Your hospital has been approached by a major HMO to perform all their MS-DRG 470
ID: 2704641 • Letter: Y
Question
Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile:
Average Charge $15,000
Average LOS 5 Days
Cost/Charge Variable Cost %
Routine Charge $3,600 0.80 60
Operating Room 2,657 0.80 80
Anesthesiology 293 0.80 80
Lab 1,035 0.70 30
Radiology 345 0.75 50
Medical Supplies 4,524 0.50 90
Pharmacy 1,230 0.50 90
Other Ancillary 1,316 0.80 60
Total Ancillary $11,400 0.75 50
1. In the above data set, assume that the hospital
Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile: In the above data set, assume that the hospital's cost to charge ratio is 0.80 for routine services and 0.75 for all other ancillary services. Using this information, what would the average cost of MS-DRG 470 be? Here is the equation to solve: Charge Ratio x Routine Charge + Cost Charge Total x Total Ancillary = AVERAGE COST OF MS-DRG 470 Estimate the variable cost per MS-DRG 470 using the departmental cost/charge ratios and variable cost percentages.Explanation / Answer
Variable Cost percent (VC%) = Variable Cost (VC) / Sales Revenue (SR)
80% = VC / 15,000
.80 x 15,000 = VC
12,000 = VC
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.