Your hospital has been approached by a major HMO to perform all their MSDRG 505 cases (foot surgeries). They have offered a flat payment of $8,000 per case. You have reviewed your charges for MSDRG 505 during the last year and found the following profile:

In the above data set, assume that the hospital's cost-to-charge ratio is 0.75 for routine services and 0.70 for total ancillary services. Using this information, what would the average cost of MSDRG 505 be? PLEASE show how you have achieved your answer. Thanks!

Average charge: $11,300 Average LOS: 4.5 Days Cost/Charge 0.75 0.70 0.70 0.65 Routine charge Operating room Anesthesiology Lab Radiology Medical supplies Pharmacy Other ancillary Total ancillary $3,200 1,850 210 575 275 3,220 955 1,015 $8,100 Variable Cost % 65 80 75 40 50 85 85 55 75 0.65 0.60 0.55 0.75 0.70