Guiding capital equipment procurement with MCDA
February 23, 2020
By Joseph Gucciardi
In their efforts to improve patient care, today’s healthcare providers are hindered by consistently diminishing capital budgets and often struggle to prioritize their needs. In many cases, a methodology know as Multicriteria Decision Analysis (MCDA) can transform the decision-making process in a robust and innovative way, all the while incorporating strategic goals through tested and proven data analytics.
In their simplest form, MCDA problems all have the same basic components: alternatives for which a choice must be made, criteria to differentiate the alternatives, weights that scale criteria importance, and a methodology for ranking the alternatives. Capital procurement options can be prioritized by an analytical model utilizing criteria defined by your organizational stakeholders to facilitate traceable and repeatable decisions. This is preferable to cost benefit analysis, as equipment criteria are notoriously difficult to reduce to sum of specific costs. With MCDA, each criterion can be kept in its natural format so that their true value to the decision can be accurately determined.
Framework steps
MCDA methods vary greatly depending on the application. They can be found through open sources, developed in-house, purchased as software or outsourced to a decision-support vendor. The simplest framework consists of eight primary steps:
1. Thoroughly define the objective of your analysis.
2. Identify stakeholders necessary to inform the decision.
3. Define and select criteria, either through organizational goals or alternative analysis.
4. Identify where critical data is available (Hint: CMMS!), addressing data gaps and collection methods.
5. Determine how the criteria will be weighted, whether through a robust MCDA technique or a simple vote.
6. Analyze the alternatives by their criteria using MCDA methods or a combination of methods.
7. Calculate the weighed score for each alternative and prioritize the alternatives by their score.
8. Review the model validity and revise to meet your organization’s needs.
Criteria selection and weighting
Criteria may be easy to list: Strategic Direction, Obsolescence, Safety, Value, Integrability, Risk, etc. The difficulty comes in quantifying these to determine their weighted value to the organization. Where is the data coming from, and what if the criteria are conflicting, such as cost versus quality? Are the criteria “SMART”, as in specific, measurable, attainable, relevant and time-bound? Which criteria are relevant, which are redundant, and which reduce the analytical burden? Discard low impact criteria and keep the criteria deemed most important. One can further trim criterion using MCDA.
One MCDA technique for criteria weighting is Shannon’s Entropy, which measures dispersion in a criterion across alternatives, and then uses that data to determine its value. The greater dispersion, the greater value that criterion could have to the decision. Calculating entropy can also eliminate criteria that would have no effect on the outcome, reducing the analytical burden. Alternatively, you can use an MCDA technique called Analytical Hierarchy Process (AHP) to let stakeholders vote on which criteria are most valuable. One benefit to AHP is that it converts stakeholder preference to numerical scores in a way that reduces bias and improves collaboration.
Ranking and scoring alternatives
Basic MCDA methods that can be used in ranking include Simple Additive Weights (SAW) or Simple Multi Attribute Rating Technique (SMART). Both involve normalizing an alternative’s criteria on a linear scale between 0 and 1, multiplying its value by its criteria weight, then summing the weighed values for each criterion to determine a score. These scores are ranked from high to low, where higher value represents alternatives that aligned better with your prioritization model.
Various MCDA methods can be used in any step of your prioritization model. More complex methodologies could be implemented by a subject matter expert in MCDA, through the procurement of MCDA software, or by outsourcing to a third-party vendor. Implementing a simple model initially can streamline your procurement process with minimal effort while opening the door to more robust analysis in future planning years.
The challenge
The key to implementing MCDA is ensuring stakeholders are involved and the organization’s objectives are met. Hospitals may have a need to improve their process, but change can be a hurdle, and in the end the decision typically resides with senior leadership.
MCDA can also seem like a complex and analytical process. Healthcare Technology Management can facilitate its adoption by providing technical expertise in the decision models and data collection methods. By demonstrating how MCDA can break the decision down into easily addressable steps, leadership should be receptive and will encourage the conversation to occur.
The bottom line
The MCDA framework has been increasingly used in healthcare to address a wide number of complex decisions. Capital equipment procurement is a candidate for MCDA, but limited awareness has stunted its utilization. Organizations should consider MCDA if they need to improve the capital procurement process. MCDA offers well-structured models that are robust and transparent and can accommodate your organizations strategic goals. With MCDA, an informed, unbiased and fair decision is within reach.
About the author: Joseph Gucciardi is a staff clinical engineer at White River Junction VAMC in Vermont.
In their efforts to improve patient care, today’s healthcare providers are hindered by consistently diminishing capital budgets and often struggle to prioritize their needs. In many cases, a methodology know as Multicriteria Decision Analysis (MCDA) can transform the decision-making process in a robust and innovative way, all the while incorporating strategic goals through tested and proven data analytics.
In their simplest form, MCDA problems all have the same basic components: alternatives for which a choice must be made, criteria to differentiate the alternatives, weights that scale criteria importance, and a methodology for ranking the alternatives. Capital procurement options can be prioritized by an analytical model utilizing criteria defined by your organizational stakeholders to facilitate traceable and repeatable decisions. This is preferable to cost benefit analysis, as equipment criteria are notoriously difficult to reduce to sum of specific costs. With MCDA, each criterion can be kept in its natural format so that their true value to the decision can be accurately determined.
Framework steps
MCDA methods vary greatly depending on the application. They can be found through open sources, developed in-house, purchased as software or outsourced to a decision-support vendor. The simplest framework consists of eight primary steps:
1. Thoroughly define the objective of your analysis.
2. Identify stakeholders necessary to inform the decision.
3. Define and select criteria, either through organizational goals or alternative analysis.
4. Identify where critical data is available (Hint: CMMS!), addressing data gaps and collection methods.
5. Determine how the criteria will be weighted, whether through a robust MCDA technique or a simple vote.
6. Analyze the alternatives by their criteria using MCDA methods or a combination of methods.
7. Calculate the weighed score for each alternative and prioritize the alternatives by their score.
8. Review the model validity and revise to meet your organization’s needs.
Criteria selection and weighting
Criteria may be easy to list: Strategic Direction, Obsolescence, Safety, Value, Integrability, Risk, etc. The difficulty comes in quantifying these to determine their weighted value to the organization. Where is the data coming from, and what if the criteria are conflicting, such as cost versus quality? Are the criteria “SMART”, as in specific, measurable, attainable, relevant and time-bound? Which criteria are relevant, which are redundant, and which reduce the analytical burden? Discard low impact criteria and keep the criteria deemed most important. One can further trim criterion using MCDA.
One MCDA technique for criteria weighting is Shannon’s Entropy, which measures dispersion in a criterion across alternatives, and then uses that data to determine its value. The greater dispersion, the greater value that criterion could have to the decision. Calculating entropy can also eliminate criteria that would have no effect on the outcome, reducing the analytical burden. Alternatively, you can use an MCDA technique called Analytical Hierarchy Process (AHP) to let stakeholders vote on which criteria are most valuable. One benefit to AHP is that it converts stakeholder preference to numerical scores in a way that reduces bias and improves collaboration.
Ranking and scoring alternatives
Basic MCDA methods that can be used in ranking include Simple Additive Weights (SAW) or Simple Multi Attribute Rating Technique (SMART). Both involve normalizing an alternative’s criteria on a linear scale between 0 and 1, multiplying its value by its criteria weight, then summing the weighed values for each criterion to determine a score. These scores are ranked from high to low, where higher value represents alternatives that aligned better with your prioritization model.
Various MCDA methods can be used in any step of your prioritization model. More complex methodologies could be implemented by a subject matter expert in MCDA, through the procurement of MCDA software, or by outsourcing to a third-party vendor. Implementing a simple model initially can streamline your procurement process with minimal effort while opening the door to more robust analysis in future planning years.
The challenge
The key to implementing MCDA is ensuring stakeholders are involved and the organization’s objectives are met. Hospitals may have a need to improve their process, but change can be a hurdle, and in the end the decision typically resides with senior leadership.
MCDA can also seem like a complex and analytical process. Healthcare Technology Management can facilitate its adoption by providing technical expertise in the decision models and data collection methods. By demonstrating how MCDA can break the decision down into easily addressable steps, leadership should be receptive and will encourage the conversation to occur.
Joseph Gucciardi
The MCDA framework has been increasingly used in healthcare to address a wide number of complex decisions. Capital equipment procurement is a candidate for MCDA, but limited awareness has stunted its utilization. Organizations should consider MCDA if they need to improve the capital procurement process. MCDA offers well-structured models that are robust and transparent and can accommodate your organizations strategic goals. With MCDA, an informed, unbiased and fair decision is within reach.
About the author: Joseph Gucciardi is a staff clinical engineer at White River Junction VAMC in Vermont.