Finding and Using Healthcare Data – How do I cost adjust changes from private hospital data?
Often we want to analyze charge data from utilization databases, like the Healthcare Cost and Utilization Project (HCUP) or Medicare. Yet, it is generally known that in health and medicine, charges rarely equal costs. In most cases, charges are greater than costs. However, the degree to which charges exceed costs is not completely random. Hospitals and medical centers are somewhat idiosyncratic in how they generate bills. Hence, we want to adjust the charges for two reasons: • to deflate charges so that they more closely reflect costs, and • to remove hospital specific idiosyncracies. The ratio of costs to charges (RCC), described in detail below, is one way of making this adjustment. Adjusting charges with the RCC leverages information that every hospital annually reports to Medicare in the Medicare Cost Report. The Medicare Cost Report is a very large report that hospitals are required to complete if they want to receive Medicare reimbursements.
