Using the information below, develop a Linear Program to determine the best course of action for a community hospital. Using the results of the Linear Program prepare an executive summary 2-3 pages, outlining the best course of action and justifying your decision. Submit the following:
- An Excel file with your LP output
- Executive Summary
- Formulate this as a linear programming problem.
- Do a Sensitivity Analysis
- To get the most revenue, which service(s) should be offered?
- What is the optimal volume(s)?
- What is the total expected revenue from the new services?
- State any assumptions that go into your analysis
A community hospital is planning to expand its services to three new service lines in the medical diagnostic categories (MDCs) and their corresponding diagnostic related groupings (DRGs) shown in Table 10.5.1
TABLE EX 10.5.1.
MDC DRGs Description
2 36-47 Diseases and disorders of the foot
19 424-433 Mental diseases and disorders
21 439-455 Injury, poisoning, and toxic effects of drugs
Five common resources must to be allocated among these three new service lines according to which will bring the most revenue (using overall average DRG payments in a given MDC category). The resources are beds (measured as patient days), nursing staff, radiology, laboratory, and operating room (constraints). The health care manager in charge of this expansion project obtained the average consumption patterns of these resources for each MDC from other peer institutions, and estimated the resources that can be made available (per year) for the new service lines in Table EX 10.5.2:
TABLE EX 10.5.2.
Resource Category MDC-2 MDC-19 MDC-21 Available Resources
Length of stay (LOS) 3.67.1 4.919,710
Nursing hours 3 75.5 16,000
Radiology procedures 0.5 1.0 3,200
Laboratory procedures 1 1.5 3 6,800
Operating room 2 4 1,540
Average revenues from MDC-2, MDC-19, and MDC-21 are $18,885, $23,143, and $17,515, respectively.