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:

Estimate the total variable cost (i.e., including both routine and ancillary) per MSDRG 505 using the departmental cost/charge ratios and variable cost percentages. 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 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