Your hospital has been approached by a major HMO to perform all their MSDRG 505 cases (foot surgeries). They have offered a flat payment of $8,000 per case. You have reviewed your charges for MSDRG 505 during the last year and found the following profile:

Average Charge: $11,300

Average LOS: 4.5 Days

                                                                        Cost/Charge     Variable Cost %

Routine Charge               $3,200 0.75                    65

               Operating Room 1,850                 0.70                    80

               Anesthesiology                 210                 0.70                    75

               Lab 575                 0.65                    40

               Radiology 275 0.65                    50

               Medical Supplies            3,220                 0.60                    85

               Pharmacy                          955                 0.55                    85

               Other Ancillary 1,015                 0.75                    55

            Total Ancillary                $8,100                 0.70                    75

QUESTION

In the above data set, assume that the hospital’s cost-to-charge ratio is 0.75 for routine services and 0.70 for Total Ancillary services. Using this information, what would the average cost of MSDRG 505 be? (Your answer might be slightly different due to rounding. Pick the closest.)