Cost-to-Charge Conversion and the Compression of Hospital Cost Comparisons: A Descriptive Measurement Study of Within-DRG Distributional Compression in Medicare Inpatient Data

Background: Hospital charges are commonly converted into estimated costs using hospital-wide cost-to-charge ratios (CCRs) for benchmarking, classification, and performance comparisons. However, this conversion process may itself affect the variation between hospitals and their rankings. Objectives: The aim of this study is to examine how converting from CCR on a hospital-wide basis affects estimated hospital costs and comparisons between hospitals.