DecisionMkg6350

event will not occur without the presence of the cause

if present, sufficient causes always result in an event's occurrence

Preconditions are the state of nature surrounding the event

Precipitating causes are events that lead to other events

process of reaching general propositions from specific facts

a phenomenon is accompanied by a certain circumstance. It is then inferred that any other instance of the phenomenon will also be accompanied by the circumstance

The critical components of the technique are:

• Anonymity for the experts.
• Feedback to the experts
• A highly controlled structure to the information flow.
• What are the major weaknesses to the method?
• Limitations include

• The possibility of the monitor biasing the results
• Experts may not be the best forecasters.
• The questionnaire may be inappropriate
• The process may break down.

Models are representations of real world processes expressed in physical, graphical or mathematical terms.

certainty plays a minor

probabilities assigned to different values of key variables, more common in healthcare

• Parametric tests -Compare data to a theoretical distribution. – make an assumption about the shape of the population distribution
• Non-Parametric tests do not make an assumption about the distribution of the population

, if you falsely use a parametric test you may claim that a relationship exists or you may miss a relationship that does exist, and if you incorrectly use a nonparametric test than you could miss a relationship (due to lack of power)

• 1. Sampling hazards- improper sampling, for example it may not be a random sample. Wrong sample- Bad sampling frame
• 2. Happen to draw bad sample.
• 3. Wrong distribution applied (i.e. not really a normal distribution) Parametric tests -Compare data to a theoretical distribution. – make an assumption about the shape of the population distribution. Non-Parametric tests do not make an assumption about the distribution of the population. For a given sample size, parametric tests tend to have more power than nonparametric tests. So, if you falsely use a parametric test you may claim that a relationship exists or you may miss a relationship that does exist, and if you incorrectly use a nonparametric test than you could miss a relationship (due to lack of power)
• 4. Insufficient power of the statistical tests The probability of detecting effects of a given size varies
• Inversely with size of test (risk of false positive)
• Inversely with variability of sample
• Directly with the size of the sample
• Findings of no significant difference may reflect the fact that the sample size is too small.
• 5. Significant results may not be policy relevant .
• 6. Graphs or Tables may be misleading
• 7. Software package may be bad or misused.
• 8. Measurement error- bad data collection or bad proxies
• 9. Regression to the mean- Samples that are selected for extreme values tend to have measurement errors that are skewed in the same direction. Consequently, in repeated measurement we can expect to find different results.
• 10. Steven’s rules – Ratio scales provide a true zero and have equal intervals – cost.
• Interval scales have equal intervals but zero is not meaningful zero degrees Fahrenheit is not “no temperature”
• Ordinal ranks – One is higher than the other
• Nominal – unordered categories – classify differences but not order mammals vs fish.
• 11. Cause and effect are confused.
• 12. Fail to include all important variables

Reduce Uncertainty, prepare lead time, benchamark, communicate and control

• 1. Survey physician groups to determine likely the numbers of referrals.
• 2. If the service is already partially established,consider the current rate and the recent trend in growth in the current rate.
• 3. Determine the potential number of procedures in the hospital's primary service area. Then estimate the hospital's likely market share. Then add an estimate of the likely referrals from outside the primary service area.
• 4. Patient mix analysis

• Sensitivity analysis looks at the effects on one variable when another variable changes. A limitation to this approach is that it does not allow for interactions between variables.
• B. Scenario Analysis
• Scenario Analysis examines the effect if a certain alternative set of events occurs.
• C. SIMULATION MODELS Monte Carlo simulations are based on probability distributions for key input variables

The agency problem exists when one or more individuals (the principals) hire another group of individuals (the agents) to perform some service on their behalf, and then delegate some decision-making authority to those agents. The agents may not have the correct incentives to act on behalf of the principal's best interest.

choose the option with the highest possible return, optimistic approach

option with the lowest possible cost, optimistic

option that has the largest minimum profit. This could be seen as pessimistic

determines how high costs could possibly be and then chooses the option with the lowest upper bound on costs, pessimistic

The concept of real options applies the tools of option pricing to “real” investment, for example a new product line.

Each player is doing the best they can given the actions that they predict from their competitors

don’t just consider current competitors, they also consider how their actions might result in additional competitors.

• Reduce Risk by spending money
• Transfer Risk by buying insurance
• Bear the risk by taking no action
• Pool the risk combine resources

standard deviation doesn't fully explain dispersion of cash flows, and dispersion of cash flows doesn't fully explain risk

Temporary, Goals are specific, Trade off between time,cost, quality

• Specific measurable goals
• Tasks
• Timeframe
• Resources

the difference in the latest start time from the earliest finish time for tasks along the critical path. When there is 0 slack, but a task is delayed, it delays the entire project. Activities with slack are not on the critical path.

Chain of tasks that must be completed at specific dates in order for the project to stay on time.

When activities are sped up by investing in more resources or spending additional money.

Helps to monitor work progress by completed tasks

visual representation of the task schedule

• Finish to Start
• Start t Start
• Finish to Finish
• Start to Finish

trade off one person’s welfare or utility for another person’s

at least one person is better off and no one is worse off. With this criteria individual welfare still determines social welfare

• B. Cost effective analysis a number of programs that measure effects in the same units.
• C. Cost benefit analysis calculate net social benefits, if NSB > 0beneficial; if NSB < 0, not beneficial. This allows a decision on a single program.
• D. Cost utility analysis QALY
• E. Cost consequence analysis a list of cost and savings is provided,user decides how to aggregate these items.

• Cost identification analysis asks what is the cost?
• Cost effectiveness analysis considers both the costs and the effects of a program.
• Cost benefit analysis calculates the net benefit or cost of a program.

• 2. Perspectives of Analysis - whose cost?
• provider is the “true cost of care.”
• payer reflect charges and the allowable level of charges.
• patient is the amount they pay.
• society is the cost of having given up resources that could have been used for other purposes.
• 3. Types Of Cost
• a. Direct Medical Cost These costs are expenditures for medical products and services.
• b. Direct Nonmedical Costs Some costs of illness are not medical - for example, transportation.
• c. Indirect Costs costs that occur because of loss of life or loss of livelihood. .
• d. Intangible Costs-Intangible costs include pain, grief, and other nonfinancial outcomes of disease and medical care.

• The QALY allows for both morbidity and mortality
• to estimate the effects of a program on health status beyond just the program’s ability to extend life

With chronic problems, “average costs” are often misleading

retirement leads to low incomes

Use of “life-years saved” as a criterion makes programs for elderly look poor

hypothetical comparison group who do not smoke but who are like smokers in a number of different key variables that could influence costs.

control variables include age, sex, race, education, drinking habits, exercise habits, family size, income, self-assessed measures of physical, mental and general health and seat belt use.

estimate an upper bound for the differences in cost

Job costing -costs differ for each unit produced. Like fee for service


Process costing - cost of each unit is about the same as the cost of every other unit. Like DRG

• Job
• More detail
• More accurate for a particular item
• Better for decision making

• Process
• Less Expensive
• Easier to maintain
• Less employee resistence

Total 500 1500 2000

Process cost $2,000/2 = $1,000

• Job Cost Patient A = $500
• Patient B = $1500

Costs directly associated with the cost objective

Costs that are not direct costs

Direct costs of a service, plus an appropriate amount of indirect costs

“benchmark” estimates of cost that are used for planning and evaluation purposes

An estimate of cost using accounting principles

The amount of the expenditures necessary to provide a service

The value of the alternatives that are given up in order to provide a service

cost of adding one additional unit.

Total costs divided by the number of units of service

Similar to marginal, but usually implies expenditures

required for several different services

can be influenced by a decision maker

1. What is the purpose of estimating cost?

2. What is the relevant range associate with the cost estimate?

3. How do we view capacity?

4. What is the time frame?

Cost are allocated form non revenue centers to other non revenue centers and to revenue centers, that center can no longer receive overhead from other centers

1) take Medicare cost reports and do a step down,

2)get a cost to charge ratio, for revenue producing areas,

3) apply the appropriate cost to charge ratio, for each item on the UB.

4) calculate the average cost for the UB for the patients in each DRG.

Disadvantages: lots of averaging and assumptions.

allocate costs to activities which are needed to generate revenue, instead of stepdown

Brief Assignment 9

attention is focused on those items that are significantly different than planned, causes analyzed

GIS= geographic information system:

information system for input, storage, processing, retrieval of spatial data.

Used to view relationships represented by vectors and pixels.

Data, coded to a geographic region. Individuals w/prostate cancer

• A type of GIS.
• Small sample and biased results.

Recognizes that some patients are sicker than others, and they cost more. It is useful for reimbursement and quality comparison

What is the outcome? Mortality, number of infections

What is the timeframe? How long someone is admitted, admissions +30 days

What population? Exclude certain companies or groups

What purpose? Cost, quality

• 2. A set of constraints that define the range of feasible solutions. For example, a hospital only has some many beds available, so any model is constrained by the amount of bed days,
• 3. Decision variables that have values determined by the solving of the model.

b. Queueing models analyzing tradeoffs where waiting lines are present.

A Poisson process looks at the distribution of the number of times some event occurs in a particular amount of time

no feasible solution. This means that the problem has no answer

there is no limit to how high the objective can go

Revenue cycle, looks at how long a dollar in billings takes to get through the cycle. The focus is on billings and collections

cash conversion cycle, – more broad than the revenue cycle, it looks at the full process from ordering inventory to final collection. The focus is on the timing of flows along the cycle.

supply chain, The set of participants and processes that are involved in getting products from vendors to final users.

value chain, The set of processes from the use of raw materials to the final good or service.

graphic tools for tracking performance data about established quality standards

statistical control charts for binary results – the measurements either conform or don’t conform to standards

Brief assign 10