6. Using Excel (or another spreadsheet program) for multiple regression, estimate the fixed and variable costs for the OR using the number of operations and acuity as the independent variables. Assume that during those years the case mix index for OR patients was 2.86, 3.00, 2.90, 3.10, 3.50, and 3.27, respectively. Use data from Problem 5 to solve this problem.

7. Break-even analysis. Assume that all payers pay the same prospective rate for surgery patients in DRG 3.

Type of Operation	DRG 3
Reimbursement Rate	$1,000
Program-Specific Fixed Costs*	$150,000
Variable Costs	$800

^*Depreciation on equipment plus salary supplement for program supervision.

Supplies, labor, etc.

a. What is the break-even volume of patients undergoing the surgery for DRG 3?

b. If there are three different types of patients undergoing surgeries, as follows, what would be the break-even point for each DRG?

% of Patients in this DRG	Type of Operation	Rate of Reimbursement	Program-Specific Fixed Costs	Variable Costs
25	DRG 1	$500	$50,000	$300
35	DRG 2	2000	100,000	1200
40	DRG 3	1000	150,000	800
			Joint 500,000 OR overhead
100		Total fixed costs	$800,000

c. If only 760 DRG 3 operations will take place, should we discontinue DRG 3 from an economic perspective?