For the HMO vaccination program example provided in the chapter, reanalyze the situation assuming that the probability of a flu outbreak is 65 percent and the cost of the vaccination program is $8 million. What is your decision under these new condition

Preview File Edit View Go Tools Window Help Ill BE 100% Sat 10:09 PM a E Healthcare Operations Management McLaughlin Daniel B. ISRG].pdf (page 183 of 452) A simple example will help to illustrate this process. A health maintenance organization (HMo) is considering the cconomic benefits of a preventive flu vac- cination program. If the program is not offered, the estimated cost to the HMO if there is a flu outbreak is $8 million with a probability of 0.4 (40 percent), and $12 million with a probability of 0.6 (60 percent). The program is estimated to cost $7 million, and the probability of a flu outbreak occurring is 0.7 (70 per cent). If a flu outbreak does occur and the HMooffers the program afterward, it will still cost the organization $7 million, but the resulting costs to the HMO would be reduccd to $4 million with a probability of 0.4 (40 percent) or $6 mil- lion with a probability of 0.6 (60 percent). What should the HMo decide? The decision tree for the HMO vaccination program is shown in Figure 6.12 FIGURE 6.12 Flu outbreak HMO Vaccination Program Program No flu outbreak Decision Tree l Program HMO vaccination decision Flu outbreak No program No program No flu outbreak H NOTE: The tree diagrams in Figures 6.12 to 6.15 were drawn with the help of PrecisionTree, a software product

Now, flu outbreak chance is 65% and cost of vaccination is 8 million.

Case1: Cost = 0.65*(8*0.4 + 12*0.6) = 6.76 million

Case2: Cost = 8 + 0.65*(4*0.4 + 6*0.6) = 11.38 million

How do you find the break even point?