Cross-Cluster Referrals and Opt-out Subsidies in Healthcare Systems
Prof. Weixin SHANG
Professor of Department of Operations and Risk Management, Faculty of Business, Lingnan University
Date: 18 December 2024 (Wednesday)
Time: 15:00 – 16:30
Venue: E22-G008
Host: Prof. Grace Qi FU, Associate Professor in Business Intelligence and Analytics, Assistant Dean (Planning and Accreditation)
Abstract
Extremely long and varied waiting times for specialty services are a longstanding and pressing problem for many public healthcare systems, whereas private hospitals can provide the same services with minimal waiting times but at significant cost. We explore two approaches to tackle this problem: cross-cluster referrals, which enable patients to switch from their home cluster to other clusters for shorter waiting times, and opt-out subsidies, which involve subsidizing patients who choose to receive private services outside the public system. While these practices are observed in some healthcare systems, there are few related studies in the literature. We establish a multi-cluster service network model to analyse the decision-making of individual patients and to determine the optimal patient-routing policy for overall system optimization. Additionally, we conduct both analytical and numerical investigations to explore the effective implementation of the two approaches. Our findings reveal that while cross-cluster referrals can generally improve system performance, they may paradoxically worsen system performance under certain conditions. Moreover, we demonstrate that the opt-out subsidy scheme is a justified measure of societal well-being, as it helps mitigate the negative externalities that arise from individual optimization. However, unlike the case of a single-server queue, a static subsidy scheme cannot, in general, fully coordinate the multi-cluster network due to the cross-cluster effect generated by patient referrals. Cross-cluster referrals are effective when there is a significant disparity in waiting times between clusters. Furthermore, it is crucial to exercise proper operational control to prevent the potential pitfall of excessive referrals, which could ultimately worsen overall system performance. Although a fixed opt-out subsidy does not completely eliminate negative externalities, it is deemed publicly acceptable and has the capacity to encourage self-optimizing patients to align their behaviour more closely with the desired outcomes of a socially optimal system. This mechanism is particularly effective when all clusters are overloaded.
Speaker
Professor Weixin Shang is a Professor in the Department of Operations and Risk Management, Faculty of Business, Lingnan University (Hong Kong). He obtained his Bachelor degree from Tsinghua University and his PhD degree from the Hong Kong University of Science and Technology. Before joining Lingnan University (Hong Kong), he worked in School of Management, Fudan University from 2007 to 2012. His research interests include sustainable operations management, service operations management, and information economics. He has published papers in Management Science, Manufacturing and Service Operations Management, Production and Operations Management, and Naval Research Logistics, etc. He serves as an Associate Editor for Decision Sciences.
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