres to the three-fold objectives of the College which are the
instruction, research, and extension service. It attends to the needs of clients in the nearby
area, and more importantly serves as a training venue for veterinary medicine students. It also
acts as an important source of actual cases for the students of SLCVM, aiding it in
developing research in animal science. The patients become subjects of case studies in
students theses and researches, as well as recipients of new treatment and surgical
procedures.
SLVTH operation is being subsidized or supported by San Lazaro University which is
a government-run and funded university. The faculty veterinarian employed by the university
handles patient cases brought by the public or clients on the hospital, simultaneously
educating veterinary students who assist him/her. SLVTH, being under the SLCVM, is hailed
as a national institution of excellence in veterinary education, research, and extension.
SLVTH faces problems which affect the activities and whole operations of the
hospital. Problems such as budget insufficiency or scarcity of resources and lack of budget
monitoring are among the most critical issues. Others include inability to upgrade equipment
or machines, underpriced services caused by lack of review and adjustments of service fees
as well as lack of basis for price setting, long processing of procurement of supplies and
inputs, lack of promotional efforts, and lack of communication among management staff.
Procurement of supplies for the hospital has to undergo a process which takes time.
As a result, the hospital cannot respond immediately when supplies or inputs necessary for
delivering veterinary services come short. Some veterinarians of SLVTH desire to have more
technologically advanced equipment and materials which they deem necessary for the
improvement of the hospitals services. However, it currently experiences budget deficit
making them unable to upgrade facilities. SLVTH would also like to know if it is charging

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This case was written by Flordeliza G. Tolentino (BSABM 09), Tricia C. Ascan (Assistant Professor 3), and
Nimfa D. Montes (Assistant Professor 7) of the University of the Philippines Los Banos, 2009.
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The case has been disguised and is used for class purposes only. This case does not intend to present either
correct or incorrect handling of management problems.
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too low on its services which greatly affects the financial performance of the hospital since
the fees collected becomes the basis for their budget allocation. Although the hospital would
like to remain as a non-profit oriented hospital, it must also consider that additional income is
needed for the continuous operation of the hospital since its funds come from the Revolving
Fund and not from the General Fund given by the national government. The current officers
of San Lazaro College of Veterinary Medicine would like to find ways on how improve the
operations and services of their veterinary hospital.

Brief History of the San Lazaro CVM
The San Lazaro College of Veterinary Medicine under the San Lazaro University was
established in early 1900s by a Republic Act. It included a Veterinary Teaching Hospital.
The San Lazaro Veterinary Teaching Hospital is known as the practicum laboratory for the
subjects of Veterinary Clinics in the SLCVM. It was instituted to provide training and
diagnosis in the widespread devastation of rinderpest. The college accepts animal patients in
need of medical attention which veterinary students assist, watch, and learn from the faculty
veterinarian who handles the patient cases.
The SLVTH has two stations: one in Manila and one in Batangas. The Manila Station
handles practicum laboratory for veterinary students as well as caters to clients within Metro
Manila. The Batangas Station is composed of the two departments, the Animal Disease
Diagnostic Laboratory (ADDL) and the Large Animal Clinic (LAC). The Batangas Station
facility is home to the Virology and Vaccine Laboratory, Theriogenology Laboratory and
Experimental Animal farm facility of SLCVM. The facility also serves as the offices of the
Department of Veterinary Clinical Sciences (DVCS).

Vision, Mission, Objectives
Vision
The San Lazaro Veterinary Teaching Hospital has a vision of being a premier
veterinary teaching hospital in the country and in Asia. It aims to further strengthen its
leadership as the national institution of excellence in veterinary education, research, and
extension, as part of the San Lazaro College of Veterinary Medicine. SLVTH was instituted
with students as the priority. Research and extension services are other key components in
the pursuit of high quality education.
Mission

We, the staff of the San Lazaro Veterinary Teaching Hospital, are committed to
provide a venue for the instruction of San Lazaro University Veterinary students in
veterinary clinical sciences, and in so doing, maintain a comprehensive high quality
preventive medical, and surgical care for small animals and exotic animals brought forth by
its surrounding localities.


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Instruction/Education
Education is a principal mission of the SLVTH. It commits to continuing leadership
for improvement and innovation in veterinary education. Through the education programs of
SLVTH, it will be able to respond to the employer/health care market and the students needs
of high value of education. Its programs will capture the value of interdisciplinary and inter-
professional education.

Research
Research drives the advancement of all what SLVTH does. It is the key to sustaining
a competitive lead as an academic institution. It will provide conduit of access between
investigators and external research constituencies that encourage basic and clinical research,
technology transfer, and health outcomes and veterinary health systems improvements.

Extension
Clinical service is a critical faculty and non-faculty veterinarian activity. It advances
the profession, provides personal development, and is a major avenue of community
interaction. The communities are served through the clinical service offered by the SLVTH.
These clinical service programs are a key component to the education and research programs
of the SLVTH.

The Organizational Structure of SLCVM and SLVTH
The SLVTH is one of the 4 departments of the San Lazaro College of Veterinary
Medicine. It serves as the laboratory of the Department of Veterinary Clinical Sciences for
training junior and senior clinicians. Being under SLCVM, the veterinary hospital is also
supervised by the college dean. The director of the SLVTH is in-charge of the overall
operation of the whole Veterinary Teaching Hospital. The SLVTH has an administrative
officer assigned to all clerical tasks, and monitors the attendance or leave of absences, daily
time records and tardiness, and salaries of all hospital employees. Each station also has its
faculty-in-charge and other staff.
The SLVTH used to conduct regular meetings every first or second Monday of the
month. However, it is no longer being followed because the staff cannot find a common
schedule to hold the meeting. Only the director, administrative officer, and the three faculty-
in-charges attend the meetings. The other staffs of the SLVTH under the three stations do not
hold regular meetings. Appendices 1 & 2 show the organizational structure of the SLCVM
and SLVTH.

Target Clients, Services Offered, and Fees
The SLVTH as a whole targets the nearby communities and the university
constituents, staff and students. The Manila Station caters to the small animal owners while
the Batangas Station caters to both small animals as well as livestock or large animal owners
(farm owners) in nearby towns or cities.
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Of the patients being brought to the hospital, specifically to the small animal clinic
stations, 95% corresponds to dogs, 3-4% is cats, and 1% is other animals. The VTH Manila
Station has an average number of patients of 30-40 per day. On the other hand, the Batangas
Station- small animal clinic has an average number of 10-30 patients per day. The large
animal clinic however, has an irregular number of clients. About 1-2 animal/s per month is
being brought to the large animal clinic station. Sometimes, upon the request of the farm
owner, the resident veterinarian goes to the farm to visit the animals and perform medical
procedures as necessary.
The most common services availed by the clients in the small animal clinic are
preventive medicines such as vaccination and deworming, medical check-up and consultation
when their animals are sick. SLVTH maintains its prices which are cheaper than other
veterinary clinics/hospitals. The prices of services offered by SLVTH is about 50 to more
than 100% lower than the fees set by the private veterinary clinics. It does not regularly
adjust prices. The latest changes or adjustment on prices of services was in the year 2002.
Any change made on the prices of services should include strong justification to be approved
by the Board of Trustees.
In setting charges of the services, the hospital uses the gross profit method, wherein
the price is computed by adding a percentage to either the purchase price or wholesale cost.
In the case of SLVTH, a 160% to the wholesale cost of the product (medicines and other
consumables) is added. The rates change based on the change of buying cost of supplies and
drugs.
In addition, a competitive pricing strategy is used in setting charges for surgical
procedures. The SLVTH examines the competitors prices and then charges lower rates than
the majority. Furthermore, prices of these services would depend on the length of time of the
procedure and the complexity in doing the procedure. The hospital charges lower prices than
the competitors because by doing so they stay on their objective of being a teaching and
government-owned and non profit-oriented hospital. Appendix 3 shows the comparative
prices of some veterinary services between SLVTH and private veterinary practitioners.

Hospital Operations
Each station employs resident veterinarian/s. The Manila Station has two resident
veterinarians since they have more clients compared to the other two stations. The Batangas
Station has only one resident veterinarian but the medical technologist is also a licensed
veterinarian hence may assume responsibility when the resident veterinarian is absent. Since
SLVTH is a teaching hospital, faculty veterinarian along with the junior and senior clinicians
also serve as a source of manpower of delivering services to the customers.

SLVTH Manila Station is open 8 hours a day, from 8am to 12nn and 1pm to 5pm,
from Monday to Saturday except holidays. The station accepts cases only from 8am to 11am
and 1pm to 3pm. There is also no x-ray and no laboratory exam during Wednesdays.
Furthermore, ultrasound is only available during Friday.
On the other hand, the Batangas Station operates 5 days a week from Monday to
Friday from 8 am to 12nn in the morning and 1pm to 5pm in the afternoon. Also, during
Fridays, it accepts cases for necropsy until 2pm only.
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Finance Performance
The San Lazaro University Internal Operating Budget (IOB) comes from two sources,
the General Fund (GF) and the Revolving Fund (RF). General Fund is the budget allocation
from the National Government through the General Appropriations Act while the Revolving
Fund comes from the Universitys income from the following sources: tuition, interest
income, rental income from housing and other properties, hospital fees, legal research fees,
residence hall and dormitory fees, income from other auxiliary services, and other
miscellaneous sources. As for the SLVTH, the Revolving Fund is its only source of income;
it must generate more income to be able to get more funds.
Therefore, the two stations are greatly dependent on each other since the income
generated by these stations are combined, and the supplies needed are divided among them
regardless whether they earned income or not.
The budget allotted for the SLVTH depends on the income of the previous year. A
15% administrative cost is also included in the hospitals annual expenses allowing the 85%
remaining from the generated income to be used up by the hospital. However, the
Universitys Budget Office only provides about 80 85% appropriations from the previous
years income. Sometimes, the expenses incurred for the year is more than the revenue from
the previous year which means that the hospital is spending more than what it is earning.
When this happens, the hospital receives a supplemental budget from the university aside
from the budget originally allotted to them. According to the administrative officer, the
supplemental budget given to the hospital also comes from the income generated by the unit
(the remaining 15 20% withheld by the budget office). When this is not used by the unit, it
is pooled together with all other incomes generated by other units and are then used for other
purposes by the university.
Table 1 shows the total appropriations, allotment received and the supplemental
budget utilized by the hospital for the years 2003 to 2007. The supplemental budget was
computed by deducting the total appropriations indicated on the Internal Operating Budget
from the allotment received by the hospital. Based on the data below, the total appropriations
allotted to the hospital were fully utilized. Further, the hospital resorted to a supplemental
budget to be able to finance the total cost.

Table 1. Total Appropriations, Allotment Received and Supplemental Budget (2003-2007)
Year Total Appropriations
(Internal Operating
Budget, in Pesos)
Allotment Received
(in Pesos)
Supplemental Budget
(in Pesos)
2003 3,475,000 4,410,830.00 -935,830
2004 3,732,000 4,046,650.63 -314,650.63
2005 3,733,000 4,377,550.82 -644,550.82
2006 4,519,000 6,445,783.56 -1,926,783.56
2007 4,272,000 6,074,726.22 -1,802,726.22
Source: Budget Management Office
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Table 2 shows the gross revenues of the SLVTH for the last five years (2003-2007).
The total income presented comes from different sources and not merely from the operation
of the hospital. There are other objects included on the recorded hospitals income which are
not part of its operation. Of the total income of the hospital, about 78-98% comes from the
hospitals operation while the remaining 2-22% comes from other sources of income.

Table 2. Gross Revenues of SLVTH (2003-2007)
YEAR BATANGAS MANILA TOTAL
2003 1, 103, 842.95 3, 165, 678.50 4, 269, 521.45
2004 1, 329, 112.75 3, 608, 061.75 4, 937, 174.50
2005 1, 099, 652.20 4, 405, 357.00 5, 505, 009.20
2006 974, 853. 12 4, 157, 929.50 5, 132, 782.62
2007 1, 288, 645.21 4, 427, 448.00 5, 716, 093.21
Source: Accounting Office


Table 3 shows the gross revenues earned versus the allotment received by the
hospital. Based on the data below, on years 2003, 2006, and 2007, the allotment received by
the hospital is higher than the income generated by the hospital, meaning additional budget
or subsidy was received by the hospital during these years. It shows that the hospitals
income is not enough to fund the costs incurred by the hospital. In 2006, there was a high
discrepancy between the income and the allotment received amounting to more than Php1M.
It also implied that the expenses of the hospital for year 2003, 2006, and 2007 are greater
than the income generated since the allotment received by the hospital depends on the needs
or the obligations incurred by the hospital.



Table 3. Gross Revenues vs. Allotment Received (2003-2007)
Year Gross Revenues
(Income)
(in Pesos)
Allotment Received

(in Pesos)
Difference
2003 4,269,521.45 4,410,830.00 -141,308.55
2004 4,937,174.50 4,046,650.63 890,523.87
2005 5,505,009.20 4,377,550.82 1,127,458.38
2006 5,132,782.62 6,445,783.56 -1,313,000.94
2007 5,716,093.21 6,074,726.22 -358,633.01

Table 4 presents a comparison between the allotment received and the obligations
incurred of the Maintenance and Other Operating Expenses of SLVTH. The unobligated
balance or the difference between the allotment and the actual expenses incurred by the
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hospital is very high especially in years 2006 and 2007, wherein the unobligated balance is
more than Php300, 000 to almost Php939,000.


Table 4. Allotment vs. Obligations Incurred
Year Allotment
(Administrative cost has
been deducted)
Obligations Incurred
(Actual Expenses excluding
administrative cost)
Unobligated
Balance

2003 4,410,830.00 4,325,702.08 85,127.92
2004 4,046,650.63 3,896,886.59 149,764.04
2005 4,377,550.82 4,376,893.48 657.34
2006 6,445,783.56 6,115,280.56 330,503.00
2007 6,074,726.22 5,135,830.54 938,895.68

Table 5 shows the statement of results of operations of the SLVTH from years 2003
to 2007. In years 2003, 2006, and 2007, it experienced net loss/deficit, and the rest posted net
surplus. Year 2006 has the highest net deficit amounting to Php1,808,249.32. The excess of
the income generated by the hospital, however, goes to the university and is being
reprogrammed for other purposes, thus, the hospitals income is not used by the hospital
alone.

Table 5. Statement of Results of Operations (2003-2007)
2003 2004 2005 2006 2007
Income 4,269,521.45 4,937,174.50 5,505,009.20 5,132,782.62 5,716,093.21
Less: Expenses

Personal Services (Non-
Government Workers)

Maintenance and Other
Operating Expenses

Capital Outlay

Administrative Cost (15%)

Total Expenses


1,561,876.00

2,463,826.08



300,000.00

640,428.22

4,966,130.30


759,514.75

2,933,531.84



203,840.00

640,428.22

4,537,314.81


1,129,013.00

3,182,880.48



65,000.00

740,576.18

5,117,469.66


1,062,911.49

4,901,629.32



150,739.75

825,751.38

6,941,031.94


1,024,174.94

4,023,597.92



88,057.68

769,917.39

5,905,747.93
Net Surplus/
(Net Deficit)

(696,608.85)

399,859.69

387,539.54

(1,808,249.32)

(189,654.72)




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A more detailed breakdown of expenses of the SLVTH is shown in Table 6. The
annual expenses of the SLVTH include personal services or salaries and wages for non-
government workers, capital outlay, and maintenance and other operating expenses (MOOE),
which are further divided into blue guards, utilities, APP List 1, APP List 2, miscellaneous,
and other operating expenses. The bulk of the MOOE comes from the List II Supplies which
includes drugs and medicines, medical, dental, and laboratory supplies, janitorial and
hardware, and other supplies. An administrative cost of 15% is also annually given to the
university. The administrative cost has already been deducted from the total amount of
budget to be spent for the following year. Most of the expenses on each year are not fixed.
For example, personal services for non-government workers are computed on a daily basis. It
means that if the worker did not show up for that day, then he would not receive payment for
that day. Also, utilities and the amount of supplies needed for each year varies.

Table 6. Breakdown of expenses
EXPENSES 2003 2004 2005 2006 2007
I. Personal Services
Non-Government Workers 1,561,876.00 759,514.75 1,129,013.00 1,062,911.49 1,024,174.94
II. Maintenance and Other Operating
Expenses

Blue Guards 264,000.00 264,000.00 264,000.00 265,000.00 283,000.00
Utilities
Water 50,352.86 102,647.52 176,385.79 303,916.08 307,247.36
Electricity 73,892.10 221,232.03 302,970.59 338,470.70 309,142.98
Telephone, Telegraph, Internet 14,341.63 63,023.44 60,637.81 57,474.36 13,248.86
Newspaper Subscriptions 960.00 17994.00 15,593.53 13,175.60 6,107.40
List I Supplies (office supplies, electrical,
and computer supplies)
80,482.57 92,220.05 135,247.42 184,588.00 210,284.35
List II Supplies(drugs &medicines, medical,
dental & laboratory supplies expenses,
janitorial and hardware, other supplies)

1,868,075.95

2,016,395.65

2,009,831.84

3,264,460.78

2,606,571.18
Miscellaneous
Repair and Maintenance 43,535.00 40,701.00 77,974.75 29,071.00 5,950.00
Traveling Expenses/Hired Vehicle 26,530.97 55,390.82 93,538.25 157,356.25 238,875.49
Printing and Binding, Photocopying 5,000.00 11,654.55 450.00 39,169.50 17,560.00
Gasoline, Oil, and Lubricant 42489.28 733.00 218,288.85 21,299.00
Clothing Allowance, 2000.00
Fidelity Bond Premiums 1,500.00 1,783.50 1,783.50 1,783.50 1,783.50
Cooking Gas Expense 670.00 2,274.70 2,527.80
Accountable Form Expenses 30,500.00 26,600.00
Taxes, Duties, and Licenses custom
charge/car registration
2000.00
Insurance ExpensesCar insurance 12,564.00
Rent Expenses 30,000.00
Food/Non-Food Expenses 5,155.00
Other Maintenance and Operating Expenses 1195.84 3,363.70 5,280.00 22,801.80
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Total Maintenance and Other Operating
Expenses
2,463,826.08 2,933,531.84 3,182,880.48 4,901,629.32 4,023,597.92
III. Capital Outlay
Equipment Outlay 300,000.00 203,840.00 65,000.00 150,739.75 88,057.68

Total Operating Expenditures 4,325,702.08 3,896,886.59 4,376,893.48 6,115,280.56 5,135,830.54
Add: Administrative Cost (15%) 640,428.22 640,428.22 740,576.18 825,751.38 769,917.39
TOTAL EXPENSES 4,966,130.30 4,537,314.81 5,117,469.66 6,941,031.94 5,905,747.93


Guide Questions:
1. Based on the given financial data, how would you assess the performance of the San
Lazaro Veterinary Teaching Hospital? Identify the critical points/factors that show how
efficient or inefficient was the use of its funds. (20 points)

2. If you are the Dean of the College of Veterinary Medicine, do you think the hospital really
needs additional sources of funds to improve its operations? Why or why not? (10 points)

3. How do you think the budget should be managed by SLVTH which is an income-
generating sub-unit of a government-owned university? Suggest an appropriate budgeting
system and identify possible sources of funds. (10 points)

4. What other performance measures may be used to assess the financial performance of the
Veterinary hospital? (5 points)

5. What do you think are other ways to improve the delivery of services of the veterinary
hospital? (5 points)










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