Contract Optimization at Texas Children's Hospital

Chris Born (), Monica Carbajal (), Pat Smith (), Mark Wallace (), Kirk Abbott (), Surain Adyanthaya (), E. Andrew Boyd (), Curtis Keller (), Jin Liu (), Wayne New (), Tom Rieger (), Bert Winemiller () and Ron Woestemeyer ()
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Chris Born: Texas Children's Hospital, 1919 South Braeswood, MC 4-8300, Houston, Texas 77030
Monica Carbajal: Texas Children's Hospital, 1919 South Braeswood, MC 4-8300, Houston, Texas 77030
Pat Smith: Texas Children's Hospital, 1919 South Braeswood, MC 4-8300, Houston, Texas 77030
Mark Wallace: Texas Children's Hospital, 1919 South Braeswood, MC 4-8300, Houston, Texas 77030
Kirk Abbott: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Surain Adyanthaya: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
E. Andrew Boyd: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Curtis Keller: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Jin Liu: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Wayne New: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Tom Rieger: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Bert Winemiller: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002
Ron Woestemeyer: PROS Revenue Management, 3100 Main Street, Suite 900, Houston, Texas 77002

Interfaces, 2004, vol. 34, issue 1, 51-58

Abstract: In 1998, faced with mounting financial pressure, Texas Children's Hospital found its mission in jeopardy. Payors sought to reduce expenditures, while physicians wanted to provide the highest quality patient care, research, and teaching. Working with PROS Revenue Management, the hospital spearheaded an initiative to bring greater analytic capabilities to administrative operations, initially focusing on optimizing the performance of contracts with insurers because of the potential revenue leverage. It did so by (1) quantifying expected future demand through forecasting, (2) establishing risk as an important means of measuring contract performance, and (3) embedding the underlying Bayesian forecasting and nonlinear optimization models in a software system that supports the daily activities of contract negotiators. Direct benefits include revenue improvements of up to $17 million annually on contracts renegotiated with use of the PROS technology. The project's initial success has spawned efforts to improve the hospital's planning and operational activities. With a system designed for transfer to other hospital settings and possible enhancement of the diagnosis-related group (DRG) classification system through the use of patient pathways, the health-care optimization technology has the potential for broad impact in the industry.

Keywords: health care: hospitals; forecasting: applications (search for similar items in EconPapers)
Date: 2004
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