Application of portfolio theory to healthcare capacity management

Paper in proceeding, 2020

Healthcare systems worldwide are faced with continuously increasing demand for care, while simultaneously experiencing insufficient capacity and unacceptably long patient waiting times. To improve healthcare access and availability, it is therefore necessary to improve capacity utilization and increase the efficiency of existing resource usage. For this, variations in healthcare systems must be managed judiciously, and one solution is to apply a capacity pooling approach. A capacity pool is a general, collaborative capacity that can be allocated to parts of the system where the existing workload and demand for capacity is unusually high. In this study, we investigate how basic mean-variance methodology from portfolio theory can be applied as a capacity pooling approach to healthcare systems. A numerical example based on fictitious data is used to illustrate the theoretical value of using a portfolio approach in a capacity pooling context. The example shows that there are opportunities to use capacity more efficiently and increase service levels, given the same capacity, and that a mean-variance analysis could be performed to theoretically dimension the most efficient pooling organization. The study concludes with a discussion regarding the practical usefulness of this methodology in the healthcare context.