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Introduction to Decision Introduction to Decision AnalysisAnalysis

Farrokh Alemi, PhDFarrokh Alemi, PhD

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What is a Decision?What is a Decision?

Choice between alternative Choice between alternative courses of actioncourses of action Involves managing uncertain Involves managing uncertain

outcomesoutcomes Involves tradeoffs between Involves tradeoffs between

different benefitsdifferent benefits

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What is Decision AnalysisWhat is Decision Analysis

1.1. Separation of a whole into its Separation of a whole into its component partscomponent parts

2.2. Using a mathematical formula Using a mathematical formula to reconstitute the wholeto reconstitute the whole

Decision makers make simple Decision makers make simple and familiar choicesand familiar choices

A formula is used to infer what A formula is used to infer what would the decision maker had would the decision maker had preferred to do in the complex preferred to do in the complex choicechoice

Subjective data are needed

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Evaluating Nursing HomesEvaluating Nursing Homes

Possible actions: fining the Possible actions: fining the home, prohibiting admissions, home, prohibiting admissions, and teaching the home and teaching the home personnel more appropriate use personnel more appropriate use of psychotropic drugsof psychotropic drugs Many different effectsMany different effects Constituencies' values should be Constituencies' values should be

taken into accounttaken into account Outcomes cannot be guaranteedOutcomes cannot be guaranteed

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Three Sources of UncertaintyThree Sources of Uncertainty

Nature of the problemNature of the problem Cause and effect  Cause and effect  External eventsExternal events

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Organizing ThoughtsOrganizing Thoughts

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Analysis Simplifies Analysis Simplifies

It may be cost prohibitive to fully It may be cost prohibitive to fully consider all elements of a decision. consider all elements of a decision. Ignore some valuesIgnore some values Ignore some uncertaintiesIgnore some uncertainties

Simplify the decision enough to meet Simplify the decision enough to meet the decision maker's needsthe decision maker's needs

Do not diminish the usefulness and Do not diminish the usefulness and accuracy of the analysisaccuracy of the analysis

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Purpose of AnalysisPurpose of Analysis

Describe problem structureDescribe problem structure Reduce uncertaintyReduce uncertainty Clarify valuesClarify values Analyze conflictAnalyze conflict

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Describe Problem StructureDescribe Problem Structure

Help them understand the problem they are addressing:Help them understand the problem they are addressing: Individual assumptions about the problem and its causes Individual assumptions about the problem and its causes Objectives being pursued by each decision maker Objectives being pursued by each decision maker Constituencies having different perceptions and values Constituencies having different perceptions and values Options available Options available Factors that influence the desirability of various outcomes Factors that influence the desirability of various outcomes Principal uncertainties that complicate the problem Principal uncertainties that complicate the problem

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Reduce UncertaintyReduce Uncertainty

Not sure what will happen if an action is takenNot sure what will happen if an action is taken Not sure what state the environment is really inNot sure what state the environment is really in The analyst uses various tools to forecast the The analyst uses various tools to forecast the

future  future  Some clues suggest the target event might occur, Some clues suggest the target event might occur,

other clues suggest the opposite  other clues suggest the opposite  The analyst distills the implications of often The analyst distills the implications of often

contradictory clues into a single forecast  contradictory clues into a single forecast  Bayes' theoremBayes' theorem

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Clarify ValuesClarify Values

Optimally, analysis provides answers to these Optimally, analysis provides answers to these questions:questions:   Which objectives are paramount?Which objectives are paramount? How can an option's performance on a wide range of How can an option's performance on a wide range of

measuring scales be collapsed into an overall measuring scales be collapsed into an overall measure of relative value?measure of relative value?

Use multi-attribute value (MAV) modeling  Use multi-attribute value (MAV) modeling  The British National Health ServiceThe British National Health Service

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Analyze ConflictAnalyze Conflict

Model the uncertainties and values that different Model the uncertainties and values that different constituencies see in the same decision  constituencies see in the same decision  A contract between an HMO and a clinician  A contract between an HMO and a clinician 

Conflict can be understoodConflict can be understood Steps can be taken to avoid disrupting negotiations  Steps can be taken to avoid disrupting negotiations 

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Process of AnalysisProcess of Analysis

Do not conduct an independent Do not conduct an independent analysis  analysis 

Decision conference  Decision conference  Day‑long retreat on structure of the Day‑long retreat on structure of the

problemproblem Follow-up day: Follow-up day:

possible actions, uncertainties, outcomes, possible actions, uncertainties, outcomes, values, and probabilitiesvalues, and probabilities

Back and forth to the decision makerBack and forth to the decision maker Active listeningActive listening

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Steps in Cycle of Analysis Steps in Cycle of Analysis

1.1. Problem exploration Problem exploration

2.2. Problem classificationProblem classification

3.3. Problem structuringProblem structuring

4.4. Quantifying valuesQuantifying values

5.5. Quantifying uncertaintiesQuantifying uncertainties

6.6. Analyze & RecommendationsAnalyze & Recommendations

7.7. Sensitivity analysisSensitivity analysis

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Step 1: Exploring the ProblemStep 1: Exploring the Problem

Why the decision maker wants to solve a problem?Why the decision maker wants to solve a problem? Problem statement: "Excessive use of drugs to restrain Problem statement: "Excessive use of drugs to restrain

residents." residents." How should nursing home residents behave? What does How should nursing home residents behave? What does

restraint restraint mean? Why must residents be restrained? Why are mean? Why must residents be restrained? Why are drugs used at all? When are drugs appropriate, and when not? drugs used at all? When are drugs appropriate, and when not? What other alternatives does a nursing home have to deal with What other alternatives does a nursing home have to deal with problem behavior?problem behavior?

Understand the objective of an organizationUnderstand the objective of an organization Define frequently misunderstood termsDefine frequently misunderstood terms Clarify the practices causing the problemClarify the practices causing the problem Understand the reasons for the practiceUnderstand the reasons for the practice Separate desirable from undesirable aspects of the practiceSeparate desirable from undesirable aspects of the practice

What is the agenda? What is the agenda? Protect an individual patient without changing the nursing homeProtect an individual patient without changing the nursing home Change the home's general practicesChange the home's general practices Correct a problem that appears to be industry wideCorrect a problem that appears to be industry wide

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Problem ClassificationProblem Classification

Which aspects of the decision model should be Which aspects of the decision model should be emphasized?emphasized? Uncertainty analysis (diagnosis or prediction) Uncertainty analysis (diagnosis or prediction) Value analysis (evaluation) Value analysis (evaluation) Both uncertainty and value analysis Both uncertainty and value analysis

Which constituencies should be included?Which constituencies should be included? Where information for the analysis will be obtained?Where information for the analysis will be obtained? The analysis could emphasize:The analysis could emphasize: Uncertainty analysis (diagnosis or prediction) Uncertainty analysis (diagnosis or prediction) Value analysis (evaluation) Value analysis (evaluation) Both uncertainty and value analysis Both uncertainty and value analysis Single or multiple constituencies Single or multiple constituencies

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Problem StructuringProblem Structuring

What the problem is about, why it What the problem is about, why it exists, and whom it affects? exists, and whom it affects?

The assumptions and objectives of The assumptions and objectives of each affected constituency each affected constituency

A creative set of A creative set of optionsoptions for the for the decision maker decision maker

Outcomes to be sought or avoided Outcomes to be sought or avoided The uncertainties that affect the The uncertainties that affect the

choice of action choice of action

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Quantifying ValuesQuantifying Values

Break complex outcomes into their Break complex outcomes into their components and weight the relative components and weight the relative value of each component value of each component Cost is typically measured in dollars and Cost is typically measured in dollars and

may appear straightforward.  But true may appear straightforward.  But true costs are complex measures and costs are complex measures and difficult to measure. difficult to measure. 

Benefits need to be measured based on Benefits need to be measured based on various constituencies' preferences.  various constituencies' preferences. 

Major pitfall: Ignoring values and Major pitfall: Ignoring values and focusing on costsfocusing on costs

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Quantifying UncertaintiesQuantifying Uncertainties

Measure uncertainty as probability Measure uncertainty as probability scoresscores Estimate the chance that the home's Estimate the chance that the home's

chemical restraint practice resulted from chemical restraint practice resulted from ignorance or knowing intention to save ignorance or knowing intention to save money money

Additional data are neededAdditional data are needed Too much data Too much data The assessment must be divided The assessment must be divided

into manageable componentsinto manageable components

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Analysis & RecommendationsAnalysis & Recommendations

Expected utility Expected utility or or expected valueexpected value is the weighted average of the is the weighted average of the values associated with outcomes of values associated with outcomes of each action.  each action.  Two actions are possible:Two actions are possible:

A1 = ConsultA1 = Consult A2 = Stop admissionA2 = Stop admission

The possible outcomes are:The possible outcomes are: Industry changesIndustry changes Only one home changesOnly one home changes No changeNo change

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Analysis & Recommendations Analysis & Recommendations (Continued)(Continued)

Industry changes

Only one home

changes

No change

Values for each outcome

100 25 0

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Analysis & Recommendations Analysis & Recommendations (Continued) (Continued)

   

 Industry changes

Only one home

changes

No change

Consult with the home

0.05 0.60 0.35

Stop admissions to the home

0.40 0.20 0.40

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Analysis & Recommendations Analysis & Recommendations (Continued)(Continued) If  pIf  pij ij is the probability of action "i" is the probability of action "i"

leading to outcome "j" leading to outcome "j" VVjj is the value associated with is the value associated with

outcome "j", outcome "j", then:then: Expected value of action "i"  =∑pExpected value of action "i"  =∑p ijij V Vjj

Expected value of consultation =  0.05 * Expected value of consultation =  0.05 * 100+ 0.60*25 + 0.35*0 = 20100+ 0.60*25 + 0.35*0 = 20

Expected value for stopping admission Expected value for stopping admission = 0.40 *100 + 0.20 *25 + 0.40 * 0 = 45= 0.40 *100 + 0.20 *25 + 0.40 * 0 = 45

Most desirable action would be to Most desirable action would be to stop admissionsstop admissions

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Sensitivity AnalysisSensitivity Analysis

Identify how various assumptions in Identify how various assumptions in the analysis affect the conclusion.  the analysis affect the conclusion.  How much an estimate would have to How much an estimate would have to

change to alter the choice of "preferred" change to alter the choice of "preferred" action.action.

Several estimates can also be modified Several estimates can also be modified at once, especially using computers. at once, especially using computers.

Return to an earlier stage:Return to an earlier stage: Add a new action or outcome Add a new action or outcome Add new uncertainties Add new uncertainties Refine probability estimates Refine probability estimates Refine utility estimates Refine utility estimates

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Take Home LessonTake Home Lesson

Decision Analysis reconstitutes the whole Decision Analysis reconstitutes the whole from its parts. The process of analysis from its parts. The process of analysis

matters as much as the end result. matters as much as the end result.