chapter 3: quantitatve methods in health care management yasar a. ozcan 1 chapter 3. decision making...
TRANSCRIPT
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 11
Chapter 3. Chapter 3. Decision Making in Healthcare FacilitiesDecision Making in Healthcare Facilities
What should I do?
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 22
OutlineOutline Decision Process What Causes Poor Decisions? The Decision Level & Decision Milieu Decision Making under Uncertainty
– Payoff Table– Methods
Decision Making under Risk– EVM, EOL, EVPI– Decision Tree Approach– Rollback Procedure
What if Payoff Values are Cost? Decision Analysis with Non-Monetary Values & Multiple-
Attributes– Dominance– Minimum Attribute Satisfaction– Most Important Attribute
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 33
The Decision Process Identification of the problem and its nature Specification of objectives and decision criteria Development of alternatives Analysis and comparison of alternatives Selection of the best alternative Implementation of the choice Controlling and monitoring the results
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 44
What Causes Poor Decisions?What Causes Poor Decisions? Mistakes in the Decision Process
Bounded Rationality: is the limits imposed on decision making by costs, human abilities and errors, time, technology, and the tractability of data.
Suboptimization: is characterized by Decisions are often departmentalized as separate organizational units compete for scarce resources. Individual departments often seek solutions that benefit their own department, but not necessarily the healthcare organization as a whole.
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 55
Decision TheoryDecision Theory
represents a general approach to decision making which is suitable for a wide range of operations management decisions, including: capacity, service design, location planning, equipment selection, etc.
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 66
The Decision Level & Decision MilieuThe Decision Level & Decision Milieu
Certainty-- Known values for parameters of interest
Uncertainty-- Impossible to assess the likelihood of various possible future events
Risk-- Certain parameters have probabilistic outcomes
Certainty-- Known values for parameters of interest
Uncertainty-- Impossible to assess the likelihood of various possible future events
Risk-- Certain parameters have probabilistic outcomes
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 77
CertaintyCertainty
Certainty rarely exists, especially in health care decisions. But if it does, simply choose the best available option (highest profit/least cost).
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 88
Decision Making under UncertaintyDecision Making under Uncertainty
Maximin-- best of the worst (pessimist)
Maximax-- best of the best (optimist)
Hurwitz-- allows you to adjust the probabilities/weighing between maximin and maximax or pessimist vs. optimist
Laplace-- best average payoff
Minimax Regret-- best of the worst regrets
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 99
Table 3.1 Payoff Table
Alternative\State of Nature
S1 S2 ……. Sn
A1 O11 O12 ……. O1n
A2 O21 O22 ……. O2n
… … … ……. …..
Am Om1 Om2 ……. Omn
Decision Tools
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1010
Example 3.1: A major imaging center is not able to meet the increased demand from patients for MRIs. The administration is willing to explore the possibilities by evaluating such alternatives as adding one or two additional units or out sourcing to other image centers and earning a commission of $30.00 per MRI.
A feasibility analysis showed that three major demand chunks could occur in the future, summarized as 500, 750 and 1000 additional MRI requests. The financial analysis of the potential business summarizes profits/losses under additional MRI demand chunks in a payoff table shown in Table below.
Alternatives500 Cases 750 Cases 1000 Cases
Buy One MRI Unit -15* 200 300
Buy Two MRI Units -150 100 725
Outsource 15 22.5 40
* in $ 000s
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1111
Maximin Solution
* in $ 000s
Alternatives 500 Cases 750 Cases 1000 Cases Worst
Buy One MRI Unit -15* 200 300 -15
Buy Two MRI Units -150 100 725 -150
Outsource 15 22.5 40 15
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1212
Maximax Solution
* in $ 000s
Alternatives 500 Cases 750 Cases 1000 Cases Best
Buy One MRI Unit -15* 200 300 300
Buy Two MRI Units -150 100 725 725
Outsource 15 22.5 40 40
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1313
Hurwitz Solution
For optimism with α = 0.5.
Then the HV value for the three alternatives would be:
HV (Buy one MRI unit) = .5(300,000)+(.5)(-15,000) = 142,500.HV (Buy two MRI units)= .5(725,000)+(.5)(-150,000)= 287,500.HV (Outsource) = .5(40,000)+(.5)(15,000) = 27,500.
α HV Decision Alternative
1.0 725,000* Buy Two MRI Units
.5 287,500 Buy Two MRI Units
.4 200,000 Buy Two MRI Units
.3 112.500 Buy Two MRI Units
.24 60,600 Buy One MRI Unit
.2 48,000 Buy One MRI Unit
.1 17,500 Outsource
0 15,000 Outsource
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1414
Opportunity Losses (Regrets)
* in $ 000s
Alternatives 500 Cases 750 Cases 1000 Cases Worst
Buy One MRI Unit 30* 0 425 425
Buy Two MRI Units 165 100 0 165
Outsource 0 177.5 685 685
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1515
Laplace Strategy
* in $ 000s
Probability 1/3 1/3 1/3 ExpectedValue
Alternatives 500 Cases 750 Cases 1000 Cases
Buy One MRI Units -15* 200 300 161.67
Buy Two MRI Units -150 100 725 225
Outsource 15 22.5 40 25.89
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1616
Expected Value Model
Once the healthcare manager has assessed the probability distribution, computation of the expected values for each alternative is straightforward, as follows:
EMV(Ai) = Σj pj Oij
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1717
Payoff Table for EMV
* in $ 000s
Probability .2 .6 .2 Expected Value
Alternatives 500 Cases 750 Cases 1000 Cases
Buy One MRI Unit -15* 200 300 177
Buy Two MRI Units -150 100 725 175
Outsource 15 22.5 40 24.5
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1818
Expected Opportunity Loss
The probabilities can also be incorporated into the regrets (or opportunity losses) calculated earlier. In this way the healthcare manager can assess the expected losses and try to minimize them with proper decision. Calculations of expected opportunity loss follow the formula:
EOL(Ai) = Σj pj Rij
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 1919
Expected Opportunity Loss
* in $ 000s
Probability .2 .6 .2 Expected Opportunity LossAlternative 500
Cases750
Cases1000
Cases
Buy One MRI Unit 30* 0 425 91
Buy Two MRI Units 165 100 0 93
Outsource 0 177.5 685 243.5
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2020
Expected Value of Perfect Information (EVPI)
EVUC = Σj pj (Best Oij given Sj)
EVPI = EVUC-EMV
Probability .2 .6 .2
Alternatives 500 Cases 750 Cases 1000 Cases
Buy One MRI Unit -15* 200 300
Buy Two MRI Units -150 100 725
Outsource 15 22.5 40
* in $ 000s
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2121
Expected Value of Perfect Information (EVPI)
EVUC = Σj pj (Best Oij given Sj)
EVUC = (.2*15000) + (.6*200000) + (.2*725000) = 268000.
EVPI = EVUC-EMV
EMV = $177,000
EVPI = $268,000 – $177,000 = $91,000
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2222
What if Payoffs are Costs?
Alternatives 500 Cases 750 Cases 1000 Cases
Buy One MRI Unit 2,050* 2,075 2,100
Buy Two MRI Units 4,050 4,075 4,100
Outsource 5 10 15
* in $ 000s
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2323
Regret Table Using Costs
Alternatives 500 Cases 750 Cases 1000 Cases
Buy One MRI Unit 2,050-5=2,045* 2,075-10=2,065 2,100-15=2,085
Buy Two MRI Units 4,050-5=4,045 4,075-10=4,065 4,100-15=4,085
Outsource 5-5=0 10-10=0 15-15=0
* in $ 000s
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2424
Decision Tools-- The Decision TreeDecision Tools-- The Decision Tree
DecisionNode
EventNode
EventNode
EventNode
Actions
Action A
Action B
Action C
OutcomesEvents 1
2
3
1
2
3
1
2
3
Outcome 1
Outcome 4
Outcome 7
Outcome 2
Outcome 5
Outcome 8
Outcome 3
Outcome 6
Outcome 9
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2525
Buy O
ne M
RI Unit
Buy Two MRI Units
Outsource
500 Cases, p=.2
750 Cases, p=.6
1000 Cases, p=.2
500 Cases, p=.2
750 Cases, p=.6
1000 Cases, p=.2
500 Cases, p=.2
750 Cases, p=.6
1000 Cases, p=.2
-$15*
$300
$200
-$150
$100
$725
$15
$22.5
$40
Figure 3.1 Decision Tree
* in $000
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2626
177
177
175
24.5
Buy O
ne M
RI Unit
Buy Two MRI Units
Outsource
500 Cases, p=.2
750 Cases, p=.6
1000 Cases, p=.2
500 Cases, p=.2
750 Cases, p=.6
1000 Cases, p=.2
500 Cases, p=.2
750 Cases, p=.6
1000 Cases, p=.2
-$15*
$300
$200
-$150
$100
$725
$15
$22.5
$40
║
║
* in $000
Analysis of the Decision Tree: Rollback Procedure
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2727
Multi-attribute DecisionsMulti-attribute Decisions
Dominance Procedure: compares a pair of alternatives attribute by attribute.
Minimum Attribute Satisfaction Procedure: satisfactory levels are set for each alternative
Most Important Attribute Procedure: attributes are ranked in order of importanceattributes are ranked in order of importance
Combination: combines two or more of the combines two or more of the above procedures.above procedures.
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2828
Decision Analysis with Non-Monetary Decision Analysis with Non-Monetary Values and Multiple AttributesValues and Multiple Attributes
Attributes* \ Alternative
Cardinal McKesson Owens & Minor
Importance Ranking
MinimumAcceptable
Level
Availability 7 7 7 1 >= 7
Reliability of IT Technology
7 5 7 2 >= 6
Quality of Products
8 9 8 3 >= 7
Cost in $000 per year
23,749 24,195 23,688 5 <=25,000
On Time Delivery 97% 95% 97% 4 >=95%
*Attributes are scored on a 1-10 scale (with the exception of those associated with costs
and on-time-delivery percentage), score of 10 being most favorable.
Chapter 3: Quantitatve MChapter 3: Quantitatve Methods in Health Care Maethods in Health Care Managementnagement
Yasar A. OzcanYasar A. Ozcan 2929
The End