Evaluating inpatient costs: the staging mechanism.

Inpatient records at a short-term hospital over two years were analyzed according to the stage or degree of severity of their discharge diagnosis to examine their utilization of services. Patients with a more severe disease stage for surgical and medical conditions generated substantially higher total charges, ancillary charges, and had longer lengths of stay. At the 75th percentile (representing that value at which three-quarters of the cases fall below it in magnitude), increases in total charges from Stage I to II for ulcer of stomach, appendicitis, and diverticulitis were 103, 168, and 110 per cent, respectively. Ancillary charges for these diseases showed even greater increases, 167, 200, and 160 per cent, respectively. Components of ancillary charges revealed similar trends. The results suggest that a twofold review mechanism incorporating length of stay and charges, using the staging technique, would make the review procedure more discriminating in identifying cases appropriate for review.