Hospital case mix and average charge per case: an initial study

The use of case mix to explain hospital costs has been refined in previous research on the cost of hospital-based health care. This study demonstrates the significance of hospital case mix in explaining charges for health care treatment. By assuming that the variables which influence cost should also influence charges, an evaluative function is added to the basic investigative analysis potential of the hospital production process model. The relationship between case mix and charges is found to be weaker than the relationship between case mix and costs. This difference is qualified by methodological variation and possibly explained by cross-subsidization of patient services and lack of adequate controls on charge determination. Further, the relationship between case mix and charges is found to differ between Medicare and Blue Cross patients. This evidence suggests that hospital accounting may not be recovering costs evenly and equitably from clients.