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. 1986 Spring;7(3):37–51.

Table 8. Impact of hospital differences in charge-to-cost ratios on diagnosis-related group relative weights.

Item Case A
DRG 1 DRG 2 Hospital charge-to-cost ratio
Cost Charges Cases treated Cost Charges Cases treated
Hospital X $100 $200 1 $200 $400 1 2.0
Hospital Y 100 100 1 200 200 1 1.0
Mean cost or charge per case 100 150 — 200 300 — —
graphic file with name hcfr-7-3-37-g001.jpg graphic file with name hcfr-7-3-37-g001.jpg
DRG charge-to-cost ratio 1.5 1.5
Mean cost per case for all DRG's: $600 ÷ 4 = $150
Mean charges per case for all DRG's: $900 ÷ 4 = $225
Relative cost weights: $100 ÷ $150 = .667 (DRG 1)
$200 ÷ $150 = 1.33 (DRG 2)
Relative charge weights: $150 ÷ $225 = .667 (DRG 1)
$300 ÷ $225 = 1.33 (DRG 2)
Item Case B
DRG 1 DRG 2 Hospital charge-to-cost ratio
Cost Charges Cases treated Cost Charges Cases treated
Hospital X $100 $200 2 — — 0 2.0
Hospital Y — — 0 $200 $200 2 1.0
Mean cost or charge per case 100 200 — 200 200 — —
graphic file with name hcfr-7-3-37-g001.jpg graphic file with name hcfr-7-3-37-g001.jpg
DRG charge-to-cost ratio 2.0 1.0
Mean cost per case for all DRG's: ((2 × $100) + (2 × $200)) ÷ 4 = $600 ÷ 4 = $150
Mean charges per case for all DRG's: ((2 × $200 + 2 × $200)) ÷ 4 = $800 ÷ 4 = $200
Relative cost weights: $100 ÷ $150 = .667 (DRG 1)
$200 ÷ $150 = 1.33 (DRG 2)
Relative charge weights: $200 ÷ $200 = 1.00 (DRG 1)
$200 ÷ $200 = 1.00 (DRG 2)

NOTE: DRG is diagnosis-related group.