Contracts to Coordinate Healthcare Providers in the Telemedicine Referral System

Xianyi Wang, Xiaofang Wang and Hui He
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Xianyi Wang: School of Business, Renmin University of China, Beijing 100872, China
Xiaofang Wang: School of Business, Renmin University of China, Beijing 100872, China
Hui He: Business School, Beijing Technology and Business University, Beijing 100048, China

Sustainability, 2021, vol. 13, issue 18, 1-25

Abstract: With the help of telemedicine, healthcare providers can increase patients’ access to high-quality services while reducing the medical expenditure, especially for patients in remote areas. Once advanced care is needed, local patients will first be referred to an online health service and then be referred to the offline hospital if the online healthcare fails. In practice, local community hospitals and the advanced tertiary hospitals generally lack financial incentives to exert costly, but non-reimbursable, effort to avoid poor patient outcomes. Therefore, we build a new model to analyze the interaction between these two service providers, promoting them to exert the right effort by designing payment contracts. Our results show that neither fee-for-service nor bundled payment contracts can achieve the social optimum. Tertiary hospitals always exert less effort than the socially-optimal effort while the community hospital may exert less or more effort depending on the online treatment cost. Then, we propose a performance-based bundled payment contract that can coordinate both hospitals’ decisions to achieve socially optimal outcomes. Finally, we numerically show the impact of the referral service fee and the online treatment cost on the efficiency of these contracts.

Keywords: contract design; telemedicine services; healthcare coordination; pay-for-performance; efficiency; payment system; community health (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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