An early warning technique.

During budget preparation, forecasts of inpatient utilization for the coming year play a pivotal role. Use of ancillary services and nursing care is a function of the number of admissions and patient days expected. With DRG payment, the average length of stay has decreased, as has the amount of ancillary service per case. Utilization experience should be reviewed after the budget utilization forecast is made. If it is likely to be lower than the forecast, management should respond as soon as possible. The earlier these responses are made, the more effective they are.