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Case mix planning in hospitals: A review and future agenda

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Health Care Manag Sci
DOI 10.1007/s10729-015-9342-2
Case mix planning in hospitals: a review and future agenda
Sebastian Hof1 · Andreas Fügener1 · Jan Schoenfelder1 · Jens O. Brunner1
Received: 27 March 2015 / Accepted: 16 September 2015
© Springer Science+Business Media New York 2015
Abstract The case mix planning problem deals with choos-
ing the ideal composition and volume of patients in a
hospital. With many countries having recently changed to
systems where hospitals are reimbursed for patients accord-
ing to their diagnosis, case mix planning has become an
important tool in strategic and tactical hospital planning.
Selecting patients in such a payment system can have a sig-
nificant impact on a hospital’s revenue. The contribution of
this article is to provide the first literature review focusing
on the case mix planning problem. We describe the problem,
distinguish it from similar planning problems, and evalu-
ate the existing literature with regard to problem structure
and managerial impact. Further, we identify gaps in the lit-
erature. We hope to foster research in the field of case mix
planning, which only lately has received growing attention
despite its fundamental economic impact on hospitals.
Keywords Health care · Strategic planning · Case mix
planning · Literature review
1 Introduction
Per capita expenditures in health care in western coun-
tries have been increasing, in real terms, by an average
 Andreas Fügener
andreas.fuegener@wiwi.uni-augsburg.de
1 Universitäres Zentrum für Gesundheitswissenschaften
am Klinikum Augsburg (UNIKA-T), School of Business
and Economics, Universität Augsburg,
Universitätsstraße 16, 86159 Augsburg, Germany
of 4 percent per year in the years from 2000 to 2009.
This increase has taken place against the background of an
increase in life expectancy of 10 years between 1970 to
2011 up to an average of more than 80 years [48]. To deploy
expenditures efficiently, financial resources must be allo-
cated carefully. Since hospitals account for the biggest part
of health care costs, e.g., 31.5 % in the United States [32],
this is especially valid for hospitals.
Policy-makers in several countries have reacted to this
challenge by changing the reimbursement systems of hospi-
tals to be based on diagnosis related groups (DRGs) rather
than on daily hospital rates or on individually generated
costs [11]. Fetter et al. [24], Pettengill and Vertrees [51],
and Young et al. [65] provide research on the design of
such patient groups. The increasing use of DRGs allows for
learning effects across different countries [50, 52]. Under
a DRG-based policy, there are two main strategies for a
hospital to succeed economically. The first one is to use
resources efficiently. Efficient resource usage may refer to,
e.g., proper staffing or high utilization of operating room
capacities. The second strategy is to choose the mix and
the volume of patients to give priority to those patients
that can be treated efficiently. This approach is called case
mix planning. The mathematical problem determining the
optimal case mix is called the case mix planning problem
(CMPP).
Case mix planning has been identified early as an impor-
tant tool for strategic hospital planning. Milsum et al. [44]
argue that the mix of patients should be considered a major
factor in the management of patient admissions. Robbins
and Tuntiwongpiboom [57] and Meyer et al. [43] emphasize
that hospital managers should consider the use of mathe-
matical models to control costs. Mulholland et al. [45] note
that case mix planning can be used to align the quality

of medical care with the financial performance of a hos-
pital. The introduction of diagnosis related reimbursement
systems in further countries evokes new potential fields of
application. E.g., in German hospitals the reimbursed case
mix is negotiated at the beginning of each year between the
health care providers and insurance companies. Case mix
planning can be used as a tool to identify goals for such
negotiations.
The contribution of our research is to provide the first lit-
erature review focusing on the CMPP. There exist several
overviews which partially touch on CMPPs, among many
other problems. Hulshof et al. [35] present a taxonomic clas-
sification of planning decisions according to different plan-
ning levels and different services in health care. Cardoen
et al. [16], Guerriero and Guido [27], May et al. [42], and
Abdelrasol et al. [1] discuss studies focusing on the operat-
ing theater. Although all reviews mentioned above discuss
CMPPs among other problems, they only present subsets
of the literature on CMPPs. We provide a comprehensive,
structured literature review classifying CMPPs according
to modeling approaches, uncertainty of demand and sup-
ply, goals of using CMPPs, means to achieve the desired
case mix, and factors impacting the freedom of choosing
the case mix. We use these categories since they comprise
the relevant methodological aspects of case mix planning
models. Additionally, we illustrate the managerial impact
of case mix planning and show how the CMPP is related
to other hospital resource capacity planning problems. The
CMPP has attracted little attention in the literature. Since
this field is strategically important for hospitals and the
efficient delivery of health services, we point out possible
directions for future research.
The remainder of this paper is structured as follows. In
Section 2, we show how case mix planning is related to other
hospital resource capacity planning problems. Section 3
classifies CMPPs according to different aspects; strengths
and weaknesses of CMPPs are reviewed from a manage-
ment perspective. In the final section, a conclusion is drawn
and opportunities for future research are presented.
2 Case mix planning in the framework of hospital
operations management
Case mix planning is a central issue in strategic planning
for hospitals. In this section, we provide a broader view of
case mix planning to illustrate its role in the context of hos-
pital operations management. There are various frameworks
that describe how case mix planning can be embedded in
hospital operations management. The idea of adapting man-
ufacturing planning methods, such as resource planning, to
hospitals is described by Roth and Van Dierdonck [58].
S. Hof et al.
They consider DRGs as hospital products with certain
resource requirements. The case mix is planned at the level
of major diagnostic categories. An aggregate admission
planning module is used to determine the required capacities
for a hospital’s main resource centers. Vissers [62] encour-
ages a focus on process-orientation in health care modeling.
Consequently, Vissers et al. [63] present a patient-flow ori-
ented production control framework. In this scheme, the
definition of annual target patient volumes is considered a
major component of hospital planning as well. Van Merode
et al. [60] show how these concepts can be embedded
in enterprise resource planning (ERP) systems. They sug-
gest utilizing ERPs in hospitals for deterministic planning
only. Simulation [31] and system dynamics [8] can be com-
plementarily used for the evaluation of stochastic hospital
processes. Rather than focusing on resource capacity plan-
ning, Hans et al. [30] propose a more generic scheme that
comprises multiple managerial areas.
Besides these structural concepts, further approaches
help to understand the purpose of case mix planning. Dif-
ferent long-term hospital planning concepts are discussed
by Butler et al. [13]. Business planning is one possible tool
for strategic decision-making. For instance, Reynolds [55]
illustrates how the management of the case mix can be
embedded in hospital business planning. He defines a hospi-
tal’s case mix hierarchically on the three levels departments,
major diagnostic categories, and DRGs. Nackel et al. [46]
and Canning and Loeb [15] provide advice on how case mix
planning can be integrated in hospital management struc-
tures. Often, the effects of strategic planning on everyday
hospital work are opaque. Butler et al. [12] and Li et al. [39]
respond to this issue by proposing concepts to evaluate
strategic decisions on hospital performance.
Hospital management games can help to understand the
role and impact of case mix planning in an interactive way.
Kraus et al. [37] provide a review on such games, in which
the consequences of case mix decisions on hospital perfor-
mance and the relation to other planning problems can be
illustrated [29]. Moreover, they can help to analyze com-
petitive effects and the impact of different reimbursement
systems [54].
All the above mentioned contributions discuss important
and valuable aspects of case mix planning or help to under-
stand its role. However, they do not describe the operations
management problem of how to optimize the patient mix
subject to hospital resource structure and patient demand.
Thus, they are out of scope of our analysis of the state of art
in case mix planning.
In the remainder of this section we use a hierarchi-
cal framework based on Hans et al. [30] to illustrate the
distinction of case mix planning from similar planning prob-
lems. Further, we show how case mix planning is related
Case mix planning in hospitals: a review and future agenda
Fig. 1 Relationship of case mix
planning to other hospital
resource capacity planning
problems
to upstream and downstream decision processes. Figure 1
visualizes an application of this generic framework to the
context of case mix planning. The four hierarchical levels
are ordered by decreasing level of impact and increasing
level of detail.
Strategic planning involves the hospital’s mission and its
translation into hospital resource capacity planning on the
basis of highly aggregated information. Decisions on the
total supply of the most expensive and important resources
are based on the hospital’s mission. Total capacity supply
serves as an input for case mix planning. However, recom-
mendations for alterations in the total supply of resources
can be fed back from case mix planning. Common goals for
the strategic allocation of resources are the optimization of
both the case mix and resource utilization.
Tactical planning describes the organization of opera-
tions. Admission planning at the level of aggregated patient
groups can be used to achieve a given case mix. E.g.,
Adan and Vissers [2], Adan et al. [3], Nunes et al. [47],
and Vanberkel et al. [61] develop models that describe
how a targeted case mix can be reached. Further, Vissers
et al. [64] compare different admission policies regard-
ing service quality and resource utilization. The master
surgery schedule (MSS) determines how much operating
room time is to be assigned to different surgeon groups
on each weekday. It can also be used to obtain a certain
patient mix.
The detailed coordination of operations is described on
the operational level. While offline operational planning
refers to making decisions in advance, online operational
planning refers to reacting to unforeseen events. These two
levels have only indirect influence on the case mix via
the preceding hierarchical levels. Note that at all levels,
appropriate market research is crucial to match demand and
supply.
Case mix planning can have a significant impact on
downstream hospital operations. Therefore, it should be
Hierarchical level Resource Capacity Strategies for Achieving
Planning Problems Desired Case Mix
designed deliberately. Different approaches as well as the
state of the art in case mix planning are discussed in the
next section. These approaches differ, among other charac-
teristics, by the degree of consideration of different related
upstream and downstream planning problems.
3 State of the art in case mix planning
We followed a three step approach to search for relevant lit-
erature. First, we conducted an exploratory approach using
Google Scholar to detect relevant manuscripts on case mix
planning since there is no clear terminology for this prob-
lem. Second, we screened references and reverse citations
of the articles we had identified in the first step. Here-
after, we identified major keywords of the manuscripts we
found in the first two steps. In the third step, we performed
a search on the databases JSTOR, PubMed, ScienceDi-
rect, Web of Science, and Wiley Online Library using these
keywords to ensure that we did not neglect essential publica-
tions. We searched for articles until June 30, 2015. Detailed
information on each publication concerning general infor-
mation, modeling characteristics, and information regarding
the application in practice is provided in Table 1. We found
25 publications analyzing the CMPP for hospitals. These
publications are composed of 21 articles published in peer-
reviewed journals, 1 dissertation, 1 research report, 1 book,
and 1 mimeographed publication. There is no dominant
journal publishing research on the CMPP problem.
Research on the CMPP has attracted the attention of the
research community, as is shown by the fact that 5 publi-
cations are cited more than 80 times. The CMPP has been
gaining increased attention in the course of the last three
decades, as can be seen in Fig. 2, which is an indicator for
the increasing relevance of case mix planning. Except for 5
publications, all authors are affiliated to institutions in the
United States or in Canada. However, with many developed
Table 1 Summary

General information Modeling information Means to achieve the desired case mix Factors impacting the freedom of choosing the case mix Degree of implementation

Type Citations∗ Country of Modeling Stochastic Goals of Patient Number Length of Resource OR Beds Physi- Nurses ICU Diagnostic Budget Other Min Max Computa- Real Documented
of publi- affiliation approaches model using grouping of patient planning allocation cians services resources patient patient tional data usage in
Publication cation CMPPs groups cycle volume volume study practice

Baligh and Laughhunn [4] J 43 US LP - BEN N/A N/A N/A - - - - - - -   -  - - -

Blake and Carter [6] J 148 CA GP, MIP, LP - MUL DIAG N/A Y    - - - -       
Blake and Carter [7] J 17 CA GP, MIP - MUL DIAG N/A Y - - - - - - -       -
Brandeau and J 15 US LP - PR DEP, PA 14 Y -   - -   -      
Hopkins [9]
Broyles and J 10 US LP - PR DIAG, PA 6 Y - -  - - - - -     - -
Rosko [10]
Calichman [14] J 25 US IP - PR DEP 10 W    - - - - - -    - -
Choi and J 5 US NLP  PR DEP 10 Y   - - - - - - -    - -
Wilhelm [17]
Dexter et al. [19] J 74 US, CA LP - PR SU 98 Y    - -  - - -     -
Dexter et al. [20] J 53 US, CA LP - C SU 98 Y    - -  - -  -    -
Dexter et al. [21] J 84 US NLP  PR SU 122 Y   - - - - - - -     -
Dowling [22] B 25 US LP - NR DIAG 55 N/A -   -  -  -      -
Feldstein [23] D 294 US LP - NR DIAG 9 N/A - -    - -  -     -
Fügener [25] J 1 DE MIP  REV DEP 3 W     -  - - -     -
Gupta [28] J 115 US NLP  REV DEP N/A N/A   - - - - - - -   - - -
Hobbs [33] M 0 US LP - NR DIAG 24 M -   - - - -   - -   -
Hughes and J 42 US LP - PR DIAG 10 Y -   -    - - - -  - -
Soliman [34]
Kuo et al. [38] J 77 US LP - REV SU 20 W   - - - - - -      -
Ma et al. [41] R 9 BE IP, MIP, SIM - PR DIAG 40-200 N/A    - - - - - -    - -
Ma and J 17 BE IP, MIP, SIM  PR DIAG 18 N/A    - - - - - -    - -
Demeulemeester [40]
Meyer et al. [43] J 1 US LP - PR SERV 3 W - - -   -        -
Mulholland et al. [45] J 35 US LP - PR DIAG 183 Y -   - -  - -      -
Rauner et al. [53] J 3 AT NLP - QUAL SERV/DIAG 4 Y - -  - - - -       -
Rifai and Pecenka [56] J 25 US GP, LP - MUL SERV 4 N/A -  - -  - -  - - -  - -
Robbins and J 21 US LP - PR DIAG N/A N/A - -  -  -   -  -  - -
Tuntiwongpiboom [57]
Testi et al. [59] J 141 IT IP, SIM - BEN WA 6 Y   -  - - - -      

∗ Number of Google Scholar Citations, as of September 7, 2015

Abbreviations:
J: Journal, B: Book, D: Dissertation, R: Research report, M: Mimeographed
US: United States, CA: Canada, DE: Germany, BE: Belgium, AT: Austria, IT: Italy
LP: Linear programming, IP: Integer programming, MIP: Mixed integer programming, NLP: Nonlinear programming, SIM: Simulation, GP: Goal Programming
BEN: Benefit, MUL: Multiple goals, PR: Profit, C: Costs, NR: Number of patients, REV: Revenue, QUAL: Quality
DIAG: Diagnosis, DEP: Departments, PA: Payer, SU: Surgeons, SERV: Services, WA: wards
N/A: Not applicable, Y: Year, M: Month, W: Week
S. Hof et al.
Case mix planning in hospitals: a review and future agenda
Fig. 2 Number of publications
per time period
countries having recently changed or being about to change
their reimbursement systems for hospitals, we expect an
increasing interest in research on case mix planning in these
countries in the near future.
Following the description of the methodology of our
search and the meta-analysis, we review the current state
of the literature on the CMPP. In the first subsection, we
structure and summarize the topics covered in the litera-
ture. In the second subsection, we classify the literature
according to modeling approaches, uncertainty of demand
and supply, goals of using CMPPs, means to achieve the
desired case mix, and factors impacting the freedom of
choosing the case mix. This allows us to take a look at the
CMPP from different perspectives and to highlight problem
specific characteristics. In the last subsection, we evalu-
ate the managerial impact of case mix planning. Along our
classification, we identify aspects that are not addressed
satisfactorily in the published literature.
3.1 Topics covered in the literature
Case mix planning can be used for various purposes and
be implemented in different ways. The natural purpose of
case mix planning is to determine the optimal patient port-
folio of a hospital. So far, researchers have concentrated
their attention on two different approaches to model the
decision-making process.
The first one focuses on the optimization of the case
mix without considering how to attain this solution. This
approach can be interpreted as formulating target volumes
for the admission of patients. Hobbs [33] and Feldstein [23]
laid the foundation for case mix planning by applying the
technique of linear programming to the problem of deter-
mining the optimal patient mix of a hospital. Dowling [22]
provides a detailed case study. All three publications have in
common that an emphasis is put on the estimation of prob-
lem parameters. Further basic models for this approach are
presented by Robbins and Tuntiwongpiboom [57], Meyer et
al. [43], and Calichman [14]. While the first of these publi-
cation focuses on the whole hospital, the second determines
the optimal mix of three cardiac services, and the third
presents a guideline for building an optimal operating room
schedule. Hughes and Soliman [34] state that the case mix
should be planned for a short time span arguing that hospital
resources are only fixed for short periods. While all of these
models only focus on a single goal, Rifai and Pecenka [56]
discuss the combination of the goals of minimizing idle time
of facilities and maximizing profit.
The aim of the second approach is to find a resource allo-
cation scheme that induces the optimal case mix. The phi-
losophy behind this approach is that an increase of allocated
resources for a specific patient group will imply an increase
in the volume of patients in these patient groups. Direct
influence on the number and mix of patients via the man-
agement of patient admissions can be legally and practically
restricted. This might be due to limited demand, the inter-
diction of marketing, or the prohibition of patient rejections.
These problems can be circumvented by implementing a
supply induced case mix strategy by allocating resources
to achieve a desired case mix. Since operating rooms are
considered one of the most scarce hospital resources [27],
allocation of operating room time to surgeons of different
medical specialties is seen as an appropriate approach to
influence the case mix [38]. A worst-case scenario, which
describes the most negative scenario if case mix planning
is neglected, is presented by Dexter et al. [20]. To appro-
priately consider the stochastic nature of patient demand,
Dexter et al. [21], Gupta [28], and Choi and Wilhelm [17]
implement uncertainty of demand in their resource allo-
cation approaches. Testi et al. [59] describe a three-phase
approach that combines case mix planning with the devel-
opment of an MSS and the evaluation of different rules
concerning the sequence of surgeries. Fügener [25] uses
stochastic patient paths to link case mix decisions with the
design of an MSS.
The following three publications explicitly combine
these two ways of implementation by formulating target
patient volumes as well as resource allocation schemes.
Blake and Carter [6] model the trade-off between financial
objectives of hospitals and physicians. Ma et al. [41] and Ma
and Demeulemeester [40] combine case mix planning with
downstream planning problems.

Since case mix planning can provide a holistic view of
hospitals, it can be applied for various purposes. Dexter
et al. [19] illustrate how the impact of possible capacity
investments such as the acquisition of additional nurses can
be evaluated by studying the CMPP. Baligh and Laugh-
hunn [4] and Broyles and Rosko [10] present the idea of
using case mix planning as a tool for hospital financial
planning. A similar approach is used by Brandeau and Hop-
kins [9] to investigate impacts of a hospital modernization
project and of changes of the reimbursement system. Blake
and Carter [7] further develop the latter idea and evalu-
ate the impact of different funding options for hospitals
and physicians on resource allocation. In contrary to the
aforementioned papers, Rauner et al. [53] compare reim-
bursement systems using a formulation of the CMPP that
includes several hospitals. They conclude that fixed hospital
budgets outperform variable hospital budgets.
The literature on the CMPP comprises a diverse range
of topics. The basic task of the CMPP is to determine the
optimal patient mix of a hospital. Equivalent goals can be
achieved by optimizing the allocation of operating room
time since the allocation of resources to patient groups can
be seen as a surrogate for case mix planning. Additional
areas of application include the evaluation of investments
in resource capacity, hospital financial planning, and the
assessment of reimbursement systems for hospitals and
physicians.
3.2 Methodological classification of the literature
Depending on the purpose, the type of implementation,
but also on other aspects, CMPPs differ with regard to
several modeling aspects. To understand the choice of dif-
ferent ways of modeling in the respective case mix planning
approaches, we classify the case mix planning literature
according to different criteria. For each of the criteria,
we first summarize the literature, then provide a struc-
tured analysis, point out exceptional ideas, and explain
why different model formulations are favored in different
situations.
3.2.1 Modeling approaches
The CMPP is frequently modeled as a linear program (LP)
and solved with standard software. In its basic version, the
CMPP has a structure similar to the product mix problem
[57]. The product mix problem describes the problem of
finding the optimal mix of products that are to be manufac-
tured, subject to resource and demand constraints. Naturally,
the decision variables in the CMPP problem are integer
if they refer to the volume of patients of different patient
groups. However, most publications consider a linear for-
mulation because the resulting problem is easier to solve,
S. Hof et al.
the difference in the results is negligible for high patient
volumes, or the decisions can actually be measured in real
numbers. If the decision variables are modeled as integer
variables, the CMPP is potentially more complicated to
solve. In this case it is a generalization of the integer knap-
sack problem and thus NP-complete. The frequent use of
standard software to solve LPs, integer programs (IPs), and
mixed integer programs (MIPs) to optimality suggests that
the basic CMPP is easy to solve for small instances without
distinction of the chosen modeling approach.
Goal programming, which is a special form of linear pro-
gramming with multiple objectives, is suggested by Rifai
and Pecenka [56] and Blake and Carter [6, 7]. After hav-
ing separately decided on the optimal case mix and having
developed a master surgery schedule, Testi et al. [59] eval-
uate their results using computer simulation. The drawback
of such sequential decision making is that the global opti-
mum for the whole hospital may be missed by searching
for optima of partial problems of the decision process. In
general, there is a trade-off between reaching the global
optimum by tackling the whole problem and reducing the
complexity of calculations by solving partial problems. Ma
et al. [41] and Ma and Demeulemeester [40] use an inte-
grated approach for solving the CMPP simultaneously with
downstream planning problems. Since standard approaches
fail, they introduce a branch-and-price framework to solve
problem instances of medium-size hospitals with more than
200 beds. Models that explicitly incorporate stochastics can
lead to non-linear model formulations. E.g., Gupta [28]
describes a non-linear program and develops an iterative
algorithm that can be used to find the global solution of
this problem. Similarly, Choi and Wilhelm [17] formulate
a generic model and derive several stochastic programming
formulations. Rauner et al. [53] use a concave effectiveness
measure to compare different allocation schemes. The use
of this measure leads to a non-linear program with a concave
objective function and a convex feasible region.
In summary, we conclude that linear programming is the
most common choice to model CMPPs. If uncertainty in
demand or economies of scale are allowed for, non-linear
formulations are considered. This might be a promising
direction for future research.
3.2.2 Uncertainty of demand and supply
Most case mix planning models follow a deterministic
approach, arguing that uncertainties compensate each other
or that appropriate buffer capacity is reserved. Further,
incorporating stochasticity may add potentially unnecessary
complexity to the models. However, recent research sug-
gests that the consideration of certain stochastic aspects is
of strategic importance for case mix planning. Moreover,
the incorporation of lower-level decisions can necessitate
Case mix planning in hospitals: a review and future agenda
stochastic modeling. Stochastic influences on case mix
planning can be clustered into three types.
First, patient demand can be seen as a random vari-
able, as the number of elective and emergency patients
may not be forecasted accurately [21]. Furthermore, demo-
graphic changes and alterations in typical diseases have
a high influence on long-term planning. Choi and Wil-
helm [17], Gupta [28], and Dexter et al. [21] model strategic
demand uncertainty with the following trade-off decision.
The reservation of a high amount of resources for a spe-
cific department or surgeon group leads to a high risk of
idle capacities. However, if too few resources are avail-
able, patients have to be turned away, resulting in a loss of
potential revenue. Dexter et al. [21] assume that if demand
for a surgeon is lower than the allocated operating room
time, the free operating room time can be reallocated at the
operational level.
Second, the variability in resource consumption and sup-
ply can be an important factor for planning the optimal
case mix. To increase the patient service level, Ma and
Demeulemeester [40] take variability in the length of stay
into account to reduce bed shortages. Fügener [25] mod-
els different courses of treatment by using stochastic patient
paths. The aforementioned papers integrate stochasticity of
resource consumption mainly to derive decisions on the
tactical level. However, some effects of the variability of
resource consumption on strategic planning exist. E.g., large
volumes of high-risk patients can lead to significant varia-
tions in the utilization of resources. Milsum et al. [44] point
out that the variability in total resource consumption can be
reduced by increasing the share of patient groups with a low
variance in resource usage. We did not find any formulations
of CMPPs dealing with uncertainty of supply.
Third, uncertainty concerning objective function coeffi-
cients can be modeled to obtain robust results. Mulholland
et al. [45] mention this strategically relevant issue by noting
that the optimal case mix can be sensitive to changes in the
reimbursement and costs of patient groups. Thus, before a
certain case mix is implemented, potential variations have
to be anticipated. Meyer et al. [43] show how the range of
the objective function coefficients with the same optimal
solution can be determined. They note that this information
might be useful if changes in reimbursement for different
patient groups are likely to occur. Dexter et al. [21] consider
the standard error of contribution margin per operating room
hour to exclude surgeons with a very high variability in this
measure from the allocation of additional operating room
time. They argue that including those surgeons could lead
to strange and unrealistic allocation schemes due to outlier
patients.
Sensitivity analyses in various case mix planning mod-
els reveal the need for modeling different scenarios and
variations of input coefficients to obtain realistic results. A
distinction among stochastic aspects that add value to the
CMPP can be made between those that are important for
robust strategic planning and those that are necessary to
incorporate lower-level decisions. Of all studies discussed
in this section, only Choi and Wilhelm [17], Gupta [28],
and Dexter et al. [21] model strategic demand uncertainty.
Therefore, we encourage research containing this type of
uncertainty.
3.2.3 Goals of using CMPPs
Goals pursued in case mix planning can be divided into
financial goals and non-financial goals. Most publications
formulate financially driven CMPPs. Financial objectives
can be formulated in different ways. While most authors
consider the maximization of the sum of contribution mar-
gins as the primary objective, some studies argue that, since
most costs of hospitals are fixed, it is sufficient to con-
sider revenues instead of profits [28]. To ensure benefits for
both hospitals and physicians, Mulholland et al. [45] maxi-
mize the sum of hospital profits and revenues of physicians.
Financially driven case mix planning does not necessarily
imply that profit for the hospital owner is to be gener-
ated. It can also be used for cross-financing other hospital
affairs such as investment projects. E.g., Dexter et al. [19]
illustrate that financial gains of case mix planning can be
used to increase patient service by acquiring additional
nurses. They point out that profit can also be used to cover
costs for research and the treatment of indigent patients.
Dexter et al. [21] argue that with additional profit capi-
tal investments like purchasing information systems can be
stemmed.
Although most approaches measure the optimal case mix
in monetary units, case mix planning can also be driven by
non-financial goals. E.g., Baligh and Laughhunn [4] maxi-
mize the “value of patients”. This value has to be defined
according to hospital policy and can include moral and ethi-
cal considerations, patient mortality rates, or the possibility
of being referred to another hospital. However, they do not
illustrate how such parameters can be estimated. Rauner et
al. [53] define a quality measure to evaluate different case
mixes. This criterion consists of a logarithmic term that
describes learning effects and a square root term to model
decreasing marginal effects of allocated budget. Testi et
al. [59] calculate the objective weights of patients accord-
ing to a combination of waiting lists and historical resource
allocation.
Few papers study the combination of multiple goals.
Rifai and Pecenka [56] formulate goals of maximizing
contribution margin and minimizing idle capacity. Blake
and Carter [6, 7] investigate trade-offs between hospi-
tal management and priorities of physicians in case mix
planning.

The financial goals of a hospital mainly depend on the
ownership. While profit oriented hospitals seek to maxi-
mize yield, profit satisfiers are usually assumed to aim to
break even or to be able to cross-finance other hospital
affairs. The decision structure in a hospital itself is also of
crucial importance for the setup of realistic model formula-
tions. The hospital owner, hospital management, physicians,
and the operating room manager in a hospital are potential
decision makers with the ability to influence the hospital’s
case mix. Especially in cases with self-employed physi-
cians, considering physician preferences can add significant
value [6].
3.2.4 Means to achieve the desired case mix
The volumes of treated patients of each patient group are
the major decision variables in the CMPP. However, argu-
ing that operating rooms can be seen as the major bottleneck
of a hospital, recent literature has frequently considered the
allocation of operating room time as the major determinant
for the case mix of a hospital. Table 2 gives an overview
of the decision structures of the publications under review.
The publications are clustered along two dimensions. The
first one describes whether resources are allocated within
the problem. The second one expresses whether patients are
grouped according to their diagnosis, e.g. their DRG, or
according to hospital related capacities like surgeon groups,
and departments.
Table 2 Decision structure of
case mix planning models
No resource allocation
Resource allocation
S. Hof et al.
Particularly in earlier publications, case mix planning is
considered a tool for solely deriving target volumes for the
admission of different patient groups. The question how
such an optimal case mix can be achieved is not part of
the problem formulation. Downstream planning problems,
as mentioned in Section 2, can be used for this purpose.
Patients with similar diagnoses, similar patterns of resource
usage, and similar contribution margin are aggregated. The
more similar patterns of resource usage and contributions to
profit are, the higher the potential to improve overall out-
comes. Since DRGs were introduced to aggregate diseases
with similar treatments and revenue contributions, they are
a reasonable choice for clustering patients. Besides DRGs,
major diagnostic groups or hospital departments are com-
monly used for the identification of patient groups in the
literature. It can be necessary to further split patient groups
according to their payment [10] if significant differences
between payers exist.
If the operating room is seen as the main bottleneck of a
hospital, the allocation of operating room time to physicians
determines the mix of the surgical patients of a hospital.
This approach to case mix planning is most common in
more recent contributions. According to Dexter et al. [20],
this is caused by the change of hospital admission sys-
tems from a bed-focused view to an operating room focused
view. They note that a fundamental change from inpa-
tient treatments to outpatient treatments and same-day admit
surgeries might be the reason for this change in admission
Grouping according to diagnosis Grouping according to capacities
Baligh and Laughhunn [4] Brandeau and Hopkins [9]
Blake and Carter [7] Meyer et al. [43]
Broyles and Rosko [10] Rifai and Pecenka [56]
Dowling [22]
Feldstein [23]
Hobbs [33]
Hughes and Soliman [34]
Mulholland et al. [45]
Rauner et al. [53]
Robbins and Tuntiwongpiboom [57]
Blake and Carter [6] Calichman [14]
Ma et al. [41] Choi and Wilhelm [17]
Ma and Demeulemeester [40] Dexter et al. [19]
Dexter et al. [20]
Dexter et al. [21]
Fügener [25]
Gupta [28]
Kuo et al. [38]
Testi et al. [59]
Case mix planning in hospitals: a review and future agenda
strategies. Dexter et al. [20] justify the approach of deter-
mining the optimal case mix in terms of allocating operating
room time to physicians by highlighting that average vari-
able costs per hour of operating room time vary significantly
between physicians in their study. E.g., they observe that
variable costs of cardiothoracic surgeries exceed variable
costs of pediatric urology more than threefold. Furthermore,
these findings support the assumption that the variability
in the case mix of an individual physician is negligible
compared to changes in the hospital’s case mix due to
the allocation of operating room time. This assumption is
commonly made in the literature concerning resource allo-
cation. Rauner et al. [53] illustrate that the decision between
diagnosis and service related patient clustering is not neces-
sarily exclusive. They group surgical patients according to
treatments and non-surgical patients according to diagnoses.
Further decisions can be linked with the determination of
the optimal case mix. E.g., Fügener [25], Testi et al. [59],
and Calichman [14] combine the case mix decision with the
setup of an MSS. Besides deriving an MSS, Ma et al. [41]
and Ma and Demeulemeester [40] also incorporate a scheme
for the assignment of beds to wards in their model. Dexter
et al. [21] propose a two-stage approach for the allocation
of operating room time to surgeons. At the tactical level,
operating room time is allocated according to contribution
margins. Staff has to be recruited and operating room equip-
ment has to be acquired according to this decision. At the
operational level, operating room time can be released from
under-utilized units and reassigned to surgeons who need
more operating room time.
We have identified four prevalent factors that support
arguments whether the allocation of operating room time
is a good substitute for a hospital’s case mix. First, if
demand can only be influenced indirectly via the supply of
resources, the allocation of operating room time to different
medical fields is a reasonable implementation of case mix
planning. Second, the decision-making structure for patient
admissions can be the determining factor. Third, if the major
bottleneck of a hospital is a resource other than operating
room time, for example, beds in the intensive care unit,
either the allocation-driven approach has to be adapted or
the more general approach of determining optimal patient
volumes should be applied. Fourth, if more than just the
surgical departments have to be incorporated for optimizing
the case mix, the sole allocation of operating room time can
lead to suboptimal results.
Besides the question of how to describe an optimal case
mix, the issue of defining the granularity of patient groups
is critical for realistic modeling. The crucial trade-off to be
considered is the following. The best theoretic results can
be obtained if small groups are considered. These groups
should be homogenous with respect to resource consump-
tion and profit. However, it must be practicable to select
the number of patients of each of the patient groups which
should be treated at a hospital. If a hospital has no influ-
ence on the number of patients on a detailed level, then
patient groups with higher levels of aggregation should be
considered.
3.2.5 Factors impacting the freedom of choosing the case
mix
Since in general the operating room is considered the main
bottleneck of a hospital, operating room time is modeled as
a resource constraint in almost all publications. To produce
realistic results, restrictions on the number of patients are
considered in nearly all publications as well.
Table 1 can be consulted for the different factors that
are considered in each publication. Besides operating room
time, frequently considered critical bottlenecks are ward
beds and, to a lesser extent, intensive care unit beds, finan-
cial resources, and physicians. Note that the latter play a
special role in case mix planning since they are important
stakeholders and a potentially scarce resource.
The majority of publications considers four or fewer dif-
ferent types of resources. Dexter et al. [19] find evidence
that the exclusive consideration of operating room time
might lead to a suboptimal solution. They conclude that the
additional consideration of other scarce important resources
such as the intensive care unit or nursing ward leads to more
reliable results. Using regression analysis, Dexter et al. [20]
find that 97 % of the variability of total variable costs can
be explained by operating room time, intensive care unit
hours, hospital ward hours, and implants used. They con-
clude that it is only necessary to observe data for these
resources and that other minor resources can be neglected.
Although Kuo et al. [38] state that no significant differences
exist between different measures of operating room time in
their case study, the granularity and type of measurement
of resource usage may have significant influences on the
validity of model outcomes.
Another important set of constraints concerns patient
demand. If patient demand is not taken into account,
case mix planning is likely to generate unrealistic results,
because patient groups generating high profits and using
few resources will be favored no matter how often these
cases occur in reality. Most authors handle this by impos-
ing lower or upper bounds on the number of patients who
can be treated from each patient group. A common way is
to set these bounds according to last year’s patient volumes.
Mulholland et al. [45] note that the change of patient vol-
umes allowed by the model in comparison to the previous
year also depends on how much focus is set on financial
and other, e.g., medical, objectives. Similarly, Broyles and
Rosko [10] employ lower bounds on patients to ensure min-
imum service levels. Ma and Demeulemeester [40] state

that it can be important to consider distributions of patient
demand in the course of a week in combination with the
expected length of stay. However, Dexter et al. [21] point
out that it is not necessary to estimate demand exactly, since
adjustments can be made to cope with the actual workload
on the operational level. They argue furthermore that inter-
nal restrictions on the number of treated patients such as
teaching requirements might be tighter than demand restric-
tions. Brandeau and Hopkins [9] note that if the number
of patients in a specific patient group equals the upper
bound of demand in an optimal solution, then this is an
indicator that it would be cost-effective to treat additional
patients.
Resource and patient constraints are necessary to gener-
ate valid model output. As a supplement, further aspects can
be considered. E.g., restrictions reserving a certain part of
working time of physicians to education and time off for
research are presented in Kuo et al. [38]. These restrictions
are modeled by maintaining the operating room time for sur-
geons focusing on teaching or research as a constant. The
authors state that the aspect of lower productivity caused by
residents being present during an operation can be incor-
porated properly in the case mix planning model this way.
Hobbs [33] presents the idea of introducing an “emphasis”
constraint to assure that a certain percentage of patients is
treated in designated departments of a hospital.
In summary, it is necessary to model all expensive scarce
resources as constraints to generate realistic results. The
modeling of resources, which are not scarce or are easily
extendable, has no influence on the optimal case mix. Thus,
these resources can be neglected, unless case mix planning
is used as a tool for financial planning of the whole hospital
[9]. Since case mix planning is considered to be a strategic
or tactical planning problem, most publications argue that it
is sufficient to incorporate the total sum of each resource as
a bound on the total resource consumption of all patients.
However, there is a lack in the literature regarding the val-
idation of this simplification. Besides resource constraints,
demand restrictions are crucial for a case mix planning
model to produce realistic results. Patient volumes of the
last year can be used as an approximation of the demand.
However, if patient demand is expected to change, for exam-
ple, due to demographic changes, forecasts should be used
[21]. Only if patient demand is large enough or there are
long waiting lists for all types of patients, patient demand
can be neglected in the model.
3.3 Managerial impact
In this section, we shift the focus to several aspects of case
mix planning that go beyond modeling considerations and
play a crucial role in the use as a tool for the support of man-
agement decisions in hospitals. We analyze requirements for
S. Hof et al.
case mix planning, the degree of documented implementa-
tion of literature approaches in practice, and the opportuni-
ties and risks of applying case mix planning models in the
field.
3.3.1 Requirements for the applicability and data
prerequisites of CMPPs
Whether case mix planning can be implemented with out-
comes that are likely to be reasonable mainly depends on
two factors. The first major requirement is that the hospi-
tal has an incentive to influence its case mix. This could
relate to the reimbursement system as well as to political,
legal, or social reasons. The second major prerequisite is
that the hospital can control its case mix. Often, demand can
be influenced by imposing changes on available resources
for specific patient groups. This could be, for example, the
allocation of operating room time or the recruitment of a
particular type of physician. Further ways to induce a certain
case mix are the establishment of connections to primary
care providers, decisions on the sequence of admissions
from the waiting list of the hospital [38], and marketing
campaigns.
Basically, there are four types of parameters which are
required as inputs. The first type of parameters concerns
the objective function. While it is normally quite easy to
determine the revenue of a patient of a specific group due
to fixed reimbursement rates, it is a difficult task to deter-
mine the marginal costs of treating a single patient due
to a high quantity of fixed and semi-fixed costs. Thus,
calculating the profit for each patient group can be a
complex task.
The second set of parameters describes the resource
needs of patients. This data is usually extracted from his-
toric patient records [4]. In general, data is only available
for the respective hospital and for few comparable fiscal
years. This can lead to a bias of the model output. Dexter et
al. [20] use a bootstrap resampling method to overcome this
handicap. They simulate a wide variety of different types of
hospitals. They admit that the interpretation of the results is
somewhat limited, because the same cost data is used for all
samples. Another possibility is to use averages of data from
several hospitals. The drawback of this approach is that spe-
cific hospital advantages and disadvantages in the treatment
of patients are not adequately represented.
Third, available resources have to be estimated. In gen-
eral, available resources are easy to determine. However,
there is a danger of overestimating available capacity when
average resource consumption is used. Consider the follow-
ing artificial example. A hospital has 100 beds. Patients
with an average length of stay of 10 days are treated
in this hospital. It is very unlikely that the hospital can
host 3,650 patients in one year due to variability and
Case mix planning in hospitals: a review and future agenda
seasonality in patient demand, working restrictions on
weekends, and dependencies on other resources. Adan and
Vissers [2] show how such problems can be avoided by more
detailed planning.
The last set of parameters to be estimated concerns
patient demand. Dexter et al. [21] argue that forecasting
demand is costly both monetarily and in time, and that
it can be politically problematic. They find that the num-
ber of constraints concerning demand for surgeries can
be reduced by 85 %, e.g., by excluding surgeons requir-
ing unavailable resources from the allocation of additional
operating room time. They further point out that results
of data envelopment analysis may be used to estimate
demand.
The applicability of case mix planning as a tool for sup-
porting management decisions depends on external factors
like the reimbursement system or the legality of influenc-
ing patient demand. The collection of data is facilitated
by modern information systems. The wider the scope and
the higher the granularity, the more accurate is the model.
However, costs of obtaining detailed data and limits on
computational capabilities can be reasons for favoring prob-
lem formulations that focus on partial aspects and consider
aggregated data.
3.3.2 Degree of implementation
There is a lack of evidence whether theoretical benefits
can be achieved in practice due to the low degree of doc-
umented implementation in real-life settings. Documenting
the effects of case mix planning poses a considerable effort
due to long-term planning horizons. This is especially true
for the part of the literature that considers case mix plan-
ning as a consulting tool for the direction of hospital strategy
rather than for concrete advice on actual detailed guidelines.
Three publications document explicitly how case mix plan-
ning has been used in practice. Brandeau and Hopkins [9]
describe that their approach has been used for designing
contracts with public and private insurers, besides answer-
ing to questions of hospital planners about the optimal case
mix structure. Blake and Carter [6] report that their sugges-
tion to maintain low cost services to cross-finance clinical
important services has been accepted by hospital manage-
ment. Instead of eliminating these services, as it was the
initial plan, the study hospital shut down its services for
thoracic surgeries, a high-cost service. Testi et al. [59] note
that their approach has been implemented and accepted by
the hospital staff despite the medical complexity inherent in
hospital resource capacity planning. However, they do not
provide information regarding the success of the implemen-
tation. Besides these three publications, we did not find any
information on the actual application of case mix planning
in practice.
3.3.3 Critical discussion of managerial benefits of using
CMPPs
Case mix planning can be used to gain access to valu-
able information. Interesting insights into hospital resource
capacity planning can be gained from analyzing changes
in profit under various patient demand scenarios or poten-
tial extensions and reductions of critical resources. E.g.,
the results can be used to evaluate the investment in mar-
keting to increase patient demand in a particular specialty.
Likewise, benefits of additional operating room time can be
weighed up against costs for new staff in situations with
small margins. Further, case mix planning can be helpful for
anticipating consequences of changes in the reimbursement
system [53].
If the case mix of a hospital is not planned explicitly,
decisions on the composition of patients take place implic-
itly, e.g., by targeting a certain occupancy rate of resources
or by allocating operating room time based on historical
utilization. This may have negative consequences, because
there is no control over important ethical decisions [6], and
the hospital can be adversely affected in terms of financial
performance [20].
In addition to case mix planning, other approaches can be
considered to determine a good patient mix for a hospital.
Decision support systems [5, 36] can help to estimate the
impact of case mix decisions on hospital key performance
indicators. Econometric approaches like those presented by
Goldfarb et al. [26] and Conrad and Strauss [18] can be
used to estimate empirical relations between outputs and
inputs. Data envelopment analysis is used by O’Neill and
Dexter [49] to estimate the impact of granting physicians
the right to enlarge their patient volume on hospital key
performance indicators.
Despite the fact that case mix planning can be of fun-
damental importance, several points have to be considered.
First, the outcome of a model may be trivial and thus operat-
ing room time can be effectively allocated on an operational
level. Such a situation is described by Dexter et al. [21].
Second, there is a natural resistance of physicians against
interventions in their area of expertise. Blake and Carter [6]
show how this problem can be overcome. They propose
an approach where changes for physicians from current
practice are minimized in the aftermath of a remarkable
reduction in hospital funding. Third, Dexter et al. [19] note
that the additional revenue, which can be generated by using
case mix planning, has to be weighed against the time and
risks of implementing and establishing the new case mix.
Last, Meyer et al. [43] note that personal judgments have
to be consolidated with outcomes of operations planning.
Supporting this statement, Dexter et al. [20] comment that
the allocation of resources may depend to a large extent on
political deal-making.

Summarizing, case mix planning can be a valuable tool
for supporting important and far reaching decisions on hos-
pital strategy. If major changes in hospital structure are
considered, potential benefits have to be weighed up against
the risks of implementation.
4 Conclusion and future research
In this paper, we provide the first comprehensive review
of the CMPP. First, we demonstrate how case mix plan-
ning is related to other hospital resource capacity planning
problems. We outline case mix planning terminology and
note the relationship of case mix planning to other plan-
ning problems. Next, we analyze the literature on case mix
planning according to modeling approaches, uncertainty
of demand and supply, goals of using CMPPs, means to
achieve the desired case mix, and factors impacting the free-
dom of choosing the case mix. To provide a transparent,
objective point of view, we summarize the key information
of all reviewed publications. We cluster the existing litera-
ture for each criterion and summarize the main streams, but
also point out noteworthy peculiarities. Readers may addi-
tionally benefit from a critical discussion between different
modeling approaches for the above mentioned components
of the CMPP. Concluding the literature review, we analyze
the potential and the documented managerial impact of case
mix planning.
To summarize our findings, we notice that there are two
major streams in the literature on the CMPP. The first type
of case mix planning models solely formulates targets for
patient admissions and can be more convenient if several
scarce hospital resources have to be considered. The second
one is based on the allocation of operating room time to
different patient groups and points out the unique role of the
operating room being considered the major bottleneck of a
hospital. There is a variety of papers which are of tutorial
structure and introduce ideas and techniques for case mix
planning.
In general, literature on case mix planning is scarce.
Our findings suggest that further studies are required. First,
the frequent use of sensitivity analysis indicates that the
incorporation of stochasticity in the CMPP is a promising
direction for future research. Particularly, there is a need for
the evaluation of which kinds of uncertainty are of strategic
importance and what portion of uncertainty is of operational
nature and only adds complexity without providing signif-
icant value to the CMPP. In general, stochasticity can lead
to non-linear formulations. Methods have to be developed
and adopted to solve such problems efficiently. Second,
the consideration of competition is of increasing impor-
tance as financial pressure rises and hospital systems are
opened to the market. To understand the dynamics of a
S. Hof et al.
competitive hospital market, it is crucial to understand the
decision-making process of patients or referring physicians
of choosing a hospital. Hospital games [54] provide first
insights in strategic planning for hospitals in a competitive
environment. Third, an important and frequently discussed
topic is whether it is more cost efficient to provide services
in general or in specialized hospitals. Case mix planning
may provide valuable insights for this discussion. Moreover,
to enable the application of case mix planning in prac-
tice, it is vital to analyze the possibilities to incorporate
CMPPs in modern hospital structures, information systems,
and processes.
Although there is a steady trend of countries changing
their hospital reimbursement systems to such where reim-
bursement is related to the diagnosis of the patients, the
literature on case mix planning is still limited. With increas-
ing economic pressure on hospitals and growing competi-
tion, hospital providers considering strategic management
approaches like case mix planning can gain an important
competitive advantage. In many western countries, it is
common practice to reimburse hospitals based on the aver-
age costs of diagnosis related groups. If case mix planning
is applied widely in such an environment, local undersup-
ply and deferrals of high-risk patients are two problems
that have to be addressed adequately by legislation in the
future.
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