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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
Cost/Charge Variable Cost %
Routine Charge $3,600 .80 60
Operating Room 2,657 .80 80
Anesthesiology 293 .80 80
Lab 1,035 .70 30
Radiology 345 .75 50
Medical Supplies 4,524 .50 90
Pharmacy 1,230 .50 90
Other Ancillary 1,316 .80 60
Total Ancillary $11,400 .75 50
Estimate the variable cost per MS-DRG 470 using the departmental cost/charge ratios and variable cost percentages
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