Mission Hospital

Package Pricing
Analysis

Team 6
 ABOUT

Mission Hospital Specializes

Super specialty hospital Cardiac surgeries

2008 – present Patients from nearby states and neighboring countries

Upcoming Deposits

Durgapur, West Bengal, India. Indian Healthcare System

Package pricing

FLAT FEE

Tourism and
government

Introduction
 SHOULD MISSION HOSPITAL ADOPT THE PACKAGE PRICING
3
STRATEGY?

Dr. Satyajit Bose is considering the adoption of package pricing (flat fee) strategy under which patients would be
provided a fixed price for their treatment at the time of admission.

Hospital is willing to identify the key factors that drive the total cost of treatment so that it can quote an appropriate
price to the patient.

BENEFITS DRAWBACKS
• Reduction on treatment costs: Upcoming Deposits
• Hospital can underestimate treatment costs and
• Wouldn’t incur in unexpected loss after the
incur in losses.
patient is over with treatment.
• To reduce costs, hospital might compromise
• Improvement in cost efficiency.
treatment quality.
• Improvement in its finances:
• Accurate estimation of the treatment cost for the
• Negotiation of treatment charges with insurance
patient is challenging.
companies and government agencies.

Motivation
 WHAT TO CONSIDER 4

DATA
Parameter of interest: Total Cost of Treatment
Explanatory variables: Age, Body Weight etc.
Confidence level: 95%
Number of observations: 248
Hypothesis: We can't accurately use specific variables to accurately predict treatment costs

APPROACH
• Conducting statistical hypothesis testing to examine difference in the mean of total cost with different age
groups, different marriage groups or different gender groups.

• Applying a correlation matrix to find out which variables have the highest impact on the target variables, then
using these variables to build a regression models.

• Using a simple linear regression and a multiple linear regression to find out the specific quantitative
relationship between the target variable and the explanatory variables. Check the significance of
the parameters and analyzing the p-value of each parameter at a 95%. confidence level.

Method
 MULTIPLE REGRESSION ANALYSIS 5

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• The multiple regression analysis provided insights on which explanatory variables have a major influence on the
target variable, the Total Cost to the Hospital.
• We used the p-value to determine the level of significance of each variable.
• With a confidence level of 95%, the 6 variables identified are therefore ACHD, CAD-DVD, CAD-TVD, Body Height,
Total Length of Stay and Cost of Implant.

Mechanics
 RESULTS 6

01 02 03
Key complaint codes Associations Correlations

• ACHD Body Height/ Body Total length of stay/ Cost

• CAD – DVD Weight of implant
• CAD – TVD • Highly correlated. • Significantly impacts
These three have impact • Impact positive on the total cost
on total cost to hospital. Total cost to hospital.

Our regression model has Adjusted R square of 0.71, p- value are low and residual plots are random, which
suggest that model is statistically significant for building package price.

Mechanics
Message
 WHAT SHOULD YOU DO 7

According to our analysis we don't recommend adopting the package pricing strategy. Because this model
is not very good predictor of actual cost to the hospital.

Instead, we have identified the following predictors which the hospital should use to calculate expected
treatment costs:

ACHD: If this code is given to the patient, the total cost is expected to decrease
CAD – DVD: If this code is given to the patient, the total cost is expected to increase
CAD – TVD: If this code is given to the patient, the total cost is expected to increase
Body Height: The taller a patient is, the higher the hospital costs are expected
Total Length of Stay: The longer a patient stays, the higher the costs. The costs in the ICU are
significantly higher than in the stay ward
Cost of Implant: If the patients have already had an implant, or are getting one, the costs
increase.

Message
THANK
YOU
APPENDI
X
 QUESTION 1 10

Question 1
Develop a linear model to observe
if there is an association between
total cost and body weight.
0.348 There is a small correlation
between body weight and
total cost to the hospital.
Correlation coefficient

Appendix
Your Logo Here
 QUESTION 2 11

Response (y) Explanatory Variable (x)

Total Cost of Treatment (INR) Weight of Patient

Equation

y = 1846.7x + 129426

X = 50 X = 51
y = 1846.7*50 + 129426 y = 1846.7*51 + 129426
Y = 221,761.00 INR Y = 223,607.70 INR

Difference y(51) - y(50)

223,607.70 INR - 221,761.00 INR = ​1,846.70 INR

Question 2
Is it possible to conclude that a patient
weighing 51 kg is likely to spend at least
INR 1000 more than a patient weighing
1,846.70
50kg at 5% significance?
The increase of 1.0 Kilogram in
the weight of the patient, there
will be an increase of 1,847.00
INR in the total cost of the
SLOPE
treatment.

Appendix
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 QUESTION 3 12

Mean Standard Deviation

The mean for the Total Cost to Hospital The Standard Deviation for the Total
is 198,723.33 INR. Cost to Hospital is 122,587.493 INR.

Question 3
High probability that the total
Provide some understanding on what
would be the probability that a treament
cost may exceed the package price of
93.7%
Probability that the total cost
91.62%
Probability that the total cost
cost to hospital wil exceed a
package price.
The higher the package
(let's say) INR 10K or 30K or any other will exceed a pachage price of will exceed a pachage price of price, the more the
value of your interest. 10,000 INR 30,000 INR probability decreases.

Appendix
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 QUESTION 4 13

Male Average - Female Average

211,868 INR 172,111.94 INR

39,756.79 INR

Question 4
• Females pay less for their
Build a model between total cost and treatments
gender and help us understand how 39,756.79 INR
much more expensive may be the Less than males • Males are 5.65% more
treatment for males vs females. likely to pay more

Appendix
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 QUESTION 5 14

Malrried Average - Unmarried Average

250,975 INR 158,414 INR

92,561 INR

Question 5 • On average, unmarried

Build a model to understand the
treatment cost between married and
unmarried patients.
92,561 INR patients pay less for their
treatments.
• Married couples are 5.68%
Less than married
more likely to pay more

Appendix
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