Your hospital has been approached by a major HMO to perform all their MS-DRG 470
ID: 2713820 • 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 Routine Charge $3,600 Cost/Charge 0.80 Variable Cost % 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 Estimate the variable cost per MS-DRG 470 using the departmental cost/charge ratios and variable cost percentages.
Explanation / Answer
Department Charge Cost to Charge Cost Variable % Variable cost Average LOS 5 days 3,600 0.80 2,880 60% 1,728 Opearting Room 2,657 0.80 2,126 80% 1,700 Anesthesiology 293 0.80 234 80% 188 Lab 1,035 0.70 725 30% 217 Radiology 345 0.75 259 50% 129 Medical Supplies 4,524 0.50 2,262 90% 2,036 Pharmacy 1,230 0.50 615 90% 554 Other Anciliary 1,316 0.80 1,053 60% 632 Anciliary 11,400 0.75 8,550 50% 4,275 Total 11,459 Total Variable cost is $ 11,458.71
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