PRODUCTION AND OPERATIONS MANAGEMENT Vol. 4, No. I, Winter 1995 Printed in U.S.A. HOSPITAL RESOURCE PLANNING: CONCEPTS, FEASIBILITY, AND FRAMEWORK * ALEDA V. ROTH AND ROLAND VAN DIERDONCK Kenan-Flagler Business School, University of North Carolina, Chapel Hill, North Carolina27599 Vlerick Schoolof Management,University of Ghent,Gent-Ledeberg, Belgium The manna of health care reform in hospitals in the United States and elsewhere, the spiralling costs of health care, and the development of diagnostic-related groups ( DRGS) that define health services as “products” are influencing the strategic role of operations planning and control in hospital delivery systems.We developed a new operations planning and control system that we call “Hospital Resource Planning” (HRP). This system is based on the concept of DRGS and the familiar concept of manufacturing resources planning ( MRP-II). To determine the potential fea- sibility of HRP, we gathered longitudinal data from two hospitals, one 300~bed community hospital and one 1,lOO-bed teaching hospital. Our exploratory study indicated that while the concept of MRP-II can be transferred to hospitals, the traditional MRP logic has shortcomings. HRP advances prior research in three ways: ( 1) consideration of DRGS as products with a biIl of resources structure that simultaneously incorporates both capacity and materials resources, (2) implementation of a hospital-wide (versus a functional) planning and controI’system, and (3) gross-to-net requirements logic based on notions of treatment staging. Other feasibility issues that we addressed pertain to a stochastic bill of resources, trends toward hospital product standardization, and the coordination of a central planning system with decentralized decision making. The paper concludes with a description of areas for future research. (HOSPITAL RESOURCE PLANNING; PLANNING AND CONTROL SYSTEMS; BILL OF RESOURCES; TREATMENT STAGING, OPERATIONS STRATEGY, REENGI- NEERING HEALTHCARE) 1. Introduction Government regulations, competition, and patient advocacy groups are directly influ- encing how hospitals manage resources as they are increasingly pressured to simulta- neously reduce costs and improve quality. The hospital sector is particularly concerned with regulatory trends concerning reforms in health care delivery systems and mechanisms for reimbursement. Prominent among these trends are fixed-price, prospective payment systems ( PPS) based on diagnostic-related groups ( DRGS) (Fetter and Freeman 1986; Solovy 1989). Extending beyond reimbursement to product line management, DRGS have had a far reaching impact on the development of hospital operations: “DRGS have the potential for changing the manner in which hospitals are managed and the way in which hospital services are planned and administered” (Crawford and Fottler 1985, p. * Submitted May 1992; revised September 1994; accepted November 1994. 2 1059-1478/95/0401/002$1.25 Copyright 0 1995, F’mduction and Operations Management Society