Table 1. Method of computation of estimated cost per case and of adjustments to estimated costs per case.

Type of cost and adjustment	Cost weights			Charge weights
	Method of computation
Total cost	Routine + special care + ancillaries			Routine + special care + ancillaries
Routine cost	Hospital-specific routine per diem cost (Cost report)	×	Case-specific routine length of stay (MEDPAR)	Routine accommodations charges (MEDPAR)
Special care cost	Hospital-specific special care per diem cost (Cost report)	×	Case-specific special care length of stay (MEDPAR)	Special care charges (MEDPAR)
Ancillary cost	Hospital-specific cost to charge ratios for 7 categories of ancillary services (Cost report)	×	Case-specific charges for 7 categories of ancillary services (MEDPAR)	Ancillary department charges (MEDPAR)
	Method of adjustment
Pass-through adjustment	Capital and direct medical education costs were removed from routine, special care, and ancillary costs based on hospital specific estimates of the ratios of routine, special care, and ancillary capital and medical education costs to total, routine, special care and ancillary costs.			No adjustment
Indirect teaching adjustment	Indirect medical education costs were removed based on a hospital specific estimate of the teaching adjustment factor (1 + (.5795 × Residents/Beds)).			No adjustment
Wage adjustment	Area wage differences were removed based on an area-specific 1981 Bureau of Labor Statistics wage index applied to the labor share of the estimated cost per case.			Same adjustment