Chapter 14, Problem 14.61ACB

Demand for emergency room services. With the advent of managed care, U.S. hospitals have begun to operate like businesses. More than ever before, hospital administrators need to know and apply the theories and methods taught in business schools. Richmond Memorial Hospital in Richmond, Virginia, uses regression analysis to forecast the demand for emergency room services. Specifically, Richmond Memorial uses data on patient visits to the emergency room during each of the past 10 Augusts to forecast next August’s demand. Data for the month of August in a recent 1 0-year period are shown in the next table

Year t	Visits	Daily Average Yt
1	1,367	44 09
2	1,642	52.96
3	1.780	57.41
4	2,060	66 45
5	2,257	72 80
6	3,019	97.38
7	2,794	90.12
8	2,846	91.80
9	3.001	96.80
10	3,548	114.45

a. Use a straight-line regression model to construct a point forecast for emergency room demand for each of the next three Augusts.

b. Provide 95% prediction intervals around the forecasts.

c. Describe the potential dangers associated with using simple linear regression to forecast demand for emergency room services.

d. Which other method described in this chapter would be appropriate for forecasting patient visits to the emergency room?