Abstract
The thought process of this book needs to be complemented with guidance about how to use the framework to decide what actually to do, and this in turn requires suitable modelling. A vast range of models is used in healthcare and hospitals—accounting financial analysis, comparative system analysis (e.g. data envelopment analysis), and operational research including simulation of stocks and flows to elucidate capacity (often enumerated in hospitals in terms of bed numbers). These analytical methods do not combine physical and economic processes well, do not address the long term, and fail to connect to the wider health system. The focus of serious quantitative analyses should instead be in the domain of modelling investment appraisal. Models of business should be expressed as business cases, at whole system level, and via optimisation approaches—learning from other process industries.
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Notes
- 1.
As a curiosity, the levels of efficiency of the services analysed for the PPP hospitals were above the mean (cf. Chap. 5).
- 2.
An early example of this calculation was the so-called Hill-Burton model, developed from the eponymous act of 1946 in the US. It was developed to justify augmenting hospital capacity in the South and in areas of deprivation and implicitly with a high black population; it worked. Hill-Burton originally proposed a target bed number per state based on 4.5 beds per 1000 population, but this caused issues in that the national average was anyway only 3.4. From 1963, the calculation was amended to look at population forecasts over five years, “use rate” in terms of patient days per 1000 population, and an occupancy factor. See DEHW (1974 op. cit., p. 4). It is the essentials of this analysis which is widely replicated today in hospital planning everywhere.
- 3.
Such a three-part characterisation of business models, taken from Christiansen, may well be insufficient in many senses, but serves for the moment as an initial thought experiment.
- 4.
The earliest use of this idea was in the “input-output tables” developed from the 1940s (Leontief 1986).
- 5.
Of course, it could be pointed out that a power system produces just one output: kilowatt hours (kWh). However, this is not quite true, since a kWh at 03.00 on a weekend in summer is worth a great deal less than one at 17.00 on a winter weekday. The relevant models at least take this sort of timing and quality issue into account. Hospitals have hundreds—perhaps thousands—of outputs, and this would need gross simplification to be calculable (a traditional hospital NPSV analysis already uses a comparable degree of simplification, but without the connection to the wider healthcare system).
- 6.
The discussion in this section “A Further Reflection: How Other Process Industries Do It” is not intended to be more than outline-illustrative on power system economics, and particularly not in an age of renewable energy such as wind and solar. These raise special problems, because they are high capital cost/zero marginal cost, but cannot be “called” as required; they work when the sun shines or the wind blows, which may not be when the system most needs the power.
- 7.
There is of course a quality angle which needs careful thought. That is, if the new hospital produces better outcomes than other settings, that ought to be taken into account. We acknowledge that, at present, just as a thought experiment, that is being ignored here.
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Wright, S., Durán, A. (2020). Decision Analysis. In: Durán, A., Wright, S. (eds) Understanding Hospitals in Changing Health Systems. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-28172-4_9
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