Assignment 1

Due Date: July 16, 2018 (11 AM)

Presentation: July 16, 2018
Consider the problem of “Package Pricing at Mission Hospital” (Case 3). Note that the main
objective was to design a predictive model that will assist Mission Hospital to predict the package
price at the time of admission. Based on the attached data set “Mission_2.csv”, answer the
following questions. Please provide all “R syntax” in the Appendix of your report. Prepare your
presentation keeping in mind Questions 7 and 8.

1. Develop a suitable simple linear regression model to check if there is any relationship between
“Total Cost to Hospital” and “AGE”. For the fitted model, interpret the regression coefficient
corresponding to “AGE”.
2. At the time of admission, suppose a patient’s age is 50 years. Based on the fitted model in (1),
what will be the minimum cost of treatment for this patient at 95% confidence level?
3. Suppose Mission Hospital is planning to introduce a package price for the treatment and has
decided to charge INR 250,000 for patients of age 50 years. What is the probability that the
treatment cost will exceed the package price? Do you think that the Mission Hospital should
revise the package price?
4. Build a simple linear regression model between “Total Cost to Hospital” and “GENDER”.
Interpret the results.
5. Build a simple linear regression model between “Total Cost to Hospital” and “MARITAL
STATUS”. Interpret the results.
6. Build a multiple linear regression model with “Total Cost to Hospital” as dependent variable,
and “AGE, “GENDER” and “MARITAL STATUS” as predictors. Compare the results with that of
(4) and (5).
7. Build a multiple linear regression model with appropriate set of predictors. Identify the
statistically significant predictors that the Mission Hospital can use in predicting “Total Cost to
Hospital”. Comment on the performance of the fitted model.
8. How does the fitted model help Mission Hospital to take managerial decisions?

Hint:
1. Transform the dependent variable as suggested in the class.
2. For (7), you may start with the following code:
mod_1<-
lm(log(TOTAL.COST.TO.HOSPITAL)~AGE+MALE+UNMARRIED+ACHD+CAD.DVD+CAD.SVD
+CAD.TVD+CAD.VSD+OS.ASD+other..heart+other..respiratory+other.general+other.nerv
ous+other.tertalogy+PM.VSD+RHD+BODY.WEIGHT+BODY.HEIGHT+HR.PULSE+BP..HIGH+
BP.LOW+RR+Diabetes1+Diabetes2+hypertension1+hypertension2+hypertension3+other
+HB+UREA+CREATININE+AMBULANCE+TRANSFERRED+ELECTIVE,data=d)
summary(mod_1)