Application of Neural Prediction
the management of these private and corporate
Models in Healthcare1
Vishnuprasad Nagadevara
Indian Institute of Management
Bangalore
India
Abstract
The responsibility for providing appropriate
healthcare till now was vested with the
government. With the entry of corporate
hospitals and availability of health insurance,
the demand for better health services from both
private and government hospital has been
increasing. Whether the health care services are
provided by the state or privately run hospitals,
it is becoming more and more important to
optimally utilize the available resources. Two
important indicators of effective health service
are length of stay in the hospital and hospital
related expenses. Identification of demographic
and environmental variables impacting these
indicators will immensely help the government
in formulating long-term policies. Since most of
these variables are categorical in nature, it is
not easy to apply the usual mathematical and
econometric models for prediction purpose.
This paper uses neural prediction models to
predict the duration of stay in the hospital and
hospital related expenses using demographic,
environmental and hospital related factors and
identify the profiles of the patients in various
segments, which will help in policy formulation.
1. Introduction
The healthcare sector has changed dramatically
in the past few years, especially in the
developing countries. While provision of
healthcare is the social obligation and
responsibility of the government, many private
and corporate entities have started providing
healthcare. At the same time, health insurance is
becoming popular and as a result healthcare from
these private and corporate entities and hospitals
is becoming more and more affordable. It is
1
Proceedings of the Second International
Conference on e-Governance, Colombo, Sri
Lanka, Nov 29-Dec 1, 2004.
1
undeniable that profit motive does play a role in
entities. In order to attract customers (patients)
these entities strive to provide better facilities as
well as better care through better utilization of
resources. In addition, these entities have access
to funds from the commercial financing
institutions. On the other hand, the healthcare
services provided by the government
organizations, especially the hospitals run by the
state or central governments or the local bodies
such as municipalities suffer from lack of funds
as well as other resources. In many cases these
state-run hospitals are resorting to generation of
resources over and above the budgetary support
received from the governments and the local
bodies. Some of the strategies adopted by these
hospitals are to levy user charges, implementing
differential charges, which are based on the
ability of the patient to pay, which is generally
measured by the income levels of the patients.
Whether the healthcare services are provided by
the state or privately run hospitals, it is becoming
more and more important to optimally utilize the
available resources.
The length of stay is often used in healthcare
as an indicator for the resource utilization and
cost. The Healthcare Finance Administration
Medicare reimbursement system uses length of
stay for the Diagnostic Related Group payment
system [3]. With the implementation of
information technology in many hospitals, large
amount of patient data is automatically collected
and stored. With the availability of such data,
data mining techniques have been effectively
used to predict the length of stay. Many of these
prediction models are based on the data
generated within the hospital [2,3]. Mostly these
models use the internal data such as the
diagnostic tests, type of surgery, type of nursing
care etc. Other variables, which are generally
considered in these prediction models, are type
of insurance cover, medical history, experience
of the attending doctor etc. Data with respect to
a large number of these variables is generated
after the patient arrives at the hospital. On the
other hand, the healthcare system needs to be
able to predict the length of stay based on
general demographic data so that appropriate
capacities can be put in place and the
government policies could be better targeted.
Whether it is state-run or private-run hospital, it
is important that the beds and services are
available when a patient arrives and at the same
time there is a need to maximize the utilization
of the available resources.
Today, the healthcare sector faces strong
pressures to provide high quality service at an
affordable cost. This is obviously very important
in the case of privately run hospitals. With the
introduction of user charges, even if they are
based on the “ability to pay”, even the state-run
hospitals are forced to become more efficient.
Healthcare industry has large volumes of data at
its disposal and if it can extract the desired
information from this voluminous data, it can
lead to better utilization of resources.
The hospitals routinely collect large amounts
of patient related data in the course of their
regular activities. Similarly the governmental
agencies also collect large amounts of health and
other related data on a regular basis. These data
sources can be used to develop mathematical
models for predicting various variables such as
duration of hospital stay, hospital expenses etc.
One of the problems involved in developing
mathematical models using these data that are
routinely collected by the hospitals and
governmental agencies is that many of the
variables are categorical in nature. Even though
the dependent variables that are of interest are
quantitative (continuous) in nature, most of the
other variables, which could be used as
independent or explanatory variables, are
categorical in nature and not easily amicable for
usual econometric modeling. Needless to say, it
is possible to use dummy variables to capture the
effect of these categorical variables; such an
approach would require large number of dummy
variables. Under such circumstances, techniques
such as data mining could be effectively used for
analyzing these large quantities of data to
facilitate formulation of appropriate policy
measures. Techniques such as classification
trees [6], discriminant analysis [4], clustering or
segmentation [5] had been used in other areas of
public policy such as adult literacy programmes
and sericulture sectors. Similarly, it was shown
that previously undiscovered patterns for finding
out the associated primary and secondary
surgical procedures could be induced using data
mining techniques [1]. This paper presents
application of neural prediction models for
predicting the duration of hospitalization as well
the hospital related expenses based on hospital as
well as demographic data. As mentioned earlier,
data mining models have been used for
predicting length of stay and the related
expenses. But, these models are primarily based
2
on the patient data generated within the hospital
[3]. These models have used data relating to the
patient episodes and nursing diagnoses or data
collected from the hospital charge system or the
pharmacy and the laboratory information system
[7]. On the other hand, combining the hospital
related data with the demographic information
available in building such predictive models
would be helpful in better targeting the
governmental and public support to the needy
segments of the population. Identifying the
profiles of the population and classifying them
based on demographic characteristics of each
profile could make the targeting of the health
services more effective. Needless to say, the
hospital and health related variables play as
much an important role in the profiling exercise
as the demographic characteristics.
2. Neural Prediction Models
The neural prediction models employ back
propagation neural network to predict values.
The prediction is based on prediction value and
the attribute relationship discovered by mining a
set of training data. The training data contains
the independent (explanatory) as well as
dependent variables. The relationship developed
using the training set of data is tested against
another set of data called validation data. The
separation of training data from validation data is
to ensure that the predicting ability can be
validated appropriately and without bias.
Usually, the data set is divided randomly into
training set and validation set. In addition to
developing the relationship between the
dependent and independent variables through
back propagation, the neural prediction models
create the profiles of different segments based on
similarities in the explanatory variables.
3. Data
The data used in this study is obtained from the
National Sample Survey Organization (NSSO).
Data is collected by NSSO on a regular basis in
India on various aspects as part of the National
Sample Survey. This particular data set contains
data collected directly from the households
covering the entire country. Various aspects
covered in the survey include demographic
characteristics, health related factors as well as
hospital related variables. The demographic
characteristics include items such as age, gender,
social group (caste), income, education, marital While fitting the mathematical function, the
status, occupation, size of household, number of neural prediction models also create the profiles
family nuclei, rural or urban sector etc. The for each of the segments. The profile of the top
health related factors covered were source of segment consisting of 98-100 percentile with
drinking water, agency providing the water for respect to the duration of stay in the hospital is
drinking, application of items such as iodine, presented in Figure 1. Similar profile with
insecticide, vaccination, environmental factors respect to the hospital expenditure is presented in
such as type of drainage, type of latrine, habit of Figure 2.
keeping animals inside or near residential area,
type of dwelling, consumption of items such as
alcohol, ganja, charas, opium, tobacco etc. The
hospital related items include duration of stay in
the hospital, hospital expenses, type of hospital,
type of ward, availing of services such as x-ray,
medicines, surgery, services other than drugs,
etc. This data is generally used for policy
formulation by agencies like Planning
Commission, Ministry of Health etc.

4. Results
As mentioned earlier, the duration of hospital
stay and the expenditure are the two variables Figure 1. Profile of the 98-100 Percentile
selected for prediction. Each variable is divided Segment – Duration of length of stay
into 8 unequal segments (octiles). The first
octile consisted of the top 2 percent of the data
representing the 98-100 percentile. Similarly,
the last octile consisted of the bottom 2 percent
consisting of 0-2 percentile. The second and the
seventh segments each consisted of 8 percent of
the data consisting of 90-98 percentile and 2-10
percentile respectively. The third and the sixth
segments each consisted of 15 percent of the data
with 75-90 percentile and 10-25 percentile
respectively. The remaining two segments
consisted of 25 percent of the data each.
Neural prediction functions were fitted with
the two dependent variables using the other
Figure 2. Profile of the 98-100 Percentile
variables as the explanatory variables. IBM’s
Segment – Hospital Related Expenses
Intelligent Miner was used for fitting the neural
prediction functions. Two-thirds of the data were
The factors that help in differentiating the
used for training and the remaining one-third
profiles of each of the segments of the duration
was used for verification and validation. The
of stay in the hospital are identified and
prediction abilities of each of the neural
presented in Table 1. Most of the variables show
predication functions were measured by the
the impact on the duration as expected. For
normalized error. The duration of stay in the
example, the first segment (98-100 percentile)
hospital was used as one of the explanatory
has an average stay of 36 days. This segment is
variables while fitting the function for the
characterized by male patients (63 percent)
hospital expenditure. The normalized error for
where as the last segment (0-2 percentile) is
the prediction for duration was 22.64 percent. In
characterized by female patients (58 percent).
other words, the model was able to predict the
Similarly, 98 percent of the patients in the first
appropriate octile group with an accuracy level
segment live in independent dwelling units
of 78 percent. Similarly, the normalized error for
where as only 38 percent of the last segment live
the expenditure was 10.32 percent, indicating an
in independent houses. Only those variables,
accuracy level of about 90 percent.

3
which differentiate between various segments,
are presented in the table. Some of the important 110

factors are discussed below: 100 98-100

90 90-98

4.1. Demographic characteristics 80

75-90
50-75
25-50
One of the most important differentiating 70
10-25
demographic characters is the age group. As 60
2-10
expected, the long duration segments have 50 0-2

higher percentage of patients belonging to older 40

age groups (40 years and above) where as the
shorter duration segments have younger patients.
Also, as the number of households with single-
family nuclei is increasing, the duration of stay
reduces. The income group has a positive
relationship with the duration of stay. Possibly,
this is owing to the capacity of the patient to pay.
The social group as defined by the caste of the
patients indicates that those belonging to
scheduled caste and scheduled tribe spend lesser
and lesser number of days in the hospital. The
patients in the urban sector spend more number
of days in the hospital as compared to their
counter parts in the rural sector. Similarly the
type of occupation appears to have an impact on
the stay in the hospital. Other demographic
characteristics have the kind of relationship with
the duration on the expected lines. One
exception is the education level (illiterates).
Figures 3 and 4 show the trends with respect to
selected demographic characteristics with respect
to duration as and hospital related expenses.
120
98-100
100
90-98
Income Single Married Other
<=500 Family Castes
Nuclei
C harac teristic
Figure 4. Trends of expenditure with respect to
selected demographic characteristics
Those who incur higher expenses are married
and primarily belong to other castes. At the
same time, those who incur lower expenses are
with single family nuclei and belonging to the
lower income group (less than Rs. 500)
4.2. Health related aspects
The consumption of items such as alcohol, ganja,
opium, charas, tobacco and smoking habit appear
to have an impact on the stay in the hospital. As
expected, less the consumption of these items,
less is the duration of stay in the hospital. Those
who do not keep animals in the residential area
spend less number of days in the hospital.
Similarly many other health related aspects have
the impacts as expected. The exceptions are
drainage, latrine and application of insecticide.

80 75-90
Interestingly, tap water appears to lead to longer
50-75 durations as compared to tube well water. This
60
25-50 could imply that the tap water needs to be treated
40 10-25 properly. At the same time, government as the
20
2-10
water supply agency appears to be better than
0-2
0 others. Figures 5 and 6 present the trends with
respect to selected health related aspects.
Not Married

Other Caste

Nuclei
Family
Independent

Single

The effect of health related aspects on

House

hospital expenses is not as marked as in the case

of length of stay in the hospital. Nevertheless,
C harac teristic the three most important health related aspects
effecting the hospital expenses are the water
Figure 3. Trends of length of stay with respect to supply agency, source of drinking water, habit of
selected demographic characteristics keeping animals in the residential area. Among
these, the impact of source of water does not
show any particular trend. Those who incur
lower hospital expenses are the ones who do not
keep animals within the residential area, depend
on government water supply.

4
 expected relationships with respect to the
100
hospital related items. As a matter of fact there
90 are no surprises with respect to the hospital
80
98-100
related items. Since these as well as many of the
90-98

70 75-90
health related aspects appear impact the duration
50-75 on the expected lines, it could be justifiably
60
25-50 concluded that the impacts of the demographic
50 10-25 characteristics as indicated are also as reliable.
40
2-10
The length of stay in the hospital had a
0-2
30 direct impact on the expenses, for obvious
20
reasons. Similarly, availing free medicines, free
No animals No Alcohol Tap Water No surgery and other services other than drugs are
Smoking highly correlated (negative correlation) with the
C harac teristic hospital expenditure. Needless to say, this
relationship is as expected. The patients who
Figure 5. Trends of length of stay with respect to incur higher expenses are mainly in the private
selected health related aspects hospitals or in special wards where as those who
stayed in the public hospitals and free or general
wards incurred lower expenses. In other words,
100 these patients were fully utilizing the support
90
provided by the government. A quick analysis
98-100
90-98
of the impact of demographic characteristics on
80
75-90 the duration of stay indicates that, providing
50-75 primary education could have a favorable impact
70
25-50 the duration of stay in the hospital. Similarly,
60
10-25
proper housing and proper education with
2-10
respect to keeping animals in the residential
50 0-2
areas could reduce the stay in the hospital. The
40 source and agency for water supply and other
Government Tap water No Animals related health aspects could help the demand on
Water Supply
hospital services in the long term. At the same
C harac teristic
time, there is a need to target the rural population
more effectively as these patients appear to stay
Figure 6. Trends of expenditure with respect to longer in the hospital. Figures 7 and 8 present
selected health related aspects the trends with respect to selected hospital
related items.
4.3. Hospital Related Items
90

The duration of stay in the hospital is influenced

80
by the type of hospital and type of ward. Public 98-100
hospitals appear to attract longer stay where as 70 90-98

private hospitals attract shorter stays. Similarly, 60

75-90

the long duration segment is characterized by 50-75

25-50
free wards. If the medicines are fully paid, the 50
10-25
stay tends to be shorter where as if the medicines 40 2-10
are subsidized, the stay tends to be longer. 0-2

Similarly, vaccination tends to reduce the 30

duration in the stay. Those who spend more than 20

their monthly per capita expenditure on the P ublic Free Ward Medicines Other
Hospital Fully P aid Facilities
hospital stay are defined as high spenders. The Not Availed
long duration segment is characterized by a C harac teristic
higher percentage of high spenders. This
relationship could be that these patients are high
Figure 7. Trends of length of stay with respect to
spenders because they had to stay longer in the
selected hospital related aspects
hospital. Nevertheless, these profiles follow the

5
 drinking water source, agency for drinking water
120
supply, consumption of charas, ganja, tobacco
100
98-100 etc., and various hospital related items. The
90-98
normalized error with respect to the length of
80 75-90
50-75
stay in the hospital was 22.64 percent where as
60
25-50
that of the hospital related expenses was only
40 10-25 10.32. In other words, the predicting ability of
2-10 the neural prediction models was much higher
20
0-2 with respect to the hospital related expenses as
0 compared to the length of stay.
P ublic Free Ward 0-5 Days Medicines
Hospital Duration Fully P aid
The profiles of each of the octiles indicate a
C harac teristic
very interesting impact of the demographic and
health related aspects on the length of stay as
well as the hospital related expenses. Large
Figure 8. Trends of expenditure with respect to
number of those with short length of durations in
selected hospital related aspects
the hospital as well as those, whose hospital
As mentioned earlier, the profiles of the
related expenses are low, belong to single-family
patients with respect to the hospital expenses are
nuclei. At the same time, the group with long
presented in Table 2. The predictive ability of
length of stay in the hospital is dominated by
the neural prediction model with respect to the
unmarried persons where as the one incurring
hospital expenditure is much better with an error
high expenses is dominated by married persons.
rate of about 10 percent only. The average
Source of water as well as the water supply
expenditure incurred by the top 98-100
agency has an important bearing on the length of
Percentile segment was Rs. 22,728 where as the
stay as well as the hospital related expenses. The
expenditure incurred by the bottom 2 percentile
habit of keeping animals within the residential
was Rs. 207 only. As expected, patients in the
area increases the chances of longer stay in the
older age group (more than 40 years) incur
hospital as well as higher hospital related
higher expenditure as compared to the patients in
expenses.
the younger age group. Similarly, those patients
Social groups belonging to scheduled castes
who incur higher hospital related expenses are
and scheduled tribes dominate the groups with
predominantly from rural areas and involved in
shorter stay in the hospital as well as lower level
agricultural related activity. Needless to say, the
of expenses. This could be the result of their
income levels have a direct relationship with the
economic condition. The type of occupation
hospital expenses. Those with primary or above
does show a trend with respect to both the
primary education get concentrated in the groups
dependent variables, but none of the occupations
with lower expenses. Patients incurring higher
dominate any of the groups. Thus, occupation
expenses predominantly belong to social group
seem to have only a limited impact on the two
other than scheduled caste and scheduled tribes,
dependent variables.
with few having single-family nuclei.
Consumption of various harmful items such
Interestingly, patients who are married appear to
as tobacco, charas, ganja, opium, alcohol etc.
be concentrated among the groups incurring
appear to impact the duration of stay on the
higher expenditure. The most important among
expected lines. Similarly, the impact of all the
the health related aspects, appear to be the source
hospital related items on the length of stay as
of water and the agency supplying water, and the
well as the expenses is on expected lines. These
habit of keeping animals within the residential
impact directions indirectly validate the
premises.
relationships between the two dependent
variables and the demographic, health related
5. Conclusions and hospital related variables.
Neural prediction functions were fitted to predict
the length of stay in the hospital as well as the 6. Policy implications
hospital related expenses. The explanatory
variables used are the demographic Based on the profiles of patients in each of the
characteristics such as age, gender educational segments, it is possible to identify directions for
background etc., health related aspects such as long-term policy. Providing drinking water from
appropriate source and by the appropriate agency

6
could reduce the duration as well as the hospital
related expenses. Similarly, investment in
primary education and creating awareness in
better management at residences will go a long
way in reducing the hospital related expenses. It
is necessary to target the free supply of
medicines and other health services at the people
living in rural sector. Interestingly, promoting
smaller nuclear families will have a positive
impact on the two indicators namely duration of
stay and hospital related expenses. At the same
time it is also necessary to target the social
groups such as scheduled caste and scheduled
tribes for providing free medicines and other
related services. The average expenditure in the
top 98-100 percentile segment was Rs. 22,728
where as the average expenditure in the next two
segments was Rs. 12,001 and Rs. 6,814
respectively. If some of the policy initiatives
mentioned above could shift the patients by two
or more segments, from the top 98-100
percentile, the total benefit accruing to the
society will be immense.
References
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Table 1. Segment-wise Profile of Patients Based on the Duration of Stay in the Hospital
Octile Segment (Percentile)
Characteristic Attribute
98-100 90-98 75-90 50-75 25-50 10-25 2-10 0-2
Demographic Characteristics
Gender Male 63 62 61 56 52 47 44 42
Illiterate 12 21 27 30 42 56 73 88
Education
Primary 42 31 24 18 11 5 2 0
Family Nuclei One 56 61 62 66 68 73 75 87
Independent
Dwelling
House 98 95 91 85 75 66 55 38
Marital Status Not Married 61 54 43 44 30 18 11 3
<=20 12 13 14 19 28 32 39 40
20-40 27 27 30 30 32 33 36 45
Age
40-60 37 36 36 32 26 24 18 12
>60 24 22 17 15 12 10 6 2
<=500 53 61 73 77 82 83 85 92
Current Income
>500 47 39 27 33 18 17 15 8
Casual Lab-
Agriculture 17 20 22 22 22 21 15 10
Student 38 28 20 13 7 3 2 0
Occupation
Domestic Work
8 12 15 23 31 36 36 26
Others 28 30 30 25 20 14 0 0
Sector Urban 50 46 51 49 48 43 35 39
Social Group Others 87 83 82 78 74 65 55 39
Health Related Aspects
No 25 35 37 42 46 53 63 74
Drainage
Open Pucca 43 34 30 23 17 11 6 3
Insecticide No 73 77 78 79 81 83 87 88
Keep Animals No 43 47 55 59 61 62 65 71
None 25 30 37 40 49 61 73 87
Latrine
Others 28 25 17 14 8 4 2 0
Government 67 62 63 63 62 64 64 71
Water Agency
Others 31 36 33 32 31 28 28 22
Tap 59 51 53 50 48 40 35 28
Water Source
Tube well 27 27 27 27 28 33 36 42
Alcohol No 57 64 72 79 87 92 93 95
Charas No 62 69 77 84 91 96 98 99
Ganja No 61 68 77 84 91 96 98 99
Opium No 62 69 77 84 91 96 98 99
Tobacco No 52 55 65 73 80 82 84 87
Smoking No 47 54 62 68 75 80 80 78
Hospital Related Items
Public 73 64 54 47 42 39 34 26
Type of Hospital
Private 11 18 24 32 37 40 44 51
Free 71 62 53 49 46 45 42 37
Type of Ward
General 21 25 33 38 42 45 49 56
Subsidized 55 41 25 15 11 6 4 2
Medicines
Fully Paid 37 50 63 68 70 72 72 75

8
 Octile Segment (Percentile)
Characteristic Attribute
98-100 90-98 75-90 50-75 25-50 10-25 2-10 0-2
Other Than Drugs Not Availed 63 65 68 68 69 72 73 80
Vaccination Yes 76 81 84 87 88 88 89 93
High Spender Low 77 72 68 64 59 54 50 46
Average Duration Days 36 24 17 13 8 6 4 3
Normalized Error 0.14 0.18 0.19 0.2 0.24 0.27 0.3 0.31
Overall Normalized
0.2264
Error

Table 2. Segment-wise Profile of Patients Based on Hospital Related Expenses

Octile Segment (Percentile)

Characteristic Attribute
98-100 90-98 75-90 50-75 25-50 10-25 2-10 0-2
Demographic Characteristics
<=20 8 11 13 18 27 31 29 35
20-40 30 32 28 28 30 33 31 34
Age
40-60 35 34 29 25 23 24 26 24
>60 27 23 30 29 20 12 14 7
<=500 61 68 70 74 78 88 95 98
Current Income
>500 39 32 30 26 22 12 5 2
Agricultural 38 26 24 21 18 16 13 9
Student/
Occupation
Domestic
Help 21 35 38 39 39 39 39 40
Sector Urban 53 50 50 46 41 41 42 49
Below
Education Primary 8 9 10 12 12 14 15 16
Primary 10 15 16 15 15 15 15 15
Family Nuclei One 54 58 61 63 70 75 76 79
HH Size 4 to 7 43 56 50 51 64 61 65 63
Marital Status Married 75 74 66 63 56 56 54 48
Social Group Others 93 88 83 77 70 64 61 59
Health Related Aspects
Government 52 55 59 59 64 69 78 81
Water Agency
Unknown 38 39 35 35 31 28 19 17
Tap 49 49 47 46 46 44 56 64
Water Source
Tube well 42 36 32 30 27 29 21 15
Keep Animals No 54 55 58 56 58 59 70 88
Hospital Related Items
0-5 0 3 12 25 41 42 48 85
5-10 5 21 30 28 28 33 41 14
Hosp Duration 10-15 25 25 16 11 8 8 5 1
15-20 22 17 12 7 6 6 2 0
>20 48 34 30 29 17 11 4 0
Fully Paid 97 93 80 74 67 33 1 0
Medicines
Free 0 0 0 0 3 23 71 99
Not Availed 54 55 54 60 68 73 71 68
Other than Drugs
Fully Paid 42 38 26 17 12 4 1 0

9
 Octile Segment (Percentile)
Characteristic Attribute
98-100 90-98 75-90 50-75 25-50 10-25 2-10 0-2
Not Availed 16 34 52 65 79 83 82 89
Surgery
Fully Paid 82 58 26 11 2 0 0 0
Public 7 15 21 34 50 87 88 87
Type of Hospital
Private 92 78 61 48 37 7 4 3
Type of Ward Free 1 7 14 28 47 90 97 98
General 34 58 53 45 39 9 2 0
Special 63 30 17 11 6 0 0 0
Average Exp 22728 12001 6814 3622 1809 906 492 207
Normalized Error 0.11 0.12 0.13 0.13 0.1 0.06 0.05 0.07
Overall Normalized
0.1032
Error

10