Cost-to-Charge Ratio

The cost-to-charge ratio is calculated by dividing a provider’s reported total expenses during a period of time by the sum of the charges associated with all of the services delivered during that period of time. The cost-to-charge ratio is often used to estimate the cost of a specific service from the provider’s charge for that service by multiplying the charge by the cost-to-charge ratio. However, in general, the amount a provider charges for a particular service bears no systematic relationship to the cost of delivering that service.

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