Question

Recent research into the cost of various medical procedures has shown the impact of certain complications encountered in surgery on the total cost of a patient’s stay in the hospital. The researchers used regression analysis and found the following results:

Total cost for patient = Constant, plus

a × Length of stay (measured in days), plus

b × Presence of one or more complications (= 1 if true, 0 if false), plus

c × Use of a laparoscope (= 1 if true, 0 if false)

where a, b, c are coefficients of the regression model. The laparoscope is an instrument somewhat like a miniature telescope with a fiber-optic system that brings light into the abdomen. It is about as big around as a fountain pen and twice as long.

The research, based on 64 patients, showed the following regression results:

R-squared: 57%

Constant term: $3,849

Coefficients and t-values for independent variables:

	Length of Stay			Complications			Laparoscope
Coefficient	$	819		$	1,861		$	994
t-value		10.95			4.31			3.29

Required:

1. What is the estimated cost for a patient whose surgery has complications and who stays in the hospital 3 days, and whose surgery requires a laparoscope?

2. Which, if any, dummy variables are used in this regression? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

• Complications were presentunanswered
• Use of a laparoscopeunanswered
• Length of stay (measured in days)unanswered

Answer 1

1) Calculation of Estimated Cost of Patient

a = 3, b = 1, c = 1

Y = $3849 + ($819*a) + ($1861*b) + ($994*c)

Y = $3849 + ($819*3) + ($1861*1) + ($994*1)

Y = $3849 + $2457 + $1861 + $994

Y = $9161

2) The Dummy variables are use in :-

- Presence of one or more complications

- Use of Laparoscope