Situation

A hospital is trying to decide how many new rooms to add to a new wing they are building. Each new room will contain one bed.

There are currently 100 rooms. They are considering adding anywhere from 100 to 500 additional rooms. We need to build a model that will help the hospital determine how many new rooms to add.

Fixed Cost

Each new room will cost $80,000 for construction and equipment costs.

Demand

Over the last few years, the weekly number of rooms occupied (or you could also think of this as 'number of patients' per week) has been normally distributed with an average of 150 and a standard deviation of 75.

In addition to the historic demand described above, the only other hospital in town is closing down, and it is expected that this will dramatically increase the number of patients (or rooms occupied) per week. We don't have a good estimate of how many to expect -- We will assume that we could see anywhere from 100 to 300 additional patients per week. HINT: Model this as a uniform distribution where all integer values within that range are equally likely to occur.

Variable Costs

There are times when the number of patients exceeds the number of available beds. When this happens, the hospital is forced to send excess patients to another hospital in the area. Each time this happens, there is a transfer cost of $10,000 in ambulance and other emergency services.

Each bed occupied by a patient requires a weekly maintenance expense of $800 to cover costs for maintenance andrestocking medical supplies. (Unused rooms/beds don't contribute to variable costs for the week. This cost is applied to all newandexisiting rooms/beds)

Build a model that will allow you to simulate 52 weeks of patient/bed demands.

Simulation

Use the model to estimate the costs of construction plus the variable expenses outlied above. Simulate your model showing the costs for adding 100 to 500 new rooms, in increments of 50. Using a data table, run 1000 iterations of your model.

Analysis

To compare the decision options, calculate the average, standard deviation, minimum, and maximum of total 52 week cost for each. A template has been set up on the Analysis worksheet for these calculations.