Ira Horowitz

Analysis of capacity management of the intensive care unit in a hospital

A hospitals intensive care unit (ICU) is a limited and critical resource. The efficient utilization of ICU capacity impacts on both the welfare of patients and the hospitals cost effectiveness. Decisions made in the ICU affect the operations of other departments. Yet, decision making in an ICU tends to be mainly subjective and lacking in clear criteria upon which to base any given decision. This study analyzes the admission-and-discharge processes of one particular ICU, that of a public hospital in Hong Kong, by using queuing and computer simulation models built with actual data from the ICU. The results provide insights into the operations management issues of an ICU facility to help improve both the units capacity utilization and the quality of care provided to its patients.

Managing electricity procurement cost and risk by a local distribution company

Abstract A local electricity distribution company (LDC) can satisfy some of its future electricity requirements through self-generation and volatile spot markets, and the remainder through fixed-price forward contracts that will reduce its exposure to the inherent risk of spot-price volatility. A theoretical framework is developed for determining the forward-contract purchase that minimizes the LDCs expected procurement cost, subject to a cost-exposure constraint. The answers to the questions of “What to buy?” and “How to buy?” are illustrated using an example of a hypothetical LDC that is based on a municipal utility in Florida. It is shown that the LDCs procurement decision is consistent with least-cost procurement subject to a cost-exposure constraint, and that an internet-based multi-round auction can produce competitive price quotes for its desired forward purchase.

The Increasing Competitive Balance in Major League Baseball

This paper explores the changing competitive balance in Major League Baseball through the relative-entropy measure of information theory. It is shown that while competitive balance in both leagues has been on an upward path during the 20th century, the path has had numerous detours that resulted from some on-the-field and some off-the-field changes that Major League Baseball has undergone during the past 75 years. The most important detours occurred in the wake of the Black Sox scandal of 1919, Jackie Robinsons breaking the color barrier and the concurrent spread of television and erosion of the minor leagues, franchise moves and major league expansion, and free agency.

Scheduling hospital services: the efficacy of elective-surgery quotas

We take advantage of the advance-scheduling property for elective surgeries by exploring whether the use of a daily quota system with a 1-week or 2-week scheduling window would improve the performance of a typical intensive care unit (ICU) that serves patients coming from a number of different sources within the hospital. The exploration is carried out via a simulation model whose parameters are established from actual ICU data that were gathered over a 6-month period. It is shown that formally linking one controllable upstream process, namely the scheduling of elective surgeries through a quota system, to the downstream ICU admission process, can have beneficial effects throughout the hospital.

EOQ and inflation uncertainty

Abstract Inflation uncertainty is introduced into a basic EOQ model and its potential to make mischief is explored. Among other things, it is shown that even when the expected rate of inflation is less than the marginal cost of capital, the appropriate discount rate to use in computing a discounted expected total inventory cost will not necessarily be negative. Therefore, the classic EOQ square-root formula may drastically underestimate the optimal lot size. The results may be generalized to the more complex inventory models.

Cross hedging and forward-contract pricing of electricity

We consider the problem of an electric-power marketer offering a fixed-price forward contract to provide electricity that it purchases from a potentially volatile and unpredictable fledgling spot energy market. One option for the risk-averse marketer who wants to hedge against the spot-price volatility is to engage in cross hedging to reduce the contracts profit variance, and to determine the forward-contract price as a risk-adjusted price — the sum of a baseline price and a risk premium. We show how the marketer can estimate the spot-price relationship between two wholesale energy markets for the purpose of cross hedging, as well as the optimal hedge and the forward contracts baseline price and risk premium.

The Impact of Wind Generation on Wholesale Electricity Prices in the Hydro-Rich Pacific Northwest

Extant literature documents that wind generation can reduce wholesale electricity market prices by displacing conventional generation. But how large is the wholesale price effect of wind generation in an electricity market dominated by hydroelectric generation? We explore this question by analyzing the impact of wind generation on wholesale electricity prices in the Pacific Northwest region of the United States. This hydro-rich system tends to be energy-limited, rather than capacity-constrained, with its marginal generation during the hydro runoff season often a hydro unit, instead of a natural-gas-fired unit. We find that increased wind generation reduces wholesale market prices by a small, but statistically-significant, amount. While a hydro-rich system can integrate wind generation at a lower cost than a thermal-dominated region, the direct economic benefits to end-users from greater investment in wind power may be negligible.

The efficient frontier for spot and forward purchases: an application to electricity

A local electricity distribution company (LDC) can reduce its exposure to the inherent risks of spot-price volatility and uncertain future demand via forward contracts. Managements problem is to determine the optimal forward-contract purchase. We propose a practical three-stage approach for dealing with the problem. The first stage determines an optimal purchase by solving a cost-constrained risk-minimization problem. The second stage derives the efficient frontier of tradeoffs between expected cost and cost risk from the first-stage solution, at various bounds on the expected cost. The optimal solution is found by melding the frontier with managements risk preferences. In the third stage, the models parameters are estimated from data typically available to an LDC and used to determine its forward-contract purchase.

Reliability Differentiation of Electricity Transmission

In many jurisdictions, electric utility restructuring has included the creation of an independent system operator (ISO) to dispatch generation, establish the market-clearing price, and allocate limited transmission capacity among users. This paper differentiates reliability through rate unbundling. We propose a capacity reservation tariff (CRT) to induce the users to self-select their preferred levels of reliability. Based on these self-selected reliability levels, the ISO can efficiently allocate limited transmission capacity. Our proposed CRT can be a practical solution to the transmission congestion problem faced by the California ISO in the implementation of retail access.

Time-of-use rates vs. Hopkinson tariffs redux: An analysis of the choice of rate structures in a regulated electricity distribution company

Abstract Recent proposals to restructure the electricity industry in North America may effect the disintegration of a vertically integrated company into several smaller entities, including distribution companies (DISCOs). We explore whether time-of-use (TOU) pricing or a Hopkinson tariff would be more suitable for a regulated DISCO. Focusing on the economic efficiency of these alternative rate structures, we argue that a Hopkinson tariff with demand subscription is superior to TOU rates, as it can better handle the limited load diversity of local transmission and distribution (TD) demands made on the contemporary DISCO, while finessing the problem of endogenous marginal costs of local TD capacity.