This paper describes a case-based MBA elective Health Care Operations (HCO) developed by an instructor

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1 Vol. 10, No. 3, May 2010, pp issn informs I N F O R M S Transactions on Education doi /ited INFORMS Teaching Health-Care Operations in the MBA Program at Vanderbilt University Owen Graduate School of Management Michael A. Lapré Owen Graduate School of Management, Vanderbilt University, Nashville, Tennessee 37203, michael.lapre@owen.vanderbilt.edu This paper describes a case-based MBA elective Health Care Operations (HCO) developed by an instructor without prior education, consulting, or research experience in the health-care field. HCO helps MBA students analyze health-care organizations using both qualitative and quantitative principles of operations management. The course outline covers (1) designing health-care delivery systems, (2) capacity planning and decision making under uncertainty, and (3) process failure, learning, and improvement. The paper identifies challenges faced in the design and delivery of the course as well as lessons learned. I hope that this paper will be useful for other instructors who want to teach health-care operations. Key words: health-care operations; health-care delivery systems; asset-oriented processes; disease-oriented processes; focused processes; process analysis; capacity planning; R&D portfolio management; problem solving; Toyota production system; customer defection; ramp-up manufacturing History: Received: June 30, 2009; accepted: January 18, Introduction This paper describes a case-based MBA elective, Health Care Operations (HCO), that I developed and taught for the first time in fall 2008 at the Owen Graduate School of Management at Vanderbilt University. When I started designing HCO, I had almost no expertise in health care. However, aided by the wealth of readings and cases, I delivered a course that was well received by students who were more knowledgeable about the health-care context. Most of the students had already taken several health-care courses in the Health Care MBA program and had significant experience working in the health-care industry. The Vanderbilt Health Care MBA program is a specialization within the regular MBA program. Health Care MBA students take the same core courses with the students in the regular MBA program. Students also select a functional concentration such as operations, marketing, or finance. Finally, students complete a healthcare industry specialization. The past few years, the MBA program has averaged 180 students. In 2007, 18 students graduated with the health-care specialization. One year later, that number doubled to 36. In 2007, 13% of the entire graduating class found jobs in health care. In 2008, 33% of the graduating class started their careers in the health-care industry. The increase in health-care placements has been mirrored by increased enrollments in health-care MBA courses. From 2006 to 2008, the number of students enrolled in health-care MBA courses increased by 90%. When I developed HCO, Owen was already offering over a dozen health-care MBA electives, such as Health- Care Delivery and Insurance, Health-Care Marketing, Health-Care Entrepreneurship, etc. The missing elective was Health Care Operations, prompting me to design HCO. Although most of the students enrolled in HCO are health-care MBA students, several operations concentrators, as well as students seeking a career in consulting, also take HCO. In 2008, 20 students enrolled in HCO. For 2009, the HCO enrollment is currently at 32 students. The health-care industry is large and growing. In the United States, the health-care sector accounts for 17% of gross domestic product. Critical issues and challenges facing the health-care industry include rising costs, increasing demand, increasing complexity, dwindling supply of staff, and pressure to reduce medical errors (Bohmer and Knoop 2007). At the same time, reimbursements for hospitals have declined significantly. Lower revenues have led to unprecedented pressure to (i) see more patients, and/or (ii) reduce costs just to break even (Mango and Shapiro 2001). 113

2 114 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS Such pressures make it imperative to improve efficiency. As a result, operations management has become critical for health-care organizations. Mango and Shapiro (2001, p. 77) note Stocks and flows, queuing theory, just-in-time processes all of the notions associated with the factory floor are exactly what modern hospitals most sorely need. Consequently, HCO assumes that many operations management principles are very much applicable in the health-care context. Indeed, hospitals will rise or fall largely on the strength of operational performance (Mango and Shapiro 2001, p. 77). 1 The learning objectives of HCO are: (1) introduce students to a variety of health-care organizations, (2) allow students to analyze operational issues in health-care organizations using both qualitative and quantitative principles of operations management, and (3) practice formulating solutions to operationalbased problems in health-care organizations (while working in teams). This paper is organized as follows. Section 2 discusses the choice and sequence of topics covered. Section 3 describes the course requirements. Section 4 discusses the fit of HCO in the Vanderbilt MBA curriculum. Section 5 concludes with a discussion of challenges and lessons learned in the development and teaching of HCO. 2. Choice and Sequence of Topics For the general course outline, I chose a structure that has worked well for me in a case-based elective on management of service operations. The topics are organized according to the three fundamental decisions of design, operate, and improve (Gray and Leonard 2007). First, you design a process; next, you operate the process on an ongoing basis; and finally, you work to improve the process. HCO demonstrates that principles of operations management apply to health-care organizations in all three phases of designing, operating, and improving processes. The three corresponding parts in HCO are: (i) designing healthcare delivery systems, (ii) capacity planning and decision making under uncertainty, and (iii) process failure, learning, and improvement. In each part of the course, I have selected cases to illustrate the application of relevant operations management principles in a health-care context. The design part focuses on designing processes in hospitals. The operate and improve parts use both hospital and nonhospital cases. This choice does not imply that designing processes in nonhospital settings are not important. This 1 In addition to Bohmer and Knoop (2007) and Mango and Shapiro (2001), I recommend Bohmer (2000), Tucker and Edmondson (2003), and Spear (2005). These five readings provide a good starting point for prospective instructors to get up to speed with respect to health-care operations issues. choice is based on the availability of interesting, relevant, and timely cases. Table 1 shows the overview of the course. The case settings include different types of health-care organizations such as general hospitals (teaching and nonteaching), focused clinics for elective surgery, biotechnology firms (both manufacturing and drug development), retail pharmacy chains, and contact lens manufacturers. This variety of healthcare organizations has several benefits. First, MBA graduates end up working in a variety of health-care Table 1 Topic Course Overview and Cases Case and operations management concepts Part I Introduction Introduction lecture Part II Designing health-care delivery systems Asset-oriented processes Instituto Clinico Humanitas (A) (Bohmer et. al. 2006) Little s law; ensure flow and demand; reduce variability Disease-oriented processes Intermountain Health Care (Bohmer and Edmondson 2006) System to define, implement, and monitor best practice; learning system Focused processes Shouldice Hospital Limited (Heskett and Hallowell 2005) Focused factory; Strategic Service Vision Part III Capacity planning and decision making under uncertainty Process analysis Weight Solutions Clinic: Bariatric Surgery Center (Chopra and Savaskan 2004) Process flow; yield; throughput time; system capacity; bottleneck Capacity planning Genentech Capacity planning (Snow et. al. 2006) Match capacity to uncertain demand; make to stock; sensitivity analysis R&D portfolio management Vertex Pharmaceuticals: R&D Portfolio Management (A) (Pisano et. al. 2006) Project selection vs. portfolio management; vertical integration; risk Part IV Process failure, learning, and improvement Problem solving Patient Flow at Brigham and Women s Hospital (A) (Tucker and Berry 2008) Process failure; persistence of nonoptimal routines; levers for change Toyota production system Virginia Mason Medical Center (Bohmer and Ferlins 2006) Heijunka; Jidoka; Kaizen; supporting organizational context Customer defection Pharmacy Service Improvement at CVS (A) (McAfee 2006) Economics of customer defections; quality; variability; process redesign Ramp-up manufacturing Sof-Optics, Inc. (B) (Jaikumar 1991) Impact of technology choices on costs, learning curves, and expansion Part V Project presentations Project presentations

3 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS 115 organizations. Second, regardless of the health-care organization an MBA graduate ends up working in, it is beneficial to have exposure to different types of organization that interact with a graduate s organization. Third, exposure to multiple health-care organizations can be rather beneficial for graduates who end up in health-care consulting Designing Health-Care DeliverySystems Most general health-care delivery systems have multiple assets (physician services, operating rooms, beds, labs, etc.) to take care of patients with multiple diseases. There are two fundamentally different ways to design clinical processes: the asset-oriented approach and the disease-oriented approach (Bohmer 2003). The main difference between the asset-oriented and disease-oriented approaches is akin to functional versus cross-functional management. The assetoriented approach assumes a physician is like a commander-in-chief making medical decisions creating demand for assets (functions). These decisions are not managed by the organization. There is no attempt to integrate care in the sense of trying to understand what the best path is for patients with a particular disease. The organization focuses on managing capacity utilization of the various assets, trying to ensure flow, ensure demand, and reduce variability. The disease-oriented approach, on the other hand, focuses on developing a path for patients with each disease. The path dictates how patients flow through the facility, and the path (not the physician) determines the demand for assets. This approach is cross functional because the path ensures integration between the different assets. Furthermore, the organization monitors adherence to the specified path. Deviations from the path are a potential source of organizational learning to improve the path (and thus, care). The difference between the two approaches is also analogous to the difference between the static and dynamic approaches to operations management identified by Jaikumar and Bohn (1992). The asset-oriented approach is a good first step to applying static operations management principles leading to better efficiency. However, if the actual care isn t managed at the organizational level, benefits of the assetoriented approach can only take a hospital so far. To achieve further improvements, the actual care process needs to be improved, which is what the diseaseoriented approach aims to do. Therefore, dynamic operations management principles of organizational learning are required to improve a system so that patients from all physicians obtain best practice care. I use the archetype cases to teach the asset-oriented and disease-oriented approaches: Instituto Clinico Humanitas (A) (Bohmer et. al. 2006) and Intermountain Health Care (Bohmer and Edmondson 2006). Instituto Clinico Humanitas is a new forprofit private hospital. It has effectively used the asset-focused approach to become profitable a rarity among Italian private hospitals. The hospital is considering significantly expanding the small ER as well as affiliating with the University of Milan Medical School. Both options could reduce the hospital s profitability because they disrupt the well-designed operating system based on the asset-focused approach. Intermountain Health Care, an integrated system of 22 hospitals, has adopted the disease-oriented approach. It demonstrates the importance of developing and improving standard processes for control and learning, and how these processes work together to improve organizational performance. One way to reduce the tension between focusing on multiple assets versus multiple diseases is a focused approach. Focused factories (Skinner 1974) are becoming more popular in health care. I use the classic Shouldice Hospital Limited case (Heskett and Hallowell 2005) to teach the benefits of focus. Shouldice is a highly successful hernia repair clinic. Its carefully integrated strategic service vision has extreme focus in the target market as well as in its service delivery system. The case explores expansion options to deal with the ever-increasing backlog of patients arising from the success of its focused model. Instructors who want to include more sessions on health-care delivery design could consider Managing Orthopaedics at Rittenhouse Medical Center (Bohmer et. al. 2007) another case on focused factories. Two cases focusing on blending custom and standard care are QuickMedx, Inc. (Bohmer and Groberg 2003) and The Duke Heart Failure Program (Bohmer and Feldmans 2004) CapacityPlanning and Decision Making Under Uncertainty After the system design part, the class moves to the topic of operating a system on an ongoing basis. The first step is process analysis. The Weight Solutions Clinic: Bariatric Surgery Center case (Chopra and Savaskan 2004) was developed as a more advanced treatment of the process analysis issues raised in the often-used Kristen s Cookie Company (A) introduction case (Bohn 2007) for process analysis. The clinic conducts consultations and tests for obese patients. For patients who opt for weight loss through bariatric surgery, the clinic performs both open and laparoscopic surgery. Faced with long waiting times between testing and surgery, the clinic is considering capacity expansion. I use the Weight Solutions Clinic: Bariatric Surgery Center case to teach process flow mapping, yield calculations, throughput time, and system capacity. Analyzing system capacity is particularly rich in this case because assumptions on percentage of

4 116 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS patients paying with cash versus using insurance, as well as type of surgery (open versus laparoscopic), can shift the bottleneck. Likewise, capacity expansion options may or may not shift the bottleneck depending on these assumptions. Furthermore, I incorporate linear programming (with the MS Excel Solver) to determine capacity of one of the critical resources: Inpatient rooms for postsurgery stays. 2 With an increased appreciation of the intricacies of determining capacity in a static situation, I move to dynamic capacity planning: How to match capacity and increasing, uncertain demand over time? I use the Genentech-Capacity Planning case (Snow et. al. 2006) to teach capacity planning for a drug in the biotechnology industry. Faced with high demand and capacity uncertainty, Genentech needs to consider capacity expansion through outsourcing and/or building a new plant to meet future demand for Avastin and other related products. The case exposes students to (i) the impact of yield uncertainty on capacity, (ii) situations where capacity expansion comes in large chunks, (iii) capacity planning with long lead times and high uncertainty, (iv) the need to consider confidence intervals rather than point estimates, (v) inventory as flexible capacity in a maketo-stock environment, (vi) risks of contract manufacturing, and (vii) the need to conduct sensitivity analyses frequently. In the Genentech case, the company had already committed to a specific product. In many pharmaceutical and biotechnology companies, managers must figure out which products to pursue. For this purpose, I use the Vertex Pharmaceuticals: R&D Portfolio Management (A) case (Pisano et. al. 2006). Vertex is a biotechnology company that has successfully developed drugs in collaboration with GlaxoSmithKline. In the case, the company will select two out of four promising drug candidates for in-house development. The Vertex Pharmaceuticals: R&D Portfolio Management case introduces students to R&D project selection versus R&D portfolio management, vertical integration versus licensing, and behavioral implications of managing risks. Students build an appreciation for the need to balance quantitative criteria, such as real option valuation, and qualitative criteria, such as scientists preferences. At some point in the discussion, I make students pick two out of the four drug candidates. Student choices are all over the map of six possible pairs. This leads to a rich discussion of how portfolio management differs from project selection. How should one assess R&D portfolio risk? Faced with different types of risk (target, mechanism, molecule, market), should one diversify these 2 For other instructors, an Excel workbook with this linear programming component is available from the author upon request. risks? Minimize only certain types of risk? The takeaway from this discussion is that individual project selection techniques do not account for interactions between projects whereas those interactions are critical for portfolio management. There are two excellent cases to consider for further coverage of capacity and decision making under uncertainty. University Health Services: Walk-In Clinic (Maister 2006) is a great case for waiting-line analysis. Align Technology, Inc. Matching Manufacturing Capacity to Sales Demand (Bowen and Groberg 2002) provides further coverage of capacity planning Process Failure, Learning, and Improvement After the design and operate parts, the class tackles improving a system. Process failures in health care occur with a frequency that is orders of magnitude higher than in other industries. Chassin (1998) cites studies that showed that 79% of eligible heart attack survivors fail to receive beta blockers a treatment that has been shown to save lives; 58% of patients with clinical depression were not detected or treated adequately; 21% of antibiotics prescribed to ambulatory patients are used to treat colds, even though these antibiotics are useless for treating colds; and 1% of hospitalized patients were injured as a result of negligence. These percentages of process failures stand in stark contrast to those of manufacturers such as Motorola, General Electric, and Allied-Signal, who measure defects in parts per million, as opposed to percentages. Even compared to other service industries, Chassin (1998) notes that: At a defect rate of 20%, which occurs in the use of antibiotics for colds, the credit card industry would make daily mistakes on nine million transactions; banks would deposit 36 million checks in the wrong accounts each day; and deaths from airplane crashes would increase one thousandfold (p. 570). Furthermore, many healthcare organizations fail to learn from process failures (Tucker and Edmondson 2003). The day-to-day workload for health-care employees is often so high that they tend to work around problems. Faced with a problem, they engage in first-order problem solving patching the problem so that the immediate task at hand can be completed. Typically, there is no effort to engage in second-order problem solving addressing underlying root causes to prevent problems from recurring. As a result, nonoptimal routines persist. I use the Patient Flow at Brigham and Women s Hospital (A) case (Tucker and Berry 2008) 3 to expose students to organization s failure to learn. Brigham and 3 When I taught HCO in 2008, the name of the case was Patient Flow at Meldon Hospital (A). Since 2009, the name of the hospital has no longer been disguised.

5 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS 117 Women s Hospital is a renowned urban teaching hospital. The hospital is trying to improve the patient flow from the emergency department to the various intensive care units. A physician s well-intentioned describing process failures in two patient transfers generated strong negative backlash. The case teaches students about the persistence of nonoptimal routines even at renowned hospitals, reasons why nonoptimal routines persist, and challenges students to think about levers for change. Recently, the applicability of the Toyota Production System (TPS) to health-care has been getting more attention (Institute for Healthcare Improvement 2005). I use the Virginia Mason Medical Center (VMMC) case (Bohmer and Ferlins 2006) to teach the application of TPS principles in a hospital setting: Heijunka (level flow), Jidoka (solve problems when they arise), and Kaizen (continuous improvement). Central to Jidoka is stopping the line. At Toyota, employees are empowered to pull the Andon cord to stop the production line when a problem occurs. Stopping the line facilitates root-cause analysis. A critical challenge in implementing TPS in health care is creating a supporting organizational context (Spear 2005). VMMC provides a rare successful example. Faced with profitability, morale, and competition challenges, the medical center made a bold move by adopting TPS in response. Key elements to VMMC s success include governance reform, a no layoffs policy, transparency, and Japan study tours. At VMMC, the equivalent of stopping the line is a Patient Safety Alert. The commitment to provide resources to solve problems immediately was instilled and practiced by top management. Hart et. al. (1990) have noted: No business can afford to lose customers, if only because it costs much more to replace a customer than it does to retain one five times more, most industry experts agree (p. 149). Reducing customer defections is particularly critical in industries characterized by slim profit margins. In the pharmaceutical supply chain, the major pharmaceutical manufacturers had an average profit margin of 15% in 2005, whereas the downstream organizations had much smaller profit margins: distributors (2%), retail pharmacy chains (3%), and hospitals (4%) (Langabeer II 2008). So, for downstream organizations in the pharmaceutical supply chain, it is imperative to reduce customer defections as a consequence of poor service. However, service failures occur frequently. Flynn et. al. (2003) estimated that 51.5 million dispensing errors occured in pharmacies nationwide during the filling of 3 billion prescriptions each year. I use Pharmacy Service Improvement at CVS (A) (McAfee 2006) to teach economics of customer defections and process redesign to improve service. CVS is a large retail pharmacy chain. In the case, the biggest obstacle to growth is customer defections because of problems in the prescription fulfillment process. The case allows for a comparison of two target segments: Light and heavy users. The economics of customer defections demonstrates the importance of quantifying the value of different customers. The case also teaches that investments in service quality can be justified with calculations of lost revenue as a result of inferior service. Lastly, the case reinforces the importance of managing variability and applying Jidoka principles. Learning to improve the yields in manufacturing either in ramp-up or in full-scale production can be quite challenging (Lapré and Van Wassenhove 2003). The Sof-Optics, Inc. (B) case (Jaikumar 1991) concerns a young, small manufacturer of high-quality soft contact lenses. In a highly competitive, rapidly growing market, the company has made inroads with ophthalmologists and optometrists. Management focus shifts from marketing to production. Management is considering switching from an old, labor-intensive lathe production process to a new, capital-intensive molding process. The two processes have different yield learning curves. I use this case to teach the impact of technology choices on costs, learning curves, and capacity expansion. The case also exposes students to scientific experimentation on the factory floor. Several cases provide further coverage on process failure, learning, and improvement. Cincinnati Children s Hospital Medical Center (Tucker and Edmondson 2009) is a quality improvement case investigating a hospital s quest for becoming the best at getting better. The Deaconess-Glover Hospital (A) case (Spear and Kenagy 2005) provides further coverage on TPS in health care. Supply Chain Partners: Virginia Mason and Owens & Minor (A) (Narayanan and Brem 2009) explores process improvement in a medical supply chain. The case should be a good case to follow the Virginia Mason Medical Center case (Bohmer and Ferlins 2006), as I will discuss in the concluding section. 3. Course Requirements I use three components to determine grades: class participation (30%), written case analyses (30%), and a final project (40%). The written case analyses and the final project are done in groups. At the end of the course, students fill out a peer evaluation form (available as an online supplement). For an individual student, I adjust grades for the group deliverables if the peer evaluations provide a consensus to do so. Thirty percent is a good weight for class participation. It ensures active class participation throughout the course, which is obviously critical for a case-based course. The syllabus (available as an online supplement) contains study questions to guide students in

6 118 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS Table 2 Background Readings Part I Introduction Bohmer and Knoop (2007) The Challenge Facing the U.S. Health Care Delivery System Part II Designing health-care delivery systems Mango and Shapiro (2001) Hospitals Get Serious About Operations Bohmer (2000) Complexity and Error in Medicine Skinner (1974) The Focused Factory Part III Capacity planning and decision making under uncertainty Gray and Leonard (2007) Process Fundamentals Luehrman (1998) Investment Opportunities as Real Options: Getting Started on the Numbers Part IV Process failure, learning, and improvement Tucker and Edmondson (2003) Why Hospitals Don t Learn from Failures: Organizational and Psychological Dynamics That Inhibit System Change Spear (2005) Fixing Health Care from the Inside, Today Reichheld and Sasser (1990) Zero Defections: Quality Comes to Services Lapré and Van Wassenhove (2003) Managing Learning Curves in Factories by Creating and Transferring Knowledge their class preparation. Except for Sof-Optics, Inc. (B) all cases in Table 1 have teaching notes to assist instructors. Typically, I use the suggested study questions from the teaching notes. Table 2 shows background readings I recommend students to skim. For my own preparation, I have found it useful to collect resumes in the first week of class to identify relevant experience in the classroom. For each part of the course, I assign a written case analysis. I chose Intermountain Health Care (Bohmer and Edmondson 2006), Genentech Capacity Planning (Snow et. al. 2006), and Pharmacy Service Improvement at CVS (A) (McAfee 2006). Intermountain Health Care is more of a modelof-best-practice, rather than a managerial dilemma, case. Because dilemma cases tend to generate more energy in class discussions, having a write-up for Intermountain is quite useful. Genentech-Capacity Planning is a case that includes a spreadsheet that serves as a starting point for the analysis. Students need to significantly build on the spreadsheet. Consequently, it is almost imperative to have a write-up for Genentech-Capacity Planning. Pharmacy Service Improvement at CVS (A) also has some calculations that should be assigned before class. The 30% weight on written case analyses makes students feel that not all the weight is on the final project. The final project is an opportunity for students to pick and research a question for an industry or an organization that excites them. In the third week, student teams submit their proposed questions. I meet with each team to make sure the question is both interesting and feasible. The last two class sessions are entirely devoted to project presentations. Each presentation is followed by Q&A. Based on the Q&A, teams can revise their thinking and incorporate their revision of thought in the final project report, which is due at least one day after they present. The weight for the final project is 40%, split equally between presentation and final project report. The first time I taught HCO, projects addressed questions regarding DaVita (provider of dialysis services); Centerstone (a community mental health center); Vanderbilt Asthma, Sinus and Allergy Program; The Asheville Project (disease management); and CVS Minute Clinic. 4. Fit in the Curriculum The only required course for HCO is the core operations management course. HCO builds on several concepts from the core course by providing more indepth applications. Instituto Clinico Humanitas (A) (Bohmer et. al. 2006) uses Little s law (Maister 1995) and lessons from the Goldratt game (Ammar and Wright 1999). Shouldice Hospital Limited (Heskett and Hallowell 2005) and Weight Solutions Clinic: Bariatric Surgery Center (Chopra and Savaskan 2004) significantly build on process analysis (Gray and Leonard 2007), and Kristen s Cookie Company (A) (Bohn 2007). Genentech Capacity Planning (Snow et. al. 2006) uses the notion of safety stocks. Virginia Mason Medical Center Bohmer and Ferlins (2006) discusses the applicability of the Toyota Production System (Mishina 1995) in health care. The next time I teach HCO, I will introduce Supply Chain Partners: Virginia Mason and Owens & Minor (A) (Narayanan and Brem 2009). This case will build on three supply chain management sessions from the core operation management course: The beer game (Ammar and Wright 1999), Barilla Spa (A) (Hammond 2008), and Toyota Motor Manufacturing USA, Inc. (Mishina 1995). In the core operations management course, we cover the queuing case University Health Services: Walk-In Clinic (Maister 2006). If your institution does not cover this case prior to HCO, it would be an excellent case to include either just before or just after Weight Solutions Clinic: Bariatric Surgery Center (Chopra and Savaskan 2004). At the Owen School, linear programming with Excel Solver is covered in an elective Management Science with Spreadsheets. Most students take this course, but not necessarily before HCO. Therefore, I teach linear programming (LP) for determining inpatient room capacity in Weight Solutions Clinic: Bariatric Surgery Center (Chopra and Savaskan 2004) in a way that introduces LP to students who have never seen it. For students who have already seen LP, this approach provides a useful refresher as well. Because Vertex Pharmaceuticals: R&D Portfolio Management (Pisano et. al. 2006) discusses real option valuation (at a conceptual level), there is a

7 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS 119 link to corporate valuation. Most Owen students take Corporate Valuation. Although some students have already taken Corporate Valuation prior to HCO, some take it after HCO or not at all. The HBR article by Luehrman (1998) does an excellent job at introducing real-option valuation. The Luehrman (1998) article is sufficient for students to appreciate and assess the usefulness of real-option valuation in the Vertex Pharmaceuticals: R&D Portfolio Management discussion. 5. Challenges and Lessons Learned The main challenge I faced before the course was to select the mix of cases. I considered about 40 cases, and created several course outlines. I discussed draft course outlines with both colleagues and recently graduated Health Care MBAs. During the course, I frequently sought informal feedback from students. At the midpoint of the course, I did a short survey asking students what they would like me to stop, start, and continue doing (three open-ended questions). Two students told me to stop doing Weight Solutions Clinic: Bariatric Surgery Center in a single session (too much material); four students told me to start having a refresher on concepts covered in the core operations course; the bulk of the comments fell in the continue category mix of cases (6), discussion of cases (4), readings (4), wrap-up slides (3), continue as is (3), going over spreadsheets (3), enthusiasm (3), and Shouldice Hospital Limited (2). I kept track of the challenges I faced, and sought further feedback in the twelfth class session (the first 11 sessions covered the introduction and the cases, whereas sessions 13 and 14 covered student presentations). I designed an extensive survey to get in-depth course feedback from the students. After students filled out the survey, we had an in-class discussion on all the issues. The first challenge was course content. For each class session, I asked students whether they would recommend keeping it or dropping it. Table 3 shows the results. Two sessions had an approval rating below 75%: Weight Solutions Clinic: Bariatric Surgery Center and Sof-Optics, Inc. (B). Students were rather satisfied with the other sessions. Further feedback provided some clues for these results as well as ways to improve HCO. I surveyed students about the current balance of qualitative versus quantitative content. Half the class preferred the current balance. The other half of the class would prefer more quantitative content. The inclass discussion of this topic revealed that Weight Solutions Clinic: Bariatric Surgery Center had too much material for a single session, especially with the added linear programming. Students suggested using two class sessions for this case, which is what I intend to do next time I teach HCO. Table 3 Student Approval Ratings of Class Sessions Fall 2008 Topic Case Rating Part I Introduction Introduction lecture 95 Part II Designing health-care delivery systems Asset-oriented processes Instituto Clinico Humanitas (A) 95 Disease-oriented processes Intermountain Health Care 95 Focused processes Shouldice Hospital Limited 100 Part III Capacity planning and decision making under uncertainty Process analysis Weight Solutions Clinic: Bariatric 66 Surgery Center Capacity planning Genentech Capacity Planning 89 R&D portfolio management Vertex Pharmaceuticals (A) 76 Part IV Process failure, learning, and improvement Problem solving Patient Flow at Brigham and 75 Women s Hospital (A) Toyota Production System Virginia Mason Medical Center 89 Customer defection Pharmacy Service Improvement at 97 CVS (A) Ramp-up manufacturing Sof-Optics, Inc. (B) 53 Notes. For each session, I ask students if they would recommend keeping or dropping the session. The rating is the percent of students who recommended keeping each session. Class enrollment was 20 students. If a student was absent for a case discussion, he/she did not respond, resulting in a lower number of students rating that particular case. On rare occasions, a student might indicate indifference between keeping and dropping a session. I counted such indifference responses as 0.5 keep and 0.5 drop. Some students tend to relate better to recent cases. My personal bias is that as long as lessons from a case are still relevant, I do not care how old a case is. Fortunately, to appeal to as many students as possible, there are many good recent cases on health-care operations. Nine out of the ten cases in Table 1 are set in 2002 or later. One, however, is set in Half of the students preferred no more than two cases prior to The other half of the students could tolerate any number of cases prior to 2000, provided that such cases are still relevant. This split in preferences concerning recent versus old cases was reflected in additional comments students provided in the survey it was hard for quite a few students to relate to contact lens manufacturing in 1982 (the context of the Sof- Optics, Inc. (B) case). This is the case that I will drop next time I teach HCO. Graduates from Vanderbilt s Health Care MBA program end up working for a variety of organizations. Although some graduates end up working for hospitals, most graduates launch their careers in industries such as pharmaceuticals, medical devices, managed health-care plans, health-care consulting, and biotechnology. I asked students about their preferred mix of hospital versus nonhospital cases. Half the class would prefer no more than five hospital cases, whereas the other half of the class did not mind having more than five hospital cases. I currently have six hospital cases versus four nonhospital cases, so

8 120 INFORMS Transactions on Education 10(3), pp , 2010 INFORMS there is no pressing need to drastically change the current case mix. However, if I find a good nonhospital case that can be used to teach one of the topics in Table 1 well, I would certainly consider it. Students were generally pleased with the course. Course structure, topics, workload, and amount of background reading were all favorably received. The one operations management topic that seemed to be missing was supply chain management. After I taught HCO in the fall of 2008, Narayanan and Brem (2009) published a case that seems particularly promising: Supply Chain Partners: Virginia Mason and Owens & Minor (A). The case allows students to explore supply chain coordination between a medical/surgical supply distributor and a hospital. The background reading I might use is Narayanan and Raman (2004). Replacing Sof-Optics, Inc. (B) with Supply Chain Partners: Virginia Mason and Owens & Minor (A) will (i) add a case from the medical supply industry, (ii) introduce supply chain management in HCO, and (iii) ensure all cases are set in 2002 or later. Lastly, there was the challenge of having healthcare MBA students and operations students in a single class. The class felt that the introductory reading (Bohmer and Knoop 2007) does an excellent job at providing background for students who do not have any health-care experience. Likewise, students who had not taken any operations elective since the core operations course a year ago desired a refresher on core operations concepts (mainly for the first half of the course). Based on this feedback, I developed a set of slides summarizing the main core operations lessons from process analysis, waiting-line analysis, and inventory management. I posted these slides on the course intranet site in the last week of class. Students felt that posting these slides at the beginning of the course would take care of the refresher issue in the future. In sum, I had practically no expertise in health care. However, with the abundance of interesting, recent, and relevant cases on health-care operations, I was able to develop a case-based MBA elective on HCO that appeals to both health-care students as well as operations students. The health-care industry is already quite large, and will only continue to grow. Faced with all sorts of efficiency and quality issues, there will be ample opportunities for MBA graduates to work in health-care operations. I hope this paper will be useful for other instructors who want to teach in this area as well. Acknowledgments The associate editor and two anonymous reviewers provided very constructive feedback. Anita Tucker, Chris Lee, and Larry Van Horn provided helpful suggestions for the development of this course and this paper. 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