Uncertainty

Running head: DECISION OF UNCERTAINTY Decision to Expand or Not to Expand Services Century 2000 Daycare Center, a local childcare center, based in Alabama, currently accepts children ages three weeks to 15, offering part-time and full-time care. Current hours of operation are 5:00 a.m. – midnight, Monday through Friday. According to the Department of Health and Human Services Administration on Aging (AoA) (2009), the US population is aging fast, and the growth of the older population will continue significantly into the future. Century realizes population growth within the 65 and older population brings significant opportunities to service this community, therefore owners and operators are trying to decide whether or not to expand services and provide adult daycare services for people 65 years and older. According to the AoA, the count of people 65 and older was 37.3 million in 2006 but the AoA expects it to approximate 71.5 million by 2030 (Department of Health and Human Services Administration on Aging, 2009). Providing adult daycare for this population could result in a significant increase in revenue and profits for Century, if the rate of growth continues as expected, but it would also cause significant increase in risks and costs associated with the services provided. Century’s owners and operators must decide whether to expand current daycare services based on the likelihood the 65 and older population in the United States will continue to increase in record numbers, affording an opportunity for significant revenue growth. Another option for Century is to continue with business as usual, only recognizing marginal revenue growth, thus forgoing the opportunity to recognize unprecedented profits. Research In an attempt to make the right decision for the company, Century decided to research expanding based on population growth in the 65 and older segment of the US population. Century researched data sets obtained from the Department of Health and Human Services Administration on Aging (2009), which consisted of aging statistics from 1900 through 2008, and projections into the year 2050. Century also obtained information from the NCBI’s ( National Center for Biotechnology Information) Disability Trends (2009) website for information on the inability of adults between ages 18 – 64 to perform specific activities of daily living (ADLs) and instrumental activities of daily living (IADLs). This information helped Century make an accurate decision by revising a probability, obtaining and evaluating additional information, and make subsequent assumptions about the likelihood of future occurrences and outcomes. Because the decision hinges on growth of the US population within the 65 and older segment, Century’s research focused on this group. After gathering all relevant data, Century looked to interpret the findings and make an accurate decision. Interpretation of Data Century chose Baye’s Theorem to interpret the data. Because Century was researching two mutually exclusive and exhaustive outcomes, evaluating available information and opinions, and then estimating the probability to make the most accurate decision about expanding, Baye’s seemed right. Century planned to use Baye’s to predict the confidence in rapid growth of the United States’ population aged 65 and older, predict the population’s need for adult daycare due to limited ADLs and IADLs performance, and predict confidence levels for expanding. After selecting Baye’s Theorem, Century gathered the necessary data. AoA stated 12.6% of the population is 65 or older ( Department of Health and Human Services Administration on Aging, 2009). Century determined the two mutually exclusive and collectively exhaustive variables are: A1 = adults 65 and older A2 = adults 18 - 64 Making the aforementioned determinations helped Century decide whether or not to expand services offered to include adult daycare to the 65 and older segment of the US population. Century knew the current probability of P (A1) = 12.6 and the 65 and older population is forecasted for continued growth through 2030 (Department of Health and Human Services Administration on Aging, 2009). Thus, the prior probability of growth below the 65 and older segment is P (A2) = 87.4. Review of information from the AoA and NCBI revealed if someone is 65, or older, there is a 39.5% chance of difficulty performing ADLs and IADLs. Stated another way, B = difficulty or limited ability to perform ADLs and IADLs, and this is written P (B|A1) = .395. NCBI also indicated that not being 65 or older does not mean people are exempt from needing adult daycare (NCBI Disability Trends, 2009). Adult daycare needs also occur in the population segment of 18 – 64 year-olds. The probability of needing daycare under the age 65 is 4.1%, which is written as P (B|A2) = .041 (NCBI Disability Trends, 2009). Posterior probability according to Baye’s shows Century the following: P(A1|B) = P(A1)P(B|A1) / P(A1)P(B|A1) + P(A2)P(B|A2) = (.126)(.395) / (.126)(39.5) + (.874)(.041) = .0497 / .0855 = .58 The above calculations show the probability of population growth in the 65 and older segment is .58 given there is limited ADLs and IADLs present in the population. The AoA revealed a 12.6% chance of selecting someone from the US population that is 65 or older, but that chance rises to .58 from .126 if the person has limited ADLs and IADLs. View the table below for a summary of this information. Event Prior Probability P(A1) Conditional Probability P(B|A1) Joint Probability P(A1 and B) Posterior Probability P(A1|B) 65 and older adult .126 .395 .0497 .58 18 – 64 adult .874 .041 .0358 .42 P(B) = .0855 1.00 Based on the above calculations, there is a .58 chance of the 65 and older population increasing and needing adult daycare, and .42 probability of other segments increasing and needing adult day care. Decision Based on the above analysis of available data, Century should expand services to include adult daycare. Baye’s Theorem reveals there is more than a 50% chance the 65 and older population will increase and need daycare services because of difficulty performing one or more ADLs and IADLs. This should increase Century’s comfort level about the idea of expansion to cater to the aging population of the United States. As the population continues to age, so does the likelihood of finding someone physically or mentally impaired.