Question

What is a cost-to-charge ratio? Why should a nurse manager understand this ratio, and how would he or she use it?

Answer 1

Ans) The cost-to-charge ratio is the ratio between a hospital's expenses and what they charge. The closer the cost-to-charge ratio is to 1, the less difference there is between the actual costs incurred and the hospital's charges.

- Cost to charge ratios are hospital costs divided by hospital charges. In breaking down the formula for a hospital’s cost to charge ratio, there are five components:

1. the gross charges (hospital billed charges),

2. the allowed amount,

3. the contractual amount,

4. the patient portion, and

5. the hospital costs.

Understanding this ratio and to use it:

Recommendations:

-Fostering a value-based market in which payers and providers openly compete to provide services and in which consumers and employers have the appropriate information and incentives to make high-value choices for their care and coverage options.

-Enhancing transparency and data availability necessary for providers, payers, purchasers, and policymakers to successfully implement reforms and evaluate performance over time.