# DecisionMkg6350

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1. Necessary causes
event will not occur without the presence of the cause
2. sufficient causes
if present, sufficient causes always result in an event's occurrence
3. Preconditions and precipitating causes
Preconditions are the state of nature surrounding the event

Precipitating causes are events that lead to other events
4. inductive generalization
process of reaching general propositions from specific facts
5. simple enumeration
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
6. Pick a problem of your choice. Describe how you might use the Delphi technique to come up with a response to the problem. Be sure to mention each critical part of the technique
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.
7. What is a model?
Models are representations of real world processes expressed in physical, graphical or mathematical terms.
8. Deterministic models-
certainty plays a minor
9. Probabilistic/stochastic-
probabilities assigned to different values of key variables, more common in healthcare
10. What is the difference between a parametric test and a nonparametric test? Why does it matter?
• 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)
11. A friend is going to do a research study. Suggest 5 items that Houston indicates could be problematic. Briefly describe them to your friend.
• 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.
• 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
12. What are the major functions of a plan?
Reduce Uncertainty, prepare lead time, benchamark, communicate and control
13. Describe major methods for estimating revenue for a new hospital service.
• 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
14. Contrast the difference between sensitivity analysis and scenario analysis . What is Monte Carlo analysis?
15. A. SENSITIVITY 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
16. Explain the agency problem. How can it influence decision making?
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.
17. Maximax criterion
choose the option with the highest possible return, optimistic approach
18. minimin criterion
option with the lowest possible cost, optimistic
19. maximin criterion
option that has the largest minimum profit. This could be seen as pessimistic
20. minimax criterion
determines how high costs could possibly be and then chooses the option with the lowest upper bound on costs, pessimistic
21. What is a real option, how does it differ from a financial option?
The concept of real options applies the tools of option pricing to “real” investment, for example a new product line.
22. What is Nash equilibrium?
Each player is doing the best they can given the actions that they predict from their competitors
23. What is the main argument behind “contestable markets”?.
don’t just consider current competitors, they also consider how their actions might result in additional competitors.
24. Be able to do a real options problem
25. What are the four types of risk management? Provide a health care example of each type
• Reduce Risk by spending money
• Transfer Risk by buying insurance
• Bear the risk by taking no action
• Pool the risk combine resources
26. What are the major problems with using the standard deviation as a measure of risk?
standard deviation doesn't fully explain dispersion of cash flows, and dispersion of cash flows doesn't fully explain risk
27. A clinic has fixed cost of \$40,000 and variable costs of \$40 per visit. It is paid \$50 per visit. What is breakeven volume?
28. What are the critical features of a project?
Temporary, Goals are specific, Trade off between time,cost, quality
29. What are the critical elements in project management?
• Specific measurable goals
• Timeframe
• Resources
30. Slack
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.
31. Critical path
Chain of tasks that must be completed at specific dates in order for the project to stay on time.
32. Crashing
When activities are sped up by investing in more resources or spending additional money.
33. Milestones-
Helps to monitor work progress by completed tasks
34. Gant Chart
visual representation of the task schedule
35. What criteria must be followed in listing tasks?
• Finish to Start
• Start t Start
• Finish to Finish
• Start to Finish
36. What is a social welfare function?
trade off one person’s welfare or utility for another person’s
37. What is the Pareto Criteria
at least one person is better off and no one is worse off. With this criteria individual welfare still determines social welfare
38. Explain the difference between:

A. Cost analysis,
B. Cost effective analysis
C. Cost benefit analysis
D. Cost utility analysis
E. Cost consequence analysis
39. A. Cost analysis, benefits are the same under more than one option, so only costs are analyzed.
• 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.
40. What are Eisenbergs’ three dimensions to clinical economics? Explain the various options within each dimension
41. 1. Types of Economic Analysis
• 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.
42. Explain the motivation for using the Quality Adjusted Life Years approach
• 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
43. Suggest three ways that cost effectiveness studies may be biased against geriatric care
Geriatric care
With chronic problems, “average costs” are often misleading

Use of “life-years saved” as a criterion makes programs for elderly look poor
44. What is Manning et al's concept of the "Nonsmoking smoker". Why is it useful? How is it developed? Why may it not be accurate? How do the authors deal with the potential inaccuracy?
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
45. Be able to do the cost effectiveness problem. Module 4, Pg 17
46. Describe the difference between job and process costing
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
47. Suggest three advantages to job costing. Suggest three advantages to process costing.
• Job
• More detail
• More accurate for a particular item
• Better for decision making

• Process
• Less Expensive
• Easier to maintain
• Less employee resistence
48. Calculate cost using job and process costing
Total 500 1500 2000

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

• Job Cost Patient A = \$500
• Patient B = \$1500
49. Direct costs
Costs directly associated with the cost objective
50. Indirect costs
Costs that are not direct costs
51. Full costs
Direct costs of a service, plus an appropriate amount of indirect costs
52. Standard costs
“benchmark” estimates of cost that are used for planning and evaluation purposes
53. Accounting cost
An estimate of cost using accounting principles
54. Economic costs
The amount of the expenditures necessary to provide a service
55. Opportunity Costs
The value of the alternatives that are given up in order to provide a service
56. Marginal costs
57. Average costs
Total costs divided by the number of units of service
58. Incremental cost
Similar to marginal, but usually implies expenditures
59. Joint Costs
required for several different services
60. Controllable costs
can be influenced by a decision maker
61. What factors shape the choice of the cost estimation process ?
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?
62. Briefly explain the process used to stepdown overhead cost.
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
63. How could you estimate the cost for a hospital to provide a particular DRG using UB92 and Medicare cost reports? What are the problems?
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.
64. What is different about activity based costing? What is the potential advantage?
allocate costs to activities which are needed to generate revenue, instead of stepdown
65. Be able to do variance problems
Brief Assignment 9
66. What is meant by management by exception
attention is focused on those items that are significantly different than planned, causes analyzed
67. What is GIS?
What is GIS used for?
Describe some uses for GIS. How is information represented in GIS?
GIS= geographic information system:

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

Used to view relationships represented by vectors and pixels.
68. What is geocoded data? What types of databases could be geocoded?
Data, coded to a geographic region. Individuals w/prostate cancer
69. What is small area analysis? Why does small area analysis need to be used with caution?
• A type of GIS.
• Small sample and biased results.
70. Why is risk adjustment important? When might it be used?
Recognizes that some patients are sicker than others, and they cost more. It is useful for reimbursement and quality comparison
71. What are the four dimensions to risk adjustment? With respect to risk assessment what is meant by the window of observation? Provide two examples of each dimension.
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
72. What are the three components of a linear programming model?
73. 1. An objective function that states a linear relationship between the variables that is to be optimized (either maximized or minimized) and other variables.
• 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.
74. Briefly describe the use of each of the following techniques:
a. Transportation models
b. Queueing models
75. a. Transportation models involve two dimensional tables, sources of the item to be delivered, and the other the delivery points. equations and constraints used to optimize the transport process.
b. Queueing models analyzing tradeoffs where waiting lines are present.
76. What is meant by a Poisson process.? What is mean by “no feasible solution”? What is meant by an unbounded solution?
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
77. Contrast between:
Revenue cycle,
cash conversion cycle,
supply chain,
value chain,
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.
78. What is a statistical control chart? Briefly describe them
graphic tools for tracking performance data about established quality standards
79. What is an attribute chart?
statistical control charts for binary results – the measurements either conform or don’t conform to standards
80. Construct a control chart for cash for a year with the upper control limit at \$100,000, the lower control limit at \$20,000 and the target balance at \$60,000. Show cash varying over period, and show the correct response when it hits a control limit.
81. Compute optimal order quantity when price = \$100,
annual carrying costs=\$10
cost of ordering =\$9,
annual sales= 500 units
82. What is constrained optimization? What alternatives have tended to replace constrained optimization approaches?
83. The decision maker is given asset of constraints, and needs to maximize some objective given those constraints. In recent decades a series of techniques has focused on changing the constaints. One example is business process reengineering. Constrained optimization techniques have gone from cutting edge to one useful tool in the managers tool box.
84. Be able to a revenue cycle problem
Brief assign 10
 Author: kforsyth ID: 108529 Card Set: DecisionMkg6350 Updated: 2011-10-13 01:28:14 Tags: 6350 Folders: Description: Final review 6350 Show Answers: