Team-Based Scarce Resource Allocation Model Under Stochastic Demand: An Application

38 Pages Posted: 14 Aug 2016 Last revised: 3 Jun 2019

See all articles by Jingxing Wang

Jingxing Wang

University of Michigan at Ann Arbor - Department of Industrial and Operations Engineering

Romesh Saigal

University of Michigan at Ann Arbor - Department of Industrial and Operations Engineering

Date Written: June 1, 2019

Abstract

This paper considers the allocation of resources, i.e., the amount of working hours of healthcare professionals (like physicians, nurses, clerks, social workers, nutritionists, pharmacists, etc.), to teams facing a stochastic demand in a Patient-Centered Medical Home (PCMH). To handle this uncertainty, the allocation strategy described in this work consists of two phases. In the first phase, a preliminary assignment of resources is determined, and the demand process generated during the scheduling of patients. The total load on each team, generated during the scheduling period (\textcolor{red}{i.e.}, during phase one), is shown to be a stochastic differential equation (SDE). Given an initial assignment, the mismatch between this assignment and the stochastic demand observed before the start of service is an option (or a contingent claim) on this SDE. In the second phase, when the teams initiate the service of patients, based on each team's demand, the initial allocation of resources is now made to meet the total PCMH demand exactly. During phase two, this reallocation causes disruption to the teams. Real options theory is used to quantify this disruption and we propose here three fair and consistent mechanisms to price this option. After the pricing function is determined, for fairness, phase-one assignments are made such that each team incurs the same price of disruption caused during phase two. We present four examples to illustrate the strategy and a mechanism that incorporates the objective of decreasing disruption to teams handling sicker patients.

Keywords: Stochastic Demand, Real Options, Loss Aversion, Fair Allocation, Healthcare

Suggested Citation

Wang, Jingxing and Saigal, Romesh, Team-Based Scarce Resource Allocation Model Under Stochastic Demand: An Application (June 1, 2019). Available at SSRN: https://ssrn.com/abstract=2820826 or http://dx.doi.org/10.2139/ssrn.2820826

Jingxing Wang (Contact Author)

University of Michigan at Ann Arbor - Department of Industrial and Operations Engineering ( email )

1205 Beal Avenue
Ann Arbor, MI 48109
United States

Romesh Saigal

University of Michigan at Ann Arbor - Department of Industrial and Operations Engineering ( email )

1205 Beal Avenue
Ann Arbor, MI 48109
United States

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