What is sensitivity analysis?
Sensitivity analysis is basically the validity of arriving at a given arithmetic conclusion by undertaking a repetitive comparison between inputs and outputs through variation of the assumptive factors that are put in place. In this system of analysis, presence of degree of uncertainty attributed to some economic valuation hence providing reliable outputs. The main agents of sensitivity analysis includes; unmeasured values due to the difficulty in the collection procedure, imputed values merely because the opportunity cost is not known with certainty, the discount rate due to the presence of time preference which is not known and confidence intervals of statistical estimates of a given variable.
How would you use in planning for the future?
Sensitivity analysis basically applies its principles of future projections through the use of unknown variables. The presence of confidence intervals and lack of appropriate opportunity costs among the variables being used give the assurance of applying this principle in the future scenario. Sensitivity analysis allows the economists and healthcare providers to plan for the future by including all the agents of analysis discussed above.
What role does this kind of analysis play in your work environment and/or your home environment?
Sensitivity analysis provides efficiency in planning for the future. The provision of checklists in ascertaining for quality of the projection given gives a full proof of the importance of this principle in the future applicability.
If you were trying to add a new service to your facility, what ratios would you use to determine if it would be profitable and how long until it would break even?
First the degree of certainty and the discount rate must be incorporated when formulating these ratios. Therefore, to formulate efficient ratios extraneous factors must be incorporated into the input factors. This allows the formulation of a solid ratio as follows,
New service: current services: fixed services
The above ratio will provide a solid platform of deriving timely sensitivity analysis. The breakeven point can simply be arrived at through the long-term breakdown of the ratio where all the services can be provided with utmost efficiency.
References
Alanqar, I., Heidarinejad, M., & Srebric, J. (2014). A Sensitivity Analysis of Energy Simulation Accuracy for a Renovated Healthcare Building. ASHRAE Transactions, 120(1), 1-8.
Morris, T. P., Kahan, B. C., & White, I. R. (2014). Choosing sensitivity analyses for randomised trials: principles. BMC Medical Research Methodology, 14(1), 1-9.
