Technical Note—A Near-Optimal Algorithm for Real-Time Order Acceptance: An Application in Postacute Healthcare Services

Abstract

A Near-Optimal Patient Admission Policy in Postacute Care Motivated by applications in the postacute healthcare industry, in “Technical Note—A Near-Optimal Algorithm for Real-Time Order Acceptance: An Application in Postacute Healthcare Services,” Qu, Dawande, and Janakiraman study an infinite-horizon, stochastic optimization problem with a set of long-term capacity investment decisions and a sequence of real-time order acceptance/rejection decisions. To maximize the long-run average expected profit per period, the firm accepts/rejects stochastically arriving referrals in real time. Referrals differ in the revenue they offer to the firm, the resource requirements and the frequency of usage of the resources, and the stochastic duration of the episode. The authors develop a simple policy, derive a worst case guarantee on its optimality gap, and show that the policy is asymptotically optimal. They also illustrate an impressive numerical performance of the policy using public healthcare data.