Wednesday, September 11, 2013

Nurse, Can You Pass The Bullwhip? Demand Distortion in Emergency Rooms

Traditionally, industry research has focused on studying the 'bullwhip effect' across manufacturing industries.  Less attention has been focused on service sectors.  The healthcare industry is an example of a service sector that is affected by variations in consumer demand. 

Many worry that there is a shortage of healthcare providers.  Emergency Rooms (ERs) are particularly vulnerable to fluctuations in demand for medical services.  Currently, many patients use ERs as their default care provider.  The high demand for ER services may cause hospital executives to allocate more resources in order to meet demand.  Healthcare reform is focused on alleviating this problem by focusing on the need for primary care and outpatient services as a way to ease the burden on ERs.  However, sudden outbreaks of diseases like swine flu, traumatic events that result from environmental disasters and man-made catastrophes can lead to a sudden spike in the demand for these services.  This demand spike can have a 'bullwhip effect' on how healthcare managers handle their supply of providers.

Specifically, this fluctuation or spike in demand for services may lead executives to react by hiring more ER physicians and related providers.  This spike in supply of providers may lead to under-utilized providers after the temporary situation has passed.  In the meantime, resources may have been depleted in other areas to accommodate the needs of the crisis situation.  Also, the oversupply of ER providers comes at a higher cost to the facility.  These are examples of disruptions to the supply of providers that take place downstream as a result of the volatile shift in patient demand.

Many extol the virtues of lean methodologies like Six Sigma and Toyota Process System as methods to hedge against this demand volatility.  Retail clinics are also developing to redistribute medical care towards outpatient services.  "Some of the most current trends showing promise are found in retail healthcare," noted Wince. "Minute Clinic, NextCare Urgent Care and other retail convenience care clinics provide nurse practitioners in place of physicians with great success. While the scope of services provided is more limited, we find that some of the higher volume medical conditions that are currently being treated in EDs can be treated in this way. Another concept from the Lean toolbox is to segment complexity."  ( 

Like the manufacturing industry, service industries like healthcare are vulnerable to distortions in consumer demand.  Measures must be taken to forecast demand in order to avoid disruptions to the supply chain. 

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