(MONEY Magazine) – Q Last June, my wife gave birth to a beautiful little girl. The obstetrician called the birth precipitous because we arrived at the delivery room only four minutes before Karen was born. It was a wild ride to the hospital, but nothing like the ride the hospital is taking us on now. The bill came to about $4,620. We asked for an itemization of the charges and learned we had been billed for the labor room, intravenous drugs and several other services that we never used because we were in such a hurry. The most maddening charge, however, was $1,126 for "adjustments." In plainer language, this is essentially padding that brings the total up to a flat rate that hospitals charge in New York State for delivering a baby. Thus, although the hospital got $3,691 from our insurer, about $200 more than the birth actually cost, it is still demanding that I make a 20% co-payment of $929. It even has a collection agency after me. Any advice? James P. Monuszko Fort Salonga, N.Y. A You have been caught in the diagnostic related group (DRG) billing system, which was adopted in the 1980s by the federal Medicare program and by New York, Connecticut and New Jersey. Basically, the system works like this: Flat fees are established for hospital treatment of specific diagnoses. At the time your wife gave birth, for instance, the DRG rate for a delivery was $4,619.80 (what could that last 80 cents have been for -- a Pamper?), regardless of whether you spent 23 hours in the labor room or barely got past the front door. The virtue of the DRG system is that it simplifies billing and gives hospitals an incentive to cut costs by setting limits on what they are allowed to charge. In this case, you got the short end of the stick. But, often as not, hospitals got stuck with delivering more services than they could charge for -- helping to explain why Connecticut and New Jersey have since dropped their DRG billing plans. (Medicare still uses the system, but its patients generally do not have to make co-payments on the DRG portion of their hospital bills.) Cost caps may be part of our future, since several health reform proposals include them. (For a summary of the various plans and a chance to voice your opinion on the subject, see Money Newsline on page 14.) In the meantime, though, you are out of luck. So pay up -- your beautiful daughter is certainly worth the expense -- and just hope that you can make it to the hospital a little sooner next time so that your wife really gets her money's worth.

Q I am puzzled by the measurement of Standard & Poor's 500 composite stock price index. According to the Wall Street Journal, the index on Sept. 30, 1993 was 458.93. Exactly a year earlier, it was 417.80. On my calculator, that's a 9.84% gain. I noticed, however, when I received a fiier from the Vanguard Group that it said the S&P 500 had gained 12.97% in the year that ended Sept. 30. What gives? Carlos Janada New York City A Vanguard's report on the S&P 500 was based on the index's total return (that is, gains plus dividends); the Journal's figures, which are the same as those that are usually listed by newspapers, calculate gains (or losses) only. The total-return measure is a better yardstick than gains alone, since it reflects what investors actually earn.

Q My father-in-law, who is retired and lives in Las Vegas, has sheets of mint- condition U.S. stamps dating back to the 1960s with a total face value of $4,000. There are about 20 different stamps in the collection. How much are they worth now? Richard Sungaila Newport Beach, Calif. A According to Steven J. Rod, author of Introduction to Stamp Collecting (Amos Press, $2.95), most U.S. stamps issued since the 1940s have no collectible value and are actually worth 15% to 20% less than their face value when sold in bulk to companies that use them for mailings. So buying stamps by the sheet does not an investment make. (Remember those folks who rushed out to purchase Elvis Presley stamps last year? Hound dogs, my friend, they're nothing but hound dogs.) The only exceptions are issues that are rare for one reason or another, such as a 1981 anti-alcoholism stamp that had a face value of 18 cents but fetches as much as $1 today. The U.S. Postal Service never sold many of these stamps, perhaps because buyers were leery of sending their friends an envelope bearing the message alcoholism: you can beat it! To determine whether your father-in-law has any such nuggets in his collection, consult a dealer who is registered with either the American Stamp Dealers Association or the American Philatelic Society, both of which have strict codes of ethics. One APS dealer in Las Vegas: Airport Collectibles (702-739-7077). If your father-in-law's stamps are purely garden variety, he can unload them in one of two ways: He can use them on his own mail, which would net him 100% of their face value -- and a very dry mouth. Or he can sell them for 85% or so of their value to Airport Collectibles, which will either peddle them to other companies or use them for its own business mail. That's what I call a real lick-widation sale.