THE RATIO OF COSTS TO CHARGES - HOW GOOD A BASIS FOR ESTIMATING COSTS

This study evaluates the accuracy of costs derived from the ratio of c osts to charges (RCCs), using costs based on relative value units (RVU s) as the ''gold standard.'' We found that RCC-calculated costs were n ot a good basis for determining the costs of individual patients. Howe ver, when examining average costs per diagnosis-related group (DRG), R CCs performed better. For almost 70% of the DRGs, average RCC-calculat ed costs were within 10% of average RVU-calculated costs. RCCs were ev en more reliable for comparing the relative cost of patients in a DRG in one hospital to the average cost of patients in that DRG in a group of hospitals. Charges, or an overall hospital RCC (as opposed to the departmental RCCs we used in most of our analyses), were not a good ba sis for determining relative hospital costs.