Costs are usually divided into fixed vs variable costs and direct vs indirect costs. Average, total, marginal, semi-fixed, and opportunity costs also may be used. Physicians, accountants, and economists may have different definitions for the same term.15Fixed costs do not vary with physician care decisions or treatment. These may include administrative salaries, bond payments, and facility upkeep. Fixed costs are not apportioned evenly. Traditionally, the operating rooms and the ICU have been assigned a disproportionately large share, thus making their charges higher than the same service performed elsewhere with an identical labor and material direct variable cost. This is why using charges or cost/charge ratios will produce a savings when a patient is transferred from an ICU bed to a stepdown bed. But, if no changes are made in the patient’s care, and therapy and the nurse/patient ratio do not change, the hospital does not save any money by this transfer. Variable costs occur based on what is or is not done for a particular patient (eg, administering amiodarone or obtaining a radiograph). Certain items in which the per patient variable cost is very small and no one tracks its individual use, such as laundry, are frequently included as a fixed cost. Some costs, such as labor, may be fixed or variable depending on circumstances. For example, if a patient is discharged from the hospital early and the nurse is sent home without pay for the remainder of the shift, the nurse’s pay is a variable cost. It changes with patient activity. However, if work rules prevent sending the nurse home without pay, no money is saved by the early hospital discharge and the nurse’s pay is a fixed cost. Direct, variable costs may be only a small component of total hospital costs (16% in one study16). In one study,11 the median direct variable hospital cost of patients undergoing cardiac surgery, from preoperative evaluation to hospital discharge, using a sufentanil-isoflurane-based anesthetic was $5,943, which is much less than the charge or average reimbursement, which must cover the overhead. Marginal cost is the cost (or savings) of having one more (or one fewer) case of an activity. Or how much more (or less) money is left in the hospital’s checkbook if I prevent one case of AF? The marginal cost, which may not be constant but may vary with activity, of doing one more operation (or preventing one more case of AF) is less than the average cost of that operation and is much less than the charge for that operation. Airlines understand this concept and set their prices accordingly. Airlines are similar to hospitals in that most of their expenses (ie, the planes, airport facilities, and the reservation system) are fixed. Direct variable expenses are comparatively small. The price of a standby ticket may be only a small fraction of a full fare, yet the airline makes a marginal profit on the standby ticket because the price of the ticket exceeds the marginal cost of flying one more customer.