ahp case 01 hospital location

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Outline

1. Introduction

2. Literature review

3. AHP methodology

4. Case implementation

5. Selecting the optimal location of hospitals to

ensure a competitive advantage6. Conclusions


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Implementation of the National HealthInsurance scheme in Taiwan since 1995 hasintensified competition in the local medicalsector.

Given elevated living standards islandwide,

Taiwanese residents have become more healthconscious and attach increasing importance toquality healthcare. Heightened consumer demand in the quality and

scope of medical services.

Introduction


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Introduction

The medical service sector has improved itsorganizational structure and encouragedhospitals to establish management practices thatwould increase their competitiveness.

In such an intensely competitive environment,

selecting the optimal location of hospitals to beestablished is of priority concern.


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Introduction

In considering where to select a location, besideslegislation restrictions, policymakers andbusiness groups seldom consider how selectingthe optimal location during the decision-makingprocess could possibly affect its competitiveness.


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Introduction

Health plan of 1984 .. & Aging -> more newhospitals ->fierce competition in medical servicesector->impact of wrong location decision

Selecting the optimal location for a hospital interms of competitiveness involves the various

hospital types in Taiwan, devising appropriateevaluation criteria and categorizing hospitalsaccording to those evaluation criteria.


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Introduction

Despite the considerable attention paid toselecting an optimal location for medical carefacilities, establishing a hospital must strictlycomply with governmental regulations, oftencausing decision makers to overlook the

importance of selecting an optimal location.


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Introduction

This study adopts the renowned diamond modelintroduced in Porters The CompetitiveAdvantage of Nations (1990) that influences howcompetitive advantages, especially with respectto developing and evaluating the objectives of

optimal location selection, are related in order todevise a standardized operational procedure.


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Introduction

Besides a literature reviewand interviewswith experts, this study also adopts themodified Delphi method, the analytichierarchy process (AHP) and thesensitivity analysis to develop an evaluation

method for selecting the optimal location of aregional hospital in Taiwan to determine itseffectiveness.


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Introduction

The proposed evaluation criterion provides avaluable reference for hospital administratorsand academic in establishing a standardizedmeans of selecting the optimal location for newmedical care facilities.


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Literature review

Porters diamond model

Porters diamond model comprises six elements;four country-specific determinants (i.e. Factorconditions, Demand conditions, Firm strategy,structure and rivalry and Related and supporting

industries) and two external variables, (i.e.chance and government).


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Literature review

Location theory

Weber (1909) proposed the position problems ofa factory. Early location theory focused mainlyon the production of raw materials and selling tomarkets in order to determine a factorys

optimal position by minimizing transportationcosts.


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Literature review

Plant location research can be categorized intothree perspectives such as:

1. Prescriptive, i.e. how to make plant-location-related decisions.

2. Nation-based, i.e., what a nation should do

to attract overseas firms to locate domestically3. Customer-based business, i.e. what criteria

are adopted to make plant-location-relateddecisions


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AHP Methodology

Skipped. Please refer to the original paper:

Wu, C.-R., Lin, C.-T., & Chen, H.-C. (2007).

Optimal selection of location for Taiwanesehospitals to ensure competitive advantage byusing the analytic hierarchy process andsensitivity analysis.Building and Environment

42, 1431-1444.


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Case implementation

An AHP-based evaluation model can bedeveloped for selecting the optimal location of

hospitals to ensure a competitive advantage viathe following steps:

Step 1: Define the evaluative criteria forselecting the optimal location of hospitals toensure a competitive advantage.


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Case implementation

Step 2: Establish a hierarchical structure. On thebasis of the modified Delphi method, acquire

important indicators into a hierarchy ofinterrelated decision elements, including goal,criteria, sub-criteria and alternatives.


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Case implementation

Step 3: Establish the pair-wise comparisonmatrix. Each decision maker makes a pair-wise

comparison of the decision elements and assignsthem relative scores.

Step 4: Calculate the eigenvalue and eigenvectorof each pair-wise comparison matrix.


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Case implementation

Step 5: Test the consistency of each comparisonmatrix.

Step 6:Aggregate the related scores provided byall decision makers using the geometric mean

method, and then estimate the relative weightsof the relative weights of the weight of theelements of each level.


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Case implementation

Step 7: Combine the relative weights of theelements of each level to select the optimal

location for hospitals to ensure a competitiveadvantage.

Step 8: Sensitivity analysis of three locationselection areas under six criteria.


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Case implementation

According to governments data, among thesethree geographical position, Taiping City is the

biggest land area. The most of populationnumber is in Dali City. The east district ofTaichung City was economically developed andmetropolis lively area.

So, the selective regions for establishing hospitalcan be considered East district of Taichung City,Taiping City, and Dali City.


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Case implementation


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Selecting the optimal location of hospitals

to ensure a competitive advantage Step 1: Define the evaluative criteria and sub-

criteria used to select the optimal location ofhospitals to ensure a competitive advantage. The modified Delphi method is applied to define

the evaluation criteria and sub-criteria. Murry and Hammons (1995) suggested that the

modified Delphi method must summarize expert

opinions on a range from 10 to 30. Seventeen hospital administrators and academics arethen issued a preliminary questionnaire in which sixevaluation criteria and 18 evaluation sub-criteria are incorporated.


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to ensure a competitive advantage

1. Factor conditions(1) Capital: for building a hospital capital is required.

(2) Labor: demand for hospital personnel, including

physicians, pharmacists, healthcare personnel,dieticians, registered professional nurses, medicalequipment technicians, medical care talent, as wellas the quality and quantity of specialized talentedindividuals.

(3) Land: how the land obtained will affect the cost;the plan as to how the land is used; and theappropriate disposition to avoid a situation inwhich land is unavailable when hospital expansion

occurs in the future.


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2. Demand(1) Population number: the demand for medical

services varies according to the local population.For instance, the demand for medical services is

greater in metropolitan areas than in rural areas.(2) Population density: hospital scale and rank(district hospital, regional hospital and medicalcenter) must correspond to the population densityof the region, such as Taipei with a highly densepopulation.

(3) Population age distribution: type of illness ofhospital patients (acute, chronic, faculty orsynthesis) must correspond to the distribution ofpopulation age. For instance, ex, the area with lowratio of old age population suits to set up the

women and children hospital.


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3. Firm strategy, structure and rivalry(1) Management objective: hospital administrators establish

a mission for the hospital to continue management practices.

(2) Rank of competing: medical centers, regional hospitals

and district hospitals for both Western and Chinesemedicine, depending on their number and scale, affect howhospitals rank in position.

(3) Policymakers attitude: individuals include the board ofdirectors (administrators), consultants (including hospital

management and financial personnel) and other relatedprofessionals such as architects have opinions towardsmanagements style, such as an authoritative or a benevolentone.


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to ensure a competitive advantage4. Related and supporting industries(1) The medicine practice and the pharmaceutical

sector: the medicine practice includes biochemistrytechnology, cultivation of medical personnel andrelated industrial development. The pharmaceuticalsector includes medical instrumentation,pharmaceuticals and medicinal preparation, medicinalcosmetics and related industrial development.

(2) Hospital administration sector: this area includesmanagement consultants, the information technology

industry, material flow and related industrialdevelopment.(3) The healthcare sector: this area involves sustaining

community health, home caregivers, long-term care,residential caregivers, the insurance sector and relatedindustrial development.


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to ensure a competitive advantage5. Government

(1) Qualifications of the hospitals establishment and theregulations of the established standard: this areaincludes establishment of the hospital. After health authorities

approve the hospital, the construction license can be appliedfor, along with related governing laws complied with.(2) Efforts to promote a medical network: in order to

promote the medical resources balanced development, thedivision medical service region, and establishes the graduationmedical service formulation. For example, lacking the regionsto the medical resources and rewarding the folk to establishmedical organizations.

(3) Promulgating tasks that require a hospitalsassessment: to strengthen the business management ofhospitals and guarantee the quality of medical service,establishing a graded medical system will influence whetherindividuals seek a physician.


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to ensure a competitive advantage6. Chance

(1) Violent change in market demand: anincreasing population in this region has increasedboth hospital bed capacity and the number ofillnesses, e.g., SARS, subsequently creating adramatic fluctuation in the demand for the localmedical market.

(2) Dramatic fluctuations in production costs:this includes the global rise in the price of steeland iron or events such as an energy crisis.

(3) Significant changes in the financial marketand exchange rate: fluctuations in the debtcredit interest rate of banks or the influence ofglobal currency values incur changes in the cost ofmedical instrumentation and pharmaceuticals.


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Step 2: Establish a hierarchical structure


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Selecting the optimal location of

hospitals to ensure a competitiveadvantage Step 3: Establish the pair-wise comparison matrix

Purposive sampling is applied to sample 13 respondentsfrom various hospital administrators and academics.

The weights of level 2 criteria and level 3 sub-criteria arethen determined for a sample group of 13 individualsmatching the above characteristics with each respondent,

making a pair-wise comparison of the decision elementsand assigning them relative scores.

The relative scores provided by 13 experts are aggregatedusing the geometric mean method.


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hospitals to ensure a competitiveadvantage

Table . Aggregate pair-wise comparison matrix for criteria of level 2

Goal Factor DemandFirm

strategy

Related and

supporting

industries

Government Chance weight

Factor 1.000 0.380 0.408 3.706 0.318 2.266 0.121

Demand 2.632 1.000 0.907 4.696 0.608 3.061 0.223

Firm strategy 2.453 1.102 1.000 4.318 0.682 2.985 0.227

Related and

supporting

industries

0.270 0.213 0.232 1.000 0.2444 0.305 0.046

Government 3.148 1.645 1.466 4.099 1.000 3.378 0.296

Chance 0.441 0.327 0.335 3.275 0.296 1.000 0.086

max 6.211571; CI=0.042314; RI=1.24; CR=0.034124 0.1


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hospitals to ensure a competitiveadvantage Step 4 : Calculate the eigenvalue and eigenvector

Step 5 : Results of the consistency test and theCR of the comparison matrix from each 13experts are all 0.1, indicating consistency.


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Factor Capital Labor Land weight

Capital 1.000 2.261 1.414 0.464

Labor 0.442 1.000 0.587 0.201

Land 0.707 1.704 1.000 0.335

max3.000449332; CI=0.000224666; RI=0.58; CR=0.000387355 0.1

max6.211571; CI=0.042314; RI=1.24; CR=0.034124 0.1 max 6.211571; CI=0.042314; RI=1.24; CR=0.034124 0.1


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Eigenvalue and CR

Factor

max

=3.00044; CI=0.00022; RI=0.58CR=0.0003870.1

Demandmax=3.00013; CI=0.000669; RI=0.58CR=0.0011540.1

Firm strategymax=3.00116; CI=0.000584; RI=0.58CR=0.0010073770.1

Related and supportingindustries

max=3.000972; CI=0.000486; RI=0.58CR=0.0008380.1

Governmentmax=3.00534; CI=0.00267; RI=0.58CR=0.0046060.1

Chancemax=3.00128; CI=0.000643; RI=0.58

CR=0.001108

0.1


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Step 6 : Estimate the relative weights of the

elements of each level.

Step 7 : Calculate the weights of overall levels

Step 8:Sensitivity analysis of three locationselection areas under six criteria


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Sensitivity analysis The performance graph displays how the

alternatives perform with respect to the change

in scenario of all parameters.

East district of Taichung city

Taiping cityDali city


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Sensitivity analysis Performance sensitivity of alternatives when

related and supporting industries (Rsi) is

increased by 25%


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Change (Ca) is increased by 30%


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Government (Gv) is increased by 20%


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Criteria Sub-criteriaWeights of sub-

criteriaEast district ofTaichung city Taiping city Dali city

Factor

Capital 0.464 0.239 0.137 0.624

Labor 0.201 0.51 0.127 0.364

Land 0.335 0.616 0.118 0.267

Synthesis

0.42

0.129

0.452

Demand

Population number 0.197 0.25 0.123 0.627

Population density 0.274 0.552 0.119 0.329

Population agedistribution

0.529 0.504 0.128 0.368

synthesis 0.467 0.125 0.408

Table. Eigen vectors and weights of three location selection areas under 18 sub-criteria


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criteriaEast district ofTaichung city

Taiping city Dali city

Firm strategy

Management object 0.166 0.24 0.129 0.631

Rank of competinghospitals

0.266 0.55 0.124 0.326

The healthcaresector

0.568 0.57 0.11 0.319

Synthesis 0.51 0.117 0.373

Related andsupportingindustries

The medicinepractice and the

pharmaceuticalsector

0.42 0.548 0.113 0.338

Hospitaladministration

sector0.287 0.565 0.121 0.314

The healthcaresector

0.293 0.296 0.133 0.571

Synthesis 0.479 0.121 0.399


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criteriaEast district ofTaichung city

Taiping city Dali city

Government

Qualifications of the

hospitals establishmentand the regulations of

the established standard

0.563 0.586 0.111 0.303

Efforts to promote amedical network

0.196 0.499 0.133 0.368

Promulgating tasks thatrequire a hospitals

assessment0.242 0.332 0.143 0.526

Synthesis 0.508 0.123 0.37

Chance

Violent change inmarket demand

0.282 0.442 0.128 0.43

Dramatic fluctuations inproduction costs

0.403 0.584 0.112 0.304

Significant changes inthe financial market and

exchange rate0.314 0.369 0.145 0.486

Synthesis 0.476 0.127 0.396


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Conclusions Demand conditions, firm strategy, structure and

rivalry and government are high.

Goal The synthesis values

Factor conditions 0.121

Demand conditions 0.223

Firm strategy, structure andrivalry

0.227

Related and supportingindustries

0.046

Government 0.296

Chance 0.086


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Conclusions


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Conclusions Priorities of the three location selection areas arethe locations of the East district of Taichung city

(EDoTC), Dali City and Taiping City.

ahp case 01 hospital location

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