Terwiesch et al. Critical Care 2011, 15:308 http://ccforum.

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VIEWPOINT

Working with capacity limitations: operationsmanagement in critical care

Christian Terwiesch1*, Diwas KC2 and Jeremy M Kahn3,4
Abstract As your hospitals ICU director, you are approached by the hospitals administration to help solve ongoing problems with ICU bed availability. The ICU seems to be constantly full, and trauma patients in the emergency department sometimes wait up to 24 hours before receiving a bed. Additionally, the cardiac surgeons were forced to cancel several elective coronary-artery bypass graft cases because there was not a bed available for postoperative recovery. The hospital administrators ask whether you can decrease your ICU length of stay, and wonder whether they should expand the ICU to include more beds For help in understanding and optimizing your ICUs throughput, you seek out the operations management researchers at your university.
in general. Limited capacity and the resulting problems of waiting times and throughput losses exist in many processes, ranging from nancial services to automotive production. The academic eld of operations management is specically designed to address these issues. The purpose of the present review is to provide a brief overview of operations management and to present a set of case studies from work environments other than hospitals, thereby exposing readers to operations management and its potential application to critical care.

What is operations management?

Working with capacity limitations

Introduction Increasing demand for critical care has made capacity limitations commonplace in the ICU [1]. These limitations occur when there are no available ICU beds for patients with critical illness, leading to delays in ICU admission that have important clinical and economic consequences. Admission delays can result in the boarding of critically ill patients in the emergency department or in other hospital units, which is associated with increased morbidity and mortality [2,3]. Admission delays can also result in decreased revenue for hospitals, as they may force hospitals to cancel elective surgeries or transfers from outside hospitals. These problems have forced the critical care community to develop innovative ways to address capacity constraints and improve throughput. Yet these problems are not unique to the ICU, or even unique to healthcare

*Correspondence: [email protected] 1 Department of Operations and Information Management, The Wharton School, Leonard Davis Institute of Health Economics, University of Pennsylvania, Huntsman Hall 573, 3730 Walnut Street, Philadelphia, PA 19104, USA Full list of author information is available at the end of the article

Many operations in particular, service processes such as restaurants and airlines have high xed costs. These xed costs typically reect the cost of maintaining a certain capacity availability, where capacity is dened as the maximum number of customers that can be served per unit of time. Examples of xed costs include the wages required to pay labor or the cost of machinery for production. Yet while costs in services tend to be xed, revenue increases proportionally to the number of customers served per unit time also referred to as throughput. This scenario creates an economic incentive to operate the process at a high level of utilization, where utilization is dened as the ratio of the number of customers served (the throughput) to the maximum number of customers that we could serve (the capacity). Consider the following simplied example. A service has a xed cost of $1,000 per day and obtains $20 per customer served. The operation thus breaks even at 50 customers served per day. At 60 customers per day, the service obtains $200 in prots per day. At 70 customers, the process obtains $400 in prots. In other words, increasing the number of customers served from 60 to 70 (a 16.7% increase) leads to a 100% increase in prots. The marginal (additional) cost of service is zero while the marginal revenue is high. Maximizing utilization becomes a key priority.
Understanding the problem

2010 BioMed Central Ltd

2011 BioMed Central Ltd

By denition, utilization cannot exceed 100%. The money-seeking manager is thus tempted to seek almost

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Figure 1. Waiting time example. In this example a sample process takes an average of 4 minutes and 12 customers arrive randomly per hour. Time (minutes) is presented on the y axis. Top: the total process time, with the service time in blue and the wait time in red. Bottom: the number of customers in the process at any one time.

100% utilization. And high utilization, in and by itself, is not a problem. To see this, assume in an example process that customers arrive exactly once every 5 minutes (12 customers arrive per hour). Further, assume that it takes us exactly 4 minutes to serve each customer (thus, we could serve up to 15 customers per hour). The resulting utilization in this process would be 12 / 15 = 80%. We might be tempted to call this a 20% underutilization and seek additional demand to improve our protability. This strategy, however, would ignore an important reality of service delivery variability. Customers are not widgets in an assembly line. The amount of service time depends on the particular needs of the customer at hand. Furthermore, the arrival times of individual customers may not be known in advance. These sources of uncertainty create a stochastic eect on our process. Consider the data shown in Figure 1. Just as before, 12 customers arrive per hour. This time, however, the arrival times are random. Similarly, we again take 4 minutes, on average, to serve a customer. Yet some customers get served quickly while others take longer. Although the mean demand and capacity remain constant, Figure 1 reveals that what previously appeared as an underutilized process is in reality a rather busy place. Indeed, some customers (for example, the fth and sixth customers) spend much more time waiting than they spend in service. We also observe that the number of customers in the process at any one time goes as high as four (three

waiting, one being served). Contrast this with the previous deterministic scenario, where each customer is served immediately upon arrival. Variability is the enemy of operations. An 80% utilization of an automated assembly line with limited or no variability might be underutilized; an 80% utilization of a time-critical service in the presence of variability is asking for trouble. The example in Figure 1 assumed that customers would patiently wait in line until it is their turn to be served. But it is easy to conceive of settings in which customers might not be able or willing to wait. The branch of operations management that mathematically analyzes the interplay between process ows, utilization, and variability is referred to as queuing theory. Various mathematical models exist to inform the capacity planning in such an environment. For example, one might ask for the amount of capacity that is needed (the number of people to be hired, or the equipment to be purchased) so that customers get served in a given expected wait time. One of the most prominent ndings in this line of work is the insight that the average waiting time increases dramatically at higher levels of utilization. Specically, the average waiting grows proportionally to a formula: utilization / (1 utilization). This nding has substantial practical implications. For example, for a utilization of 80%, the ratio of 0.8 / (1 0.8) equates to 4. For a utilization of 90%, this ratio grows to 0.9 / (1 0.9) = 9. A 10%

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Figure 2. Interaction of process responsiveness and productivity. Top: the tradeoff between responsiveness and productivity in a given process. Bottom: how process redesign can improve both responsiveness and utilization.

increase in utilization can therefore more than double the waiting time. This detrimental eect on the processs responsiveness needs to be kept in mind when we accept more demand in an attempt to increase utilization. Similar mathematical models exist for the case in which waiting is not possible. For example, one can predict the percentage of customers that will be lost due to capacity shortfalls when customers are unwilling or unable to wait.
Better, not more

Our waiting time example illustrates the fundamental tradeo between the eciency of a process as measured by its utilization and its responsiveness as measured by its waiting time. The waiting time is reduced as more resources are added. Operations management tools in particular, queuing theory can help to nd the right positioning along the eciencyresponsiveness frontier. But operations management can do more than just tradeo one desirable process characteristic against another.

Operations management is also about innovation. By creating an innovative process redesign, the aim is to shift out the frontier instead of simply supporting the optimal position on the current frontier (Figure 2). The process becomes better. New frontiers might be reached by overcoming ineciencies in the present process design (often referred to as waste) or by creating the exibility to better cope with variability. Industrial pioneers such as Henry Ford reached new frontiers by redening the production of physical goods. As work was increasingly divided, craftsmen were replaced by less skilled workers. Production processes were perfected over the subsequent decades, culminating in the legendary Toyota Production System that is now widely regarded as the gold standard for excellent operations [4,5]. The Toyota Production System emphasizes the need to continuously improve a process, driving out the so-called seven sources of waste: excess production, waiting times, transport steps, excessively

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long activity times, inventory, rework (xing quality problems), and unnecessary motions. Work ows are optimized, capacity levels are chosen to match demand, activities are standardized, and protocols are implemented to standardize work, to reduce defects, and improve productivity.
Example 1: focus the US Airline industry and the emergence of Southwest Airlines

The US Airline industry is a tough place in which to compete, and many airlines have experienced nancial losses and bankruptcies. An interesting exception is Southwest Airlines, which has created a number of eciency-related innovations in the air travel process and in turn has been rewarded with outstanding growth and protability. Many of these innovations reect the companys decision to focus on specic market segments and operational processes. For example, Southwest Airlines oers only economy-class seating, has a standardized check-in process, ies only one type of aircraft, and minimizes extraneous amenities such as meals and entertainment. Such focus has led to substantial process improvements by reducing both customerrelated and process-related variability. Consequently, Southwest Airlines can achieve high levels of utilization and improved service times, while being able to command only marginally lower fares compared with their competitors (Figure 3).
Example 2: quick response local production and quick replenishment at Zara

Figure 3. Productivity comparison in the US airline industry. Compared with other US airlines, Southwest Airlines achieves similar yields with greater efficiency. Lufthansa and Ryanair are added as non-US illustrative benchmarks. ASM, available seat mile; RPM, revenue passenger mile.

Few industries are plagued by variability like the fashion industry, in which consumer tastes are ckle and orders are placed far in advance, typically to be produced in faro places like East Asia. Consequently, retailers often end up with not enough of some products to meet demand (leading to missed sales opportunities) and too much of other products (requiring substantial mark-downs and lost prots). Zaras operational innovation has been one of local production, with approximately 50% of its merchandise sourced from its home country of Spain. At rst glance, local production appears inecient as wages in Spain are signicantly higher than in East Asia. The local production allows for quick and frequent replenishment, however, enabling a tight integration between Zaras retail operation and their production process. As a result, Zara builds in exibility into its operation and is able to react to unanticipated swings in demand.
Example 3: capacity pooling and chaining Hondas platform strategy

independent sources of variability. For example, the nancial risk of re for an individual home owner is large, yet an insurance company with millions of re policies faces relatively lower risk. Aggregating variability across independent sources is the idea behind capacity pooling. Consider an automotive company that operates multiple manufacturing plants and produces dierent models. A given car model can only be produced in exactly one plant. If demand increases relative to the forecast, that plant is unlikely to have sucient capacity to fulll it. Conversely, if demand decreases, the plant is likely to have excess capacity. The company can mitigate some of the demandsupply mismatch by pooling its capacity. Specically, if every model could be made at every plant, high demand from one model can be served with spare capacity due to low demand from another, leading to better plant utilization and more sales. Such capacity pooling, however, would require the plants to be perfectly exible requiring substantial investments in production tools and worker skills. An interesting alternative to such perfect exibility is the concept of partial exibility, also referred to as chaining. The idea of chaining is that every car can be made in two plants and that the vehicle-toplant assignment creates a chain that connects as many vehicles and plants as possible. Such partial exibility can be shown to result in almost the same benets of full exibility, yet at dramatically lower costs [6].

Variability is the enemy of operations, yet the risks associated with variability decrease as we aggregate many

Applying operations management to critical care ICUs are faced with nearly the same throughput and capacity problems as the companies in our examples. The

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vast majority of critical care costs are xed, resulting in substantial revenue increases with each additional patient [7]. ICUs also frequently operate at or near capacity, with subsequently large waiting times for admission [8]. Simply expanding capacity is not feasible due to space limitations within hospitals, workforce shortages, and government regulations [9]. Neither is expanding capacity necessarily desirable. As the above examples teach us, in the face of variable demand, expanding capacity can ultimately result in higher xed costs, excess capacity, and long-term ineciencies. The science of operations management is specically designed to solve these problems. ICU throughput is at heart a complex service problem patients are just customers arriving at random times and with varying needs. Each takes a dierent amount of service time. The overall goal is to maximize quality while minimizing waste. In the ICU, quality comes in the form of low mortality and waste comes in the form of wait times (that is, admission delays), excess activity times (that is, long lengths of stay), and the need for rework (that is, the eort required to care for ICU-acquired complications and ICU readmissions).). Operations management not only can help tradeo capacity and eciency under our current process, but can also help us shift the frontier through continuous process improvement. The rst step is to understand the current process. What is the ICU utilization, and how much does it vary? What are the sources of ICU demand, and how much of that demand is random versus predictable? What is the average ICU length of stay (service time) and how does it dier between dierent patient types? How much of the current activity is true production versus waste in the form of ICU readmissions or discharge delays? The next step is to apply queuing theory to mathematically formulate the current process and determine the point on the utilization curve that will maximize responsiveness and productivity. Increasing capacity might be necessary to achieve optimal throughput, or might only result in excess resources. Sometimes these results can be surprising. For example, an empiric analysis of ICU readmissions in the cardiac ICU at the University of Pennsylvania Hospital found that an aggressive early discharge policy resulted in an increase in overall capacity, even accounting for the increase in readmissions [10]. The nal step is the search for ways to improve the current processes to increase throughput. Taking a lesson from Toyota, standardizing care through protocols might lead to decreased waste in the form of hospital-acquired infections or excess ventilator-days [11]. Splitting the single surgical ICU into two subspecialty ICUs (one for trauma and one for cardiac surgery) might introduce economies of scope, by which the specialty ICUs can

perform their services more eciently. This situation would be analogous to Southwest Airlines, which increased eciency in part by limiting the scope of their services. To prevent adverse eects from boarding and to retain some of the gains from capacity pooling, each ICU could be cross-trained to care for the others least sick patients a form of chaining. Another approach might be to search for ways to minimize the eects of variable demand. For instance, if trauma cases tend to occur on the weekends, rescheduling elective cardiac cases from Friday to Monday could create capacity when it is most needed.

Conclusion Operations management optimizes business processes. From traditional manufacturing to distribution and services, the principles and insights from operations management have been used successfully to help rms better manage their businesses. Determining the appropriate level of capacity is often challenging, particularly when dealing with variability from multiple sources. Operations management provides us with the tools to determine the optimal level of capacity and to manage the tradeos inherent in demandsupply mismatches. Operations management, however, is not just about optimizing a given process or capacity allocation decision it is also about improving process through innovation. The three examples discussed above oer a glimpse into the kinds of process innovations used by highly successful rms, but there are many more such innovations being used by rms both large and small [12]. Perhaps the greatest role operations management can play in the ICU is in teaching us how to apply these innovations to hospital medicine, thereby improving both the quality and eciency of critical care.
This article is part of a series on Healthcare Delivery, edited by DrAndre Amaral and Dr Gordon Rubenfeld.
Abbreviations ICU, intensive care unit. Competing interests CT receives book royalty payments from McGraw-Hill Publishers. DKC and JMK declare that they have no competing interests. Author details 1 Department of Operations and Information Management, The Wharton School, Leonard Davis Institute of Health Economics, University of Pennsylvania, Huntsman Hall 573, 3730 Walnut Street, Philadelphia, PA 19104, USA. 2Department of Information Systems and Operations Management, Goizueta Business School, Emory University, 1300 Clifton Road NE, Atlanta, GA 30030, USA. 3Clinical Research, Investigation and Systems Modeling of Acute Illness (CRISMA) Center, Department of Critical Care Medicine, University of Pittsburgh School of Medicine, Pittsburgh, PA 15261, USA. 4Department of Health Policy and Management, University of Pittsburgh Graduate School of Public Health, Scaife Hall Room 602-B, 3500 Terrace Street, Pittsburgh, PA 15261, USA.

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doi:10.1186/cc10217 Cite this article as: Terwiesch C, et al.: Working with capacity limitations: operations management in critical care. Critical Care 2011, 15:308.