Simulation

Chapter 10.
Simulation
An Integrated Approach to
Improving Quality and Efficiency
Daniel B. McLaughlin
Julie M. Hays
Healthcare Operations
Management
Copyright 2008 Health Administration Press. All rights reserved. 10-2
Chapter 10. Simulation
Uses of Simulation
Simulation Process
Monte Carlo Simulation
Queueing (Waiting Line) Theory
Discrete Event Simulation (DES)
Advanced DES
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
Types of Simulation
Performance
Proof
Discovery
Entertainment
Training
Education
Prediction

Simulation Process
Model development
- Define the problem or question
- Develop the conceptual model
- Collect data
- Build computer model
Model validation
Simulate and analyze output
Simulation Process
Model
Development
Problem/
question
definition
Develop
conceptual
model
Collect data
Build
computer
model
Model
Validation

Quantitative
comparison
Expert opinion
Simulation and
Analyses

DOE
Replication
Data
collection,
storage, and
organization
Analysis

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
Simple Monte Carlo Example
Distribution of Charges
Charges $
20.00 $
30.00 $
40.00 $
50.00 $
60.00 $
70.00 $
80.00 $
90.00 $
100.00 $
110.00 $
120.00 $
Total 360
Average 70.00 $
30
20
10
Number of Patients
(Frequency)
50
60
50
40
10
20
30
40
0
10
20
30
40
50
60
70

$
2
0
.
0
0

$
4
0
.
0
0

$
6
0
.
0
0

$
8
0
.
0
0

$
1
0
0
.
0
0

$
1
2
0
.
0
0

Charges
N
u
m
b
e
r

o
f

P
a
t
i
e
n
t
s

(
F
r
e
q
u
e
n
c
y
)
Fifty percent of the
clinics patients do not
pay for their services,
and it is equally likely
that they will pay or not
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
0
0.1
0.2
0.3
0.4
0.5
0.6
Pay Do Not Pay
P
r
o
b
a
b
i
l
i
t
y
Payment Distribution
Trial
#
Coin
Flip Payment
Die
Total Charges
Patient
Payment
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 $ - $
9 H 1 9 90.00 $ 90.00 $
10 T 0 10 100.00 $ - $
$- $60.00 $110.00
Payment
N
u
m
b
e
r

o
f

T
r
i
a
l
s
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.
VVH Monte Carlo Example
CAP Payment Distribution
Created with BestFit 4.5, a software product of Palisade Corp., Ithaca, NY; www.palisade.com
Input Distributions
Probability Distribution of Cost of Reaching a
Score Greater Than 0.90
$10,000 $30,000 $50,000
Cost of Reaching a Score Greater Than 0.90
P
(
X
)

Probability Distribution of Quality Scores
0
0.02
0.04
0.06
0.6 0.7 0.8 0.9
Quality Score
P
(
X
)

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
CAP Pay-for-Performance Simulation Trials
Created with @Risk 4.5, a software product of Palisade Corp., Ithaca, NY; www.palisade.com
@RISK Data Report
Data
Output
Revenue/
Month
Revenue/Year
Quality
Score
Costs/
Year
Profit =
Revenue
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) $
Simulated Distribution of Profits
Created with
@Risk 4.5, a
software product
of Palisade Corp.,
Ithaca, NY;
www.palisade.com
Tornado Graph
Regression Sensitivity for Profit = Revenue -
Costs/H14

Std b Coefficients

Revenue/Month 12/T14 .097
Costs/Year/G14 -.414
Quality Score/D14 .815
@RISK Student Version
For Academic Use Only
-1 -0.75 -0.5 -0.25 0 0.25 0.5 0.75 1
Created with
@Risk 4.5, a
software product
of Palisade Corp.,
Ithaca, NY;
www.palisade.com
Simple Queueing System
Customer populationfinite or infinite
Arrival processoften Poisson with mean arrival rate
Queue disciplinefirst come, first served (FCFS) is one
example
Service processoften exponential with mean service rate

Arrival
Customer
Population
Input
Source

Buffer or
Queue
Server(s)
Exit
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
- Exponential service time
distribution
- Single server
- Infinite possible queue
length
- Infinite input population
- Only one queue
Queueing Solutions
M/M/1, <
Capacity utilization
= Percentage of time the server is busy

Average total number of customers in the
system =

= Arrival rate time in the system
arrivals between time mean
time service mean
time service 1/mean
arrivals between time mean 1
rate service mean
rate arrival mean
= =
= = =
s s
W L

=
Queueing Solutions
M/M/1, <
Average waiting time in the queue

Average time in the system
= Average waiting time in the queue + Average
service time
=
Average length of the queue (or average number in
the queue)
) (

= =
q
W

= + =
1 1
q s
W W
|
|
.
|
\
|
|
|
.
|
\
|
=
= =

) (
2
q
L
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 ()
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

% 75
4
3
= = = =
% 75
minutes 20
minutes 15
1
1
= = = =

Average time waiting in line

Average time in the system

Average total number of patients in the
system or
= Arrival rate Time in the system
= 3 patients/hour 1 hour
= 3 patients
hours 5 7 0
4
3
3 4 4
3
.
) ( ) (
= =
= =

q
W
hour 1
3 4
1 1
=
= =

s
W
patients 3
3 4
3
=
= =

s
L
Average number of patients waiting in line =

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
patients 2.25
4
9
) 3 4 ( 4
3
3 4
3
4
3
) (
2 2
= =
=
|
.
|
\
|
|
.
|
\
|
=
|
|
.
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\
|
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.
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|
=

q
L
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.
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.

DES
Random Data
1 2 3 4 5 6 7 8 9
0.17 0.37 0.36 0.59 0.14 0.17 0.24 0.06 0.35
0.17 0.54 0.90 1.49 1.63 1.80 2.04 2.10 2.45
0.21 0.56 0.02 0.37 0.34 0.11 1.02 0.01 0.20
Entity Number
Expon
(0.33)
Expon
(0.25)
Service
Time
Inter-arrival
Time
Time of
Arrival 0.00
DES
Simulation Event List
Upcoming
Events Statistics Attributes Variable
Just Finished
Event
E
n
t
i
t
y

#
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v
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y

#
T
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E
v
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n
t
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
DES
Simulation Event List
Just Finished
Event
Upcoming
Events Statistics Attributes Variable
E
n
t
i
t
y

#
T
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v
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t
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#
T
i
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E
v
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n
t
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
DES
Arena Screenshot
Arena screen shots reprinted with permission from Rockwell Automation.
DESArena Output
Arrival rate = 3 patients/hour; Service rate = 4 patients/hour; 200 hours
DESArena Output
DESArena Output
DESArena Output
VVH Simulation
Current situationon average, 1.5 patients in
queue
Goal1.0 patients in queue
Solutiondecrease 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
DESArena Output
Arrival rate = 2.8 patients/hour; Service rate = 4.2 patients/hour; 10 hours
DESArena Output
Arrival rate = 2.8 patients/hour; Service rate = 4.2 patients/hour; 10 hours
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.

Simulation

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Chapter 10.

Copyright 2008 Health Administration Press. All rights reserved. 10-24

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