Hospital Case-Mix Index (CMI) & Cost per Case Formula

Normalize hospital operating costs for BOTH outpatient volume AND inpatient acuity!

Dividing Total Hospital Operating Expense by raw Inpatient Discharges penalizes academic quaternary trauma centers twice: first because outpatient surgery/oncology clinics incur costs in the numerator while producing zero inpatient discharges in the denominator, and second because transplant and cardiac-ICU stays carry far higher MS-DRG relative weights than community obstetrics! Standard American Hospital Association (AHA) & HFMA benchmarking applies two multiplicative normalizers: (1) Outpatient Adjustment Factor = (Gross_Inpatient_Rev + Gross_Outpatient_Rev) / Gross_Inpatient_Rev yields AHA Adjusted Discharges = Inpatient_Discharges * Outpatient_Factor; and (2) multiplying by Case-Mix Index CMI = Sum_DRG_Weights / Inpatient_Discharges yields CMI-Adjusted Equivalent Discharges = Adjusted_Discharges * CMI, giving fair Acuity-Normalized Cost per Equivalent Discharge!

Verify on Inpatient_Discharges = 10,000 (B2), Sum_Of_DRG_Weights = 16,000 (B3 -> Hospital CMI = 1.6000 in E2), Gross_Inpatient_Rev = $200,000,000 (B4), Gross_Outpatient_Rev = $100,000,000 (B5 -> Outpatient Factor = 300M / 200M = 1.50 -> AHA Adjusted Discharges = 15,000.00 in E3, and CMI-Adjusted Equivalent Discharges = 15,000 * 1.60 = 24,000.00 in E4), and Total_Operating_Expense = $192,000,000 (B6): Acuity-Normalized Cost per Case equals $192,000,000 / 24,000 = $8,000.00 (E5, vs raw unadjusted $19,200/discharge)!

HFMA Acuity-Normalized Cost per Equivalent Discharge Formula

Notice that Inpatient_Discharges cancels algebraically inside CMI_Equiv_Discharges = Sum_DRG_Weights * ((IP_Rev + OP_Rev) / IP_Rev), yet keeping B2 explicit lets CFO peer reviewers audit CMI and AHA Adjusted Discharges separately!

=LET(ds_i, B2, wt_s, B3, rv_i, B4, rv_o, B5, op_x, B6, IF(OR(ds_i <= 0, wt_s <= 0, rv_i <= 0, rv_o < 0, op_x <= 0), "Invalid Hospital Census", LET(cm_i, wt_s / ds_i, ad_d, ds_i * ((rv_i + rv_o) / rv_i), eq_d, ad_d * cm_i, ROUND(op_x / eq_d, 2))))

Pure Inpatient vs Quaternary Acuity Sensitivity Check

Test zero outpatient revenue (B5 = 0 -> Cost/Case = $12,000.00) and higher surgical acuity (B3 = 20,000 -> CMI = 2.00, Cost/Case = $6,400.00)!

=IF(ISTEXT(E2), E2, ROUND(E3 * E2, 2))

Further reading

• Arte Sheets Lesson — Hospital MS-DRG & High-Cost Outlier Payment Formula
• Arte Sheets Lesson — Medicare Physician RVU, GPCI & Payment Formula