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The 'Cost-to-charge ratio' is a financial metric that evaluates the relationship between a healthcare provider's costs and their gross patient revenue. Specifically, it measures the total expenses incurred, excluding bad debt, and compares that to the total gross patient revenue generated by the provider. This ratio is important because it helps healthcare organizations understand how much of their revenue is consumed by costs, providing insights into efficiency and profitability.

By focusing on total expenses without including bad debt, the ratio gives a clearer view of operational performance, as bad debt can distort the perception of actual revenue available for covering costs. A lower cost-to-charge ratio generally indicates better financial health, as it suggests that a smaller proportion of revenue is being used to pay for expenses. Overall, this ratio serves as a valuable tool for financial planning and analysis in the healthcare industry.