| RCCk | = | ratio of cost to charges for hospital k. |
| totchgij | = | total charge for case j in DRG i and hospital k. |
| mnchgi | = | mean charge for all cases in DRG i. |
| μi | = | mean of the log of costs for cases in DRG i. |
| σ1 | = | SD of the log of costs for cases in DRG i. |
| a | = | multiplier based on the normal distribution. |
| Ni | = | number of cases in DRG i. |
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