SYSTEM DYNAMICS IN ACTION: THE WORSE-BEFORE-BETTER SCENARIO IN THE CITY HOSPITAL - EFFECTS OF BUDGET DISTRIBUTION TO THE TRAINING & EDUCATION DEPARTMENT ON SHORT-TERM AND LONG-TERM PROFITS

Abstract

A major public city hospital is affected by the ongoing transformation in the Swiss health care system due to cost reduction pressure, mergers & acquisitions and the mandatory introduction of Diag­nosis Related Groups (DRG) by the year 2012. Facing scarce financial and personal recourses, a System Dynamics research project investigates how changes in budget allocation to the training and education department can affect the net profits of the hospital. The model simulation indicates that neither a massive cut, nor a massive increase of budget lead to the best profits in the long-term. Rather a carefully implemented adjust­ment of the budget at a small scale of plus 10% is suggested to realize an increase of the long-term profits. The results of the long-run simulation are counterintuitive and are ex­plained by means of systems approach archetypes like the worse-before-better scenario, information delays, level effects and limits to growth.