Hospital Referral and Capacity Strategies in a Two-Tier Healthcare System

40 Pages Posted: 2 Apr 2019

See all articles by Jianjun Wang

Jianjun Wang

Dalian University of Technology

Zhong-Ping Li

Dalian University of Technology

Jim (Junmin) Shi

New Jersey Institute of Technology

Jasmine Chang

NJIT

Date Written: March 8, 2019

Abstract

Healthcare referral has been widely advocated and adopted through the implementation of a two-tier healthcare system whereby patients are transferred from a comprehensive hospital provider (CHP) to a primary hospital provider (PHP). However, operationally, exactly how to implement the healthcare referral program remains a challenging research question, especially when considering the possibility of patient revisits and the coordination needed between the CHP and PHP. To address such a challenge, this paper considers a two-tier healthcare system consisting of a CHP and a PHP. By establishing a three-stage Stackelberg game within a queuing framework among the CHP, the PHP and their patients, we first investigate the equilibrium strategy in terms of the CHP’s referral rate and the PHP’s capacity level, and then examine the impact of revisit rates and referral payments (RP) on the healthcare system and the equilibrium outcomes (e.g., expected utility, social welfare, and waiting times). Two major findings of our study are: (1) Both the equilibrium referral rate and the equilibrium capacity first increase and then decrease according to the revisit rate; in addition, the patient referral process always improves the PHP's performance but is likely to sacrifice the social welfare of the CHP. (2) There exists an RP threshold value such that if the RP is below the threshold, then all the permitted patients should be referred and the system performance will be enhanced, in which case a win-win-win situation in terms of expected utilities can be attained that benefits all the stakeholders, i.e., the CHP, the PHP, and the patients. Otherwise, only a portion of the permitted patients can be referred, and an increase in RP always reduces the efficiency of the healthcare delivery system, i.e., a higher RP mitigates the operational performance of the healthcare system. Our analysis sheds light on how to implement a healthcare referral scheme.

Keywords: Healthcare operations, two-tier healthcare system, queuing-game, referral rate, capacity, referral payment

Suggested Citation

Wang, Jianjun and Li, Zhong-Ping and Shi, Jim (Junmin) and Chang, Jasmine, Hospital Referral and Capacity Strategies in a Two-Tier Healthcare System (March 8, 2019). Available at SSRN: https://ssrn.com/abstract=3348853 or http://dx.doi.org/10.2139/ssrn.3348853

Jianjun Wang

Dalian University of Technology

Huiying Rd
DaLian, LiaoNing, Liaoning 116024
China

Zhong-Ping Li

Dalian University of Technology

Huiying Rd
DaLian, LiaoNing, Liaoning 116024
China

Jim (Junmin) Shi (Contact Author)

New Jersey Institute of Technology ( email )

University Heights
NJIT
Newark, NJ US 07102
United States
9736427027 (Phone)

HOME PAGE: http://https://web.njit.edu/~jshi/

Jasmine Chang

NJIT ( email )

University Heights
Newark, NJ 07102
United States
9735966267 (Phone)

HOME PAGE: http://https://management.njit.edu/faculty/jschang

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