Yuko Ueki Popular Press Article Assignment #3

March 11, 2014

Article Title: Hospitals Address a Drug Problem: Software and Robots Help Secure and Monitor Medications Source: The Wall Street Journal Concept(s): Cost-Benefit Analysis, PPC Curve, Trade-Offs A February 23, 2014 article in The Wall Street Journal titled, Hospital Address a Drug Problem: Software and Robots Help Secure and Monitor Medications weighs the benefits and costs of a new robot system that would automate drug dispensing and curb drug diversion problems in the hospital. Hand Delivery $5.50 Robot Delivery $2.40

Per-trip cost

Additional benefits of robot-assisted medication delivery: Delivery reliability increased by 23% Delivery predictability increased by 50% 6,123 nurse hours saved on tracking and retrieving medications

The robots are expensive. There will inevitably be trade-offs given budget limitations; to purchase more robots, the hospital would most likely need to cut back on nurses. Heres a hypothetical PPC curve showing combinations of nurses and robots for efficient operations: Decision-makers must understand the
Nurses

trade-offs between employing more nurses and investing in robot technology. While robots deliver medications to patients at a lower cost and with greater reliability and predictability, they come at a hefty cost. The

Robots

Yuko Ueki Popular Press Article Assignment #3

March 11, 2014

hospital executives task is to maximize the patient utility of the hospital by choo sing the best aggregate mix of robots and nurses. From an efficiency perspective, hospital decision-makers would run a costbenefit analysis to determine the number of robots the budget would allow them to buy and maintain an efficient level of output. The figure below illustrates the determination of the efficient level of robot output. The THB curve represents Total
Costs and benefit of robots

THB THC

Hospital Benefits, the monetary value generated from acquiring more robots. The curve is positively sloped, reflecting more robots equal greater monetary benefits. THB curves downward to the hospital witnesses

Q$

Quantity of robots (Q)

diminishing marginal benefits from robots.

Total hospital costs of using robots is reflected by the upward sloping THC curve because total costs increase as more expensive robots are purchased. THC bows towards the vertical axis because marginal cost of using robots in the hospital increases with each additional robot purchased. Total net hospital benefit (TNHB) is maximized when the vertical distance between the two curves is greatest. This occurs at Q $ quantity of robots.