Healthcare Operations

Management
An Integrated Approach to
Improving Quality and Efficiency

Chapter 10. Simulation

Daniel B. McLaughlin
Julie M. Hays
 Chapter 10. Simulation
• Uses of Simulation
• Simulation Process
• Monte Carlo Simulation
• Queueing (Waiting Line) Theory
• Discrete Event Simulation (DES)
• Advanced DES

Copyright 2008 Health Administration Press. All rights reserved. 10-2

 Simulation
• Process of modeling reality to gain a better
understanding of the phenomena or system being
studied
• Simulation versus the “real world”
- More cost effective
- Less dangerous environment
- Faster
- More practical
• Does not require mathematical models or
computers

Copyright 2008 Health Administration Press. All rights reserved. 10-3

 Types of Simulation
• Performance
• Proof
• Discovery
• Entertainment
• Training
• Education
• Prediction

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 Simulation Process
• Model development
- Define the problem or question
- Develop the conceptual model
- Collect data
- Build computer model
• Model validation
• Simulate and analyze output

Copyright 2008 Health Administration Press. All rights reserved. 10-5

 Simulation Process
Model Model Simulation and
Development Validation Analyses
• Problem/
question • Quantitative • DOE
definition comparison • Replication
• Develop • Expert opinion • Data
conceptual collection,
model storage, and
• Collect data organization
• Build • Analysis
computer
model

Copyright 2008 Health Administration Press. All rights reserved. 10-6

 Monte Carlo Simulation
• Model the output of a
system by using input
variables that could not be
known exactly
• Random variables (those that are uncertain
and have a range of possible values)
characterized by a probability distribution
• Solution is a distribution of possible outcomes
that can be characterized statistically

Copyright 2008 Health Administration Press. All rights reserved. 10-7

 Simple Monte Carlo Example
Distribution of Charges
Number of Patients

Number of Patients (Frequency)

70
(Frequency) Charges $
10 $ 20.00 60
20 $ 30.00 50
30 $ 40.00 40
40 $ 50.00
30
50 $ 60.00
60 $ 70.00 20
50 $ 80.00 10
40 $ 90.00
0
30 $ 100.00
20 $ 110.00
10 $ 120.00
Total 360 Charges
Average $ 70.00

Copyright 2008 Health Administration Press. All rights reserved. 10-8

 Simple Monte Carlo Example
• Fifty percent of the 0.6
0.5
clinic’s patients do not

Probability
0.4
pay for their services, 0.3
0.2
and it is equally likely 0.1
that they will pay or not 0
Pay Do Not Pay
pay.
• The payment per patient is modeled by:
Probability of payment × Charges/patient = Payment/patient
• A deterministic solution to this problem would be:
0.5 × $70/patient = $35 per patient

Copyright 2008 Health Administration Press. All rights reserved. 10-9

 Simple Monte Carlo Example
Payment Distribution
Trial Coin Die Patient
# Flip Payment Total Charges Payment

Number of Trials
1 H 1 7 $ 70.00 $ 70.00
2 T 0 10 $ 100.00 $ -
3 H 1 8 $ 80.00 $ 80.00
4 T 0 8 $ 80.00 $ -
5 H 1 9 $ 90.00 $ 90.00
6 T 0 8 $ 80.00 $ -
7 H 1 7 $ 70.00 $ 70.00
8 T 0 10 $ 100.00 $ - $- $60.00 $110.00
9 H 1 9 $ 90.00 $ 90.00 Payment
10 T 0 10 $ 100.00 $ -

Copyright 2008 Health Administration Press. All rights reserved. 10-10

 Simple Monte Carlo Example
The Flaw of Averages
• On average each patient pays $35. However:

- Fifty percent of the patients pay nothing.

- A small percentage pay as much as $120.
- No individual patient pays $35.

• Monte Carlo simulation can reveal hidden

information and a clearer understanding of the
risks and rewards of a situation or decision.

Copyright 2008 Health Administration Press. All rights reserved. 10-11

 VVH Monte Carlo Example
CAP Payment Distribution

Created with BestFit 4.5, a software product of Palisade Corp., Ithaca, NY; www.palisade.com

Copyright 2008 Health Administration Press. All rights reserved. 10-12

 VVH Monte Carlo Example
Input Distributions
Probability Distribution of Quality Scores
0.06
P(X)

0.04

0.02

0
0.6 0.7 0.8 0.9
Quality Score

Probability Distribution of Cost of Reaching a

Score Greater Than 0.90
P(X)

$10,000 $30,000 $50,000

Cost of Reaching a Score Greater Than 0.90

Copyright 2008 Health Administration Press. All rights reserved. 10-13

 VVH Monte Carlo Example
Deterministic Analysis
Profit = Revenue – Cost
Revenue = (Rev/mon × 12 mon/yr) × Quality
bonus or penalty
= ($250,000/mon × 12 mon/yr) × 0.01
= $30,000/yr
Cost = $30,000/yr
Profit = $30,000/yr – $30,000/yr = $0

Copyright 2008 Health Administration Press. All rights reserved. 10-14

 VVH Monte Carlo Example
CAP Pay-for-Performance Simulation Trials
@RISK Data Report
Data
Profit =
Revenue/ Quality Costs/
Output Revenue/Year Revenue –
Month Score Year
Costs
Iteration/
Cell $B$14 $C$14 $D$14 $G$14 $H$14
1 155,687.16 $ 2,699,013.25 0.841 17,032.684 $ (17,032.68)
2 244,965.38 $ 2,903,593.00 0.765 15,443.749 $ (15,443.75)
3 257,408.31 $ 2,924,186.25 0.785 26,655.609 $ (26,655.61)
4 335,716.84 $ 3,441,799.25 0.653 31,370.799 $ (65,788.80)
5 232,497.83 $ 2,857,697.00 0.824 46,067.852 $ (46,067.85)
6 249,375.09 $ 3,169,170.50 0.839 27,132.934 $ (27,132.93)
7 234,730.83 $ 2,771,886.50 0.867 28,037.871 $ (319.01)
8 192,825.16 $ 2,906,499.00 0.687 29,651.076 $ (58,716.07)
9 243,230.81 $ 3,045,998.00 0.872 44,706.762 $ (14,246.78)

Created with @Risk 4.5, a software product of Palisade Corp., Ithaca, NY; www.palisade.com

Copyright 2008 Health Administration Press. All rights reserved. 10-15

 VVH Monte Carlo Example
Simulated Distribution of Profits
Distribution for Profit = Revenue - Costs/H14
2.500
Mean=-19998.71
2.000
Values in 10^ -5

1.500
@RISK Student Version
For Academic Use Only
1.000

0.500

0.000
-120 -90 -60 -30 0 30 60
Values in Thousands Created with
@Risk 4.5, a
5% 90% 5% software product
-66.9894 29.7502 of Palisade Corp.,
Ithaca, NY;
www.palisade.co
m
Copyright 2008 Health Administration Press. All rights reserved. 10-16
 VVH Monte Carlo Example
Tornado Graph
Regression Sensitivity for Profit = Revenue -
Costs/H14

Quality Score/D14 .815

@RISK Student Version

-.414 For Academic Use Only Costs/Year/G14

Revenue/Month 12/T14 .097

-1 -0.75 -0.5 -0.25 0 0.25 0.5 0.75 1

Created with
Std b Coefficients @Risk 4.5, a
software product
of Palisade Corp.,
Ithaca, NY;
www.palisade.co
m
Copyright 2008 Health Administration Press. All rights reserved. 10-17
 Simple Queueing System
Buffer or
Queue
Customer Arrival
Population Server(s) Exit
Input
Source

• Customer population—finite or infinite

• Arrival process—often Poisson with mean arrival rate 
• Queue discipline—first come, first served (FCFS) is one
example
• Service process—often exponential with mean service rate

Copyright 2008 Health Administration Press. All rights reserved. 10-18
 Queueing Notation
• A/B/c/D/E
- A = Inter-arrival time distribution
- B = Service time distribution
- c = Number of servers
- D = Maximum queue size
- E = Size of input population
• M/M/1 queueing system
- Poisson arrival distribution
- Infinite possible queue
- Exponential service time length
distribution - Infinite input population
- Single server - Only one queue
Copyright 2008 Health Administration Press. All rights reserved. 10-19
 Queueing Solutions
M/M/1,  < 
Capacity utilization
= Percentage of time the server is busy
 mean arrival rate
 
 mean service rate
1 mean time between arrivals mean service time
 
1/mean service time mean time between arrivals
Average total number of customers in the system
= 
Ls    Ws
 
= Arrival rate × time in the system
Copyright 2008 Health Administration Press. All rights reserved. 10-20
 Queueing Solutions
M/M/1,  < 
Average waiting time in the queue

 Wq 
(   )
Average time in the system
= Average waiting time in the queue + Average
service time
1 1
= s
W  W q  
  
Average length of the queue (or average number in
the queue)
2     
 Lq     
 (    )       
Copyright 2008 Health Administration Press. All rights reserved. 10-21
 VVH M/M/1 Queue Example
• Goal: Only one patient waiting in line for the
MRI
• Data:
- Mean service rate () is four patients/hour
and is exponentially distributed
- Arrivals follow a Poisson distribution and
the mean arrival rate is three
patients/hour ()

Copyright 2008 Health Administration Press. All rights reserved. 10-22

 VVH M/M/1 Queue Example
If one customer arrives every 20 minutes and
it takes 15 minutes to perform the MRI, the
MRI will be busy 75 percent of the time.
Capacity utilization of MRI
= Percentage of time MRI is busy
1  15 minutes
   75%
1  20 minutes
 3
     75%
 4
Copyright 2008 Health Administration Press. All rights reserved. 10-23
 VVH M/M/1 Queue Example
Average time waiting in line
 3 3
 Wq     0.75 hours
 (    ) 4( 4  3) 4
Average time in the system
1 1
 Ws    1 hour
  43
Average total number of patients in the system
 Ls 


or
3
 3 patients
  43
= Arrival rate × Time in the system
= 3 patients/hour × 1 hour
= 3 patients
Copyright 2008 Health Administration Press. All rights reserved. 10-24
 VVH M/M/1 Queue Example
• Average number of patients waiting in line =
2       3  3  32 9
Lq            2.25 patients
 (    )         4  4  3  4( 4  3) 4

• VVH needs to decrease the utilization,  =

/, of the MRI process
• VVH can
- Increase the service rate ()
- Decrease the arrival rate ()
- Do a combination of both
Copyright 2008 Health Administration Press. All rights reserved. 10-25
Discrete Event Simulation (DES)
Basic Simulation Model
• Entities are the objects that flow through
the system.
• Queues hold the entities while they are
waiting for service.
• Resources or servers are people,
equipment, or space for which entities
compete.

Copyright 2008 Health Administration Press. All rights reserved. 10-26

Discrete Event Simulation (DES)
Simulation Model Logic
• States are variables that describe the
system at a point in time.
• Events are variables that change the state
of the system.
• The simulation jumps through time from
event to event, and data are collected on
the state of the system.

Copyright 2008 Health Administration Press. All rights reserved. 10-27

 DES
Random Data

Entity Number 1 2 3 4 5 6 7 8 9
Inter-arrival Expon
Time (0.33) 0.17 0.37 0.36 0.59 0.14 0.17 0.24 0.06 0.35
Time of
Arrival 0.00 0.17 0.54 0.90 1.49 1.63 1.80 2.04 2.10 2.45
Service Expon
Time (0.25) 0.21 0.56 0.02 0.37 0.34 0.11 1.02 0.01 0.20

Copyright 2008 Health Administration Press. All rights reserved. 10-28

 DES
Simulation Event List
Just Finished Upcoming
Event Variable Attributes Statistics Events

lete

e in
e
e

queu
queu

leng eue
omp
queu in

serv e in

t tim
Aver queue
time

qu
th
ice
e

al tim
e

ation
be r c
s in
th of
t typ

l wai

age
ble
y#

#
al

wait

t
Varia
Ev en

Even
Leng

Utiliz
Time

Arriv

Arriv

Time
Entit

Entit
Num

Tota
1 0.00 Arr 0 1 0.00 0.00 0 0 0 0 2 0.17 Arr
1 0.21 Dep

2 0.17 Arr 1 1 0.17 0 0 0 1.00 1 0.21 Dep

3 0.54 Arr

1 0.21 Dep 0 1 0.00 0.00 1 0 0.19 1.00 3 0.54 Arr

2 0.77 Dep

Copyright 2008 Health Administration Press. All rights reserved. 10-29

 DES
Simulation Event List
Just Finished Upcoming
Event Variable Attributes Statistics Events

lete

e in
e
e

queu
queu

leng eue
omp
queu in

serv e in

t tim
age e
e

qu
th
ice

u
e

al tim

al tim
e

ation
ber c
s in
t h of

e
t typ

l wai
u
ble
#

y#
q
wait
y

t
Varia

E ve n
Even

Leng

Utiliz
Time

Arriv

Arriv

Time
Aver
Entit

Entit
Num

Tota
3 0.54 Arr 1 1 0.54 1 0 0.07 1.00 2 0.77 Dep
4 0.90 Arr

2 0.8 Dep 0 1 0.17 0.21 2 0.3 0.35 1.00 3 0.79 Dep

4 0.90 Arr

3 0.8 Dep 0 0 0.77 3 0.3 0.34 1.00 4 0.90 Arr

4 1.27 Dep

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 DES
Arena Screenshot

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-31
 DES—Arena Output
Arrival rate = 3 patients/hour; Service rate = 4 patients/hour; 200 hours

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-32
 DES—Arena Output
Arrival rate = 3 patients/hour; Service rate = 4 patients/hour; 200 hours

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-33
 DES—Arena Output
Arrival rate = 3 patients/hour; Service rate = 4 patients/hour; 10 hours

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-34
 DES—Arena Output
Arrival rate = 3 patients/hour; Service rate = 4 patients/hour; 10 hours

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-35
 VVH Simulation
• Current situation—on average, 1.5 patients in queue
• Goal—1.0 patients in queue
• Solution—decrease arrival rate or increase the
service rate
• Simulation results:
- Decrease arrival rate to 2.7
- Increase service rate to 4.4
• Actual improvement:
- Service rate of 4.2 patients/hour
- Need arrival rate of 2.8 patients/hour

Copyright 2008 Health Administration Press. All rights reserved. 10-36

 DES—Arena Output
Arrival rate = 2.8 patients/hour; Service rate = 4.2 patients/hour; 10 hours

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-37
 DES—Arena Output
Arrival rate = 2.8 patients/hour; Service rate = 4.2 patients/hour; 10 hours

Arena® screen shots reprinted with permission from Rockwell Automation.

Copyright 2008 Health Administration Press. All rights reserved. 10-38
 Simulation
• Simulation is a powerful tool for modeling
processes and systems to evaluate choices
and opportunities.
• Simulation can be used in conjunction with
other initiatives such as Lean and Six Sigma
to enable continuous improvement of
systems and processes.

Copyright 2008 Health Administration Press. All rights reserved. 10-39