Regression analysis of health care charges with heteroscedasticity

We examine the effects of a prospective drug utilization review and patient s' characteristics on total in-patient and out-patient health care charges. Our analysis of charges is complicated by the fact that the total health c are charges are skewed. A log-transformation of these charges can normalize their distribution but may not stabilize their variance. To handle these p roblems, we propose a linear regression model with a non-constant variance (heteroscedasticity). Using results from a fitted linear regression model f or log-transformed charges, we also discuss interpreting the regression coe fficients in the original scale and estimating the total health care charge s to individual patients. Employing these methods, we analyse total health care charges for drug utilization review patients with hypertension and ide ntify patients' factors that are related to their total health care charges .