The impact of reimbursement policy on social welfare, revisit rate, and waiting time in a public healthcare system: Fee-for-service versus bundled payment

Pengfei Guo, Christopher S. Tang, Yulan Wang, Ming Zhao

Research output: Journal article publicationJournal articleAcademic researchpeer-review

26 Citations (Scopus)

Abstract

This paper examines the impact of two reimbursement schemes, fee-for-service and bundled payment, on the social welfare, the patient revisit rate, and the patient waiting time in a public healthcare system. The two schemes differ on the payment mechanism: under the fee-for-service scheme, the healthcare provider receives the payment each time a patient visits (or revisits) whereas, under the bundled payment scheme, the healthcare provider receives a lump sum payment for the entire episode of care regardless of how many revisits a patient incurs. By considering the quality-speed trade-off (i.e., a higher service speed reduces service quality, resulting in a higher revisit rate), we examine a three-stage Stackelberg game to determine the patients’ initial visit rate, the service provider’s service rate (which affects the revisit rate), and the funder’s reimbursement rate. This analysis enables us to compare the equilibrium outcomes (social welfare, revisit rate, and waiting time) associated with the two payment schemes. We find that when the patient pool size is large, the bundled payment scheme dominates the fee-for-service scheme in terms of higher social welfare and a lower revisit rate, whereas the fee-for-service scheme prevails in terms of shorter waiting time. When the patient pool is small, the bundle payment scheme dominates the fee-for-service scheme in all three performance measures.

Original languageEnglish
Pages (from-to)154-170
Number of pages17
JournalManufacturing and Service Operations Management
Volume21
Issue number1
DOIs
Publication statusPublished - 1 Jan 2019

Keywords

  • Bundled payment
  • Fee-for-service
  • Healthcare operations
  • Queueing

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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