Question

An auditor reviewed 25 oral surgery insurance claims from a particular surgical office, determining that the mean out-of-pocket patient billing above the reimbursed amount was $275.66 with a standard deviation of $78.11.
(a) At the 5 percent level of significance, does this sample prove a violation of the guideline that the average patient should pay no more than $250 out-of-pocket? State your hypotheses and decision rule.
(b) Is this a close decision

Answer 1

Z = (mean1 - mean2)/standard error (SE) of difference between means

SEdiff = √(SEmean1^2 + SEmean2^2)

SEm = SD/√(n-1)

Since only one SD is provided, you can use just that to determine SEdiff.

Find table in the back of your statistics text labeled something like "areas under normal distribution" to find the proportion related to that Z score.

Ho: No difference
Ha: Difference (State in more specific terms.)

(Use .025 for two-tailed test.)