With annual U.S. health care expenditures at $1.3 trillion and hospitals accounting for 32% of this, American hospitals could reduce costs by $42 billion a year – or provide more services at the same cost. Experience in other industries suggest these savings could be higher still.
"The same Operations Research techniques that improve the way we allocate our resources in a manufacturing plant could improve the way we run our hospitals and clinics," argues Michael Carter of the University of Toronto.
"Unfortunately there's an attitude that spending money to improve systems only diverts funds from patient care. In fact, putting money into analyzing and optimizing the way we operate our hospitals will greatly benefit patients."
Professor Carter is presenting a paper, "Modeling the Healthcare System," at the annual meeting of the Institute for Operations Research and the Management Sciences (INFORMS®), which takes place from Oct. 19 -22 at the Westin Peachtree Plaza in Atlanta. Prof. Carter will speak on Sunday, October 19 at 8 AM in Westin Peachtree 3 on the 9th floor.
Operations research is the application of math and science to decision making. The use of operations research techniques to cut health care costs has many precedents. For example, in a seminal 1991 study that appeared in the INFORMS publication Interfaces, Yale University operations researcher Robert Fetter reported that his team's creation of Diagnosis Related Groups (DRGS) for the Social Security Administration had saved the Medicare program $50 billion since the 1980's. In contrast, the cost of developing DRGs was just $2 million.
Prof. Carter recently began developing a sophisticated model of a complete hospital. The model is being applied in four large health care institutions. The ambitious simulation model will be used to support better decisions about allocating scarce resources in hospitals. He will eventually expand the model to examine primary care, clinics, home care, and long-term care facilities.
In his analysis, Prof. Carter models strategic problems by pairing two complementary mathematical modeling techniques. System dynamics is a technique used to provide strategic guidelines for resource allocation in large complex systems. Discrete event simulation is used to drill down to provide detailed models based on the actual events in a specific ward or area of focus, taking direction from, and providing feedback to, the holistic strategic model.
His model touches on considerations such as staffing requirements, service mix, impacts on changing demand, new health care delivery models, organizational structure, the centralization of specialties, and capacity planning. An important aspect of the modeling is improving interaction among hospital departments.
"I – and my American colleagues such as Dr. Seth Bonder – are alarmed that individual departments, units, and functional groups within the health care system don't communicate," he says. In particular he cites short-sighted aspects of current planning, like poor scheduling, that translate into needless costs.
"We're being wasteful, not intentionally, but wasteful just the same," he says. "For example, in one nuclear medicine department, the daily schedule was based on fixed 30-minute appointments for all patients. In fact, the average patient visit only took 17 minutes. If the appointments were scheduled in 20 minute intervals, they could treat 50% more patients per day. This situation occurs routinely in all areas of health care – no one actually checks to see how long an appointment takes. Imagine how many more patients could be seen and how waiting times could be reduced if we stopped a minute to think."
The INFORMS annual meeting includes sessions on topics applied to numerous fields, including air safety, the military, e-commerce, information technology, energy, transportation, marketing, telecommunications, and health care. More than 2,000 papers are scheduled to be delivered.
The General Chair of the convention is Prof. Donna Llewelyn, Georgia Institute of Technology. Additional information about the conference is at http://www.informs.org/Conf/Atlanta2003 and http://www.informs.org/Press .
The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications. The INFORMS website is at http://www.informs.org .