Course Level: Beginner
Format Requirements: The course will be lecture-based with in-class exercises and discussions. No prerequisites for participation.
Background: Understanding how to create, test and analyze revenue management models in the context of healthcare financing, whether for for-profit or not-for-profit healthcare providers (in particular hospitals) or for payers, will help healthcare professionals contribute to the decision-making process in their organizations in a more informed way. The primary focus of this course will be on how to set prices in an optimal manner in order to best fulfill the organization’s mission, including not-for-profit organizations. The skills gained in the course, such as price optimization, strategy evaluation and model simulation, can be used either for participants to create ad-hoc models or to evaluate the models proposed by outside revenue management consultants.
Description and Objectives: This course will introduce course participants to the basics of revenue management as relevant to healthcare financing, including estimation of price response functions, decision-making under competition, price optimization and modeling of uncertainty in price response functions and competitors’ behavior. It will also discuss tractability of the resulting optimization models, simulation of random variables such as claims amounts, and provide a questions checklist to better communicate with, and analyze the deliverables of, revenue management consultants. The course will be well-suited for both for-profit and not-for-profit healthcare organizations and will help either understand how to set prices (of procedures or of insurance plans) in order to fulfill their missions.
Upon completion of the course, participants will be able to:
- Use revenue management techniques in a manner well-suited to the goals of their organization, whether for-profit or not-for-profit,
- Have a basic understanding of the process used to develop and implement revenue management approaches in a manner relevant to their organization,
- Discuss possible price response functions (describing customers’ choice as a function of price as well as other health plans attributes) including linear and logit models, and their fitting to historical data, as well as explain consequences in terms of mathematical problem tractability, real-life accuracy and other metrics,
- Discuss how to test a model by splitting historical data into a training dataset, used to calibrate a model, and a testing dataset, used to test the calibrated model on the remaining data,
- Formulate the resulting optimization models and describe the tools available to solve them as well as any challenges resulting from the problem structure or its size,
- Provide participants with a checklist to hold informed discussions with revenue management consultants by using a systematic framework encompassing all stages of the decision-making process.