Referral strategy, incentive scheme, and network externalities in a multisite service system

Xiuli CHAO, Liming LIU, Weixin SHANG, Shaohui ZHENG

Research output: Other Conference ContributionsPresentationPresentation

Abstract

In Hong Kong, the public hospital system consists of seven clusters, and each patient is expected to receive service either from his home public hospital or from a private hospital. Hong Kong Hospital Authority (HKHA) manages the public system and faces two major challenges. First, the waiting times vary significantly across clusters and HKHA starts to refer a patient from a heavy-loaded cluster to another low-loaded one. How should HKHA make the referral decisions and when does referral strategy reduce the system cost effectively? Second, HKHA starts to cooperate with private hospitals and partially subsidizes patients who receive services from private hospitals. What is the impact of the subsidy? We analyze a multisite service system wherein a customer can accept service at his home station, or switch to another station under a switching cost, or reject the service under a rejection cost, observing the system workload. We show the optimal referral strategy follows some switching curves, and identify conditions under which referral is effective in reducing system cost. Providing subsidy can better align individual patient’s routing decision with the system optimal one and hence reduce system cost, but full coordination cannot be achieved due to network externalities.
Original languageEnglish
Publication statusPublished - 1 Jul 2016
EventManufacturing and Service Operations Management (MSOM) 2016 Conference - The University of Auckland Business School, Auckland, New Zealand
Duration: 29 Jun 20161 Jul 2016
https://www.informs.org/Meetings-Conferences/INFORMS-Conference-Calendar/MSOM-2016

Conference

ConferenceManufacturing and Service Operations Management (MSOM) 2016 Conference
CountryNew Zealand
CityAuckland
Period29/06/161/07/16
Internet address

Fingerprint

Referral
Service system
Incentive schemes
Network externalities
Hong Kong
Costs
Authority
Private hospitals
Public hospitals
Subsidies
Switching costs
Waiting time
Routing
Workload

Cite this

CHAO, X., LIU, L., SHANG, W., & ZHENG, S. (2016). Referral strategy, incentive scheme, and network externalities in a multisite service system. Manufacturing and Service Operations Management (MSOM) 2016 Conference, Auckland, New Zealand.
CHAO, Xiuli ; LIU, Liming ; SHANG, Weixin ; ZHENG, Shaohui. / Referral strategy, incentive scheme, and network externalities in a multisite service system. Manufacturing and Service Operations Management (MSOM) 2016 Conference, Auckland, New Zealand.
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CHAO, X, LIU, L, SHANG, W & ZHENG, S 2016, 'Referral strategy, incentive scheme, and network externalities in a multisite service system' Manufacturing and Service Operations Management (MSOM) 2016 Conference, Auckland, New Zealand, 29/06/16 - 1/07/16, .

Referral strategy, incentive scheme, and network externalities in a multisite service system. / CHAO, Xiuli; LIU, Liming; SHANG, Weixin; ZHENG, Shaohui.

2016. Manufacturing and Service Operations Management (MSOM) 2016 Conference, Auckland, New Zealand.

Research output: Other Conference ContributionsPresentationPresentation

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CHAO X, LIU L, SHANG W, ZHENG S. Referral strategy, incentive scheme, and network externalities in a multisite service system. 2016. Manufacturing and Service Operations Management (MSOM) 2016 Conference, Auckland, New Zealand.