Pricing Strategy and Coordination of Healthcare Service Dual-channel Supply Chain Considering Patients Referral

Abstract

Due to the growing imbalance between supply and demand in healthcare services, Internet medical service has emerged and developed rapidly, gradually forming a dual-channel healthcare service mode that integrates both online and offline channels. Considering the potential for misdiagnosis and the varying severity of patients’ conditions, this paper constructs a healthcare service dual-channel supply chain comprising patients, offline healthcare providers and online healthcare platforms. Optimal pricing strategies of healthcare services within a two-way referral mode are derived under centralized and decentralized decision-making scenarios. We introduce cost-sharing contracts as a mechanism for supply chain coordination. The impacts of key factors on decision-making are explored, namely, the probability of effective diagnosis on online platforms, the probability of patients with mild conditions, and the referral service fees. Results indicate that both the optimal prices and expected profits of the online healthcare service channel and the dual-channel model increase as the effectiveness of diagnosis on the online platform improves. Compared to the one-way referral mode, a greater number of patients are directed to online channels, thereby enabling more efficient allocation of resources across the entire healthcare service market. Moreover, cost-sharing contracts can achieve Pareto improvement in the performance of the dualchannel healthcare service. Our study provides a theoretical basis for pricing decisions by members of the dual-channel healthcare service supply chain, facilitating the creation of greater profits and social value.

Keywords

Healthcare service supply chain / dual-channel / internet medical service / patient referrals / pricing strategy

References

[1] Anderson S, Gabszewicz J. The media and advertising: A tale of two-sided markets. Handbook of the Economics of Art and Culture, 2006, 1: 567-614.

[2] Adida E, Bravo F. Contracts for healthcare referral services: Coordination via outcome-based penalty contracts. Management Science, 2019, 65(3): 1322-1341.

[3] Akçura M T, Srinivasan K. Research note: Customer intimacy and cross-selling strategy. Science, 2005, 51(6): 1007-1012

[4] Alger I, Salanié F. A theory of fraud and overtreatment in experts markets. Journal of Economics & Management Strategy, 2006, 15(4): 853-881

[5] Best T J, Sandıkçı B, Eisenstein D D, Meltzer D O. Managing hospital inpatient bed capacity through partitioning care into focused wings. Manufacturing & Service Operations Management, 2015, 17(2): 157-176.

[6] Chen N, Bai D, Lv N. Towards an integrated online-offline healthcare system: Exploring Chinese patients’ preferences for outpatient follow-up visits using a discrete choice experiment. Systems, 2024, 12(3): 75.

[7] Choi T-M, Wallace S W, Wang Y. Risk management and coordination in service supply chains: Information, logistics and outsourcing. Journal of the Operational Research Society, 2016, 67(2): 159-164.

[8] Dadlani R, Mani S, Au J G, Mohan D, Rajgopalan N, Thakar S, Aryan S, Hegde A S. The impact of telemedicine in the postoperative care of the neurosurgery patient in an outpatient clinic: A unique perspective of this valuable resource in the developing world–An experience of more than 3000 teleconsultations. World Neurosurgery, 2014, 82(3–4): 270-283.

[9] Deo S, Iravani S, Jiang T, Smilowitz K, Samuelson S. Improving health outcomes through better capacity allocation in a community-based chronic care model. Operations Research, 2013, 61(6): 1277-1294.

[10] Grennan M. Bargaining ability and competitive advantage: Empirical evidence from medical devices. Management Science, 2014, 60(12): 3011-3025.

[11] Guo J, Zhou Y, Li B. Service-cost-sharing contract design for a dual-channel supply chain with free riding. Journal of Systems Science and Systems Engineering, 2022, 31(3): 338-358.

[12] Haghgou F, Taleizadeh A A, Amalnik M S, Hajiaghaei-Keshteli M. Optimal pricing and patient satisfaction optimization for healthcare providers. Expert Systems with Applications, 2024, 247: 123229.

[13] Jang H, Lee J-H. A hierarchical location model for determining capacities of neonatal intensive care units in Korea. Socio-Economic Planning Sciences, 2019, 68: 100695.

[14] Jiang H, Pang Z, Savin S. Performance-based contracts for outpatient medical services. Manufacturing & Service Operations Management, 2012, 14(4): 654-669.

[15] Jue J S, Spector S A, Spector S A. Telemedicine broadening access to care for complex cases. Journal of Surgical Research, 2017, 220: 164-170.

[16] Kamali A H, Taleizadeh A A, Toloo M. A novel approach to optimize an integrated network design and pricing of a healthcare supply chain. Expert Systems with Applications, 2024, 252: 123976.

[17] Kraetschmer N M, Deber R B, Dick P, Jennett P. Telehealth as gatekeeper: Policy implications for geography and scope of services. Telemedicine and e-Health, 2009, 15(7): 655-663.

[18] Lee C, Tai W, Ng K K. System dynamic modelling of patient flow and transferral problem in a mixed public-private healthcare system: A case study of Hong Kong SAR. Journal of Systems Science and Systems Engineering, 2020, 29: 590-608.

[19] Leonny S, Bowra J, Davis R A, Zuleta N, Hansen K, Large R, Yeung J. Telehealth in emergency medicine in Australasia: Advantages and barriers. Emergency Medicine Australasia, 2024, 36(4): 498-504.

[20] Li J, Li S, Luo J, Shen H. Simulation optimization for inpatient bed allocation with sharing. Journal of Systems Science and Systems Engineering, 2024, 34: 55-77.

[21] Li N, Pan J, Xie X. Operational decision making for a referral coordination alliance–When should patients be referred and where should they be referred to?. Omega, 2020, 96: 102077.

[22] Li Y. Impact factors of physicians’ service price in online healthcare community, 2016

[23] Li Z, Wang J, Chang A, Shi J. Capacity reallocation via sinking high-quality resource in a hierarchical healthcare system. Annals of Operations Research, 2021, 300: 97-135.

[24] Li Z, Zou Z. Design mechanism to coordinate a hierarchical healthcare system: Patient subsidy vs. capacity investment. Omega, 2023, 118: 102852.

[25] Liu X, Cai X, Zhao R, Lan Y. Mutual referral policy for coordinating health care systems of different scales. International Journal of Production Research, 2015, 53(24): 7411-7433.

[26] Lu C, Zhang Z, Lan X. Impact of China’s referral reform on the equity and spatial accessibility of healthcare resources: A case study of Beijing. Social Science & Medicine, 2019, 235: 112386.

[27] Ma X. A service supply chain framework from process perspective. 2016 International Conference on Economics and Management Innovations (ICEMI), 2016July 9–10, 2016

[28] Ma Y, Li Z, Liu K, Liu Z. Price decision-making in dual-channel healthcare services supply chain considering the channel acceptance, price ceiling, and public welfare. International Journal of Environmental Research and Public Health, 2022, 19(20): 13028.

[29] Marube N, Longaray A A, Ensslin L, Ensslin S R, Dutra A. Evaluating supply chain management performance in public health care: An MCDA approach. Pesquisa Operacional, 2024, 44: e275847.

[30] Parvez A, Saleem J, Bhatti M A, Hasan A, Ali Z, Tauqeer T. Boruta-driven analysis of telehealth amalgamation across healthcare stratifications with diffuse-dual-channel and tiered-gatekeeper systems. Scientific Reports, 2024, 14(1): 24784.

[31] Qian Q, Guo P, Lindsey R. Comparison of subsidy schemes for reducing waiting times in healthcare systems. Production and Operations Management, 2017, 26(11): 2033-2049.

[32] Rajan B, Seidmann A, Dorsey E R. The competitive business impact of using telemedicine for the treatment of patients with chronic conditions. Journal of Management Information Systems, 2013, 30(2): 127-158.

[33] Savva N, Tezcan T, Yıldız Ö. Can yardstick competition reduce waiting times?. Management Science, 2019, 65(7): 3196-3215.

[34] Senna P, Reis A, Marujo L G, Ferro de Guimarães J C, Severo E A, dos Santos A C D S G. The influence of supply chain risk management in healthcare supply chains performance. Production Planning & Control, 2024, 35(12): 1368-1383.

[35] Shen J. Uncertain two-echelon green supply chain models based on revenue sharing contract. International Journal of Machine Learning and Cybernetics, 2021, 12(7): 2059-2068.

[36] Shumsky R A, Pinker E J. Gatekeepers and referrals in services. Management Science, 2003, 49(7): 839-856.

[37] Sun H, Wang H, Steffensen S. Mechanism design of multi-strategy health insurance plans under asymmetric information. Omega, 2022, 107: 102554.

[38] Sun L, Yu M, Wang F. Capacity decisions and revenue sharing in a telemedicine healthcare system. Journal of Combinatorial Optimization, 2023, 46(5): 31

[39] Tarakci H, Ozdemir Z, Sharafali M. On the staffing policy and technology investment in a specialty hospital offering telemedicine. Decision Support Systems, 2009, 46(2): 468-480.

[40] Teng D, Li N, Peng Z, Kong N. Threshold control policy for patient referral under cooperation scenarios. 2017 13th IEEE Conference on Automation Science and Engineering (CASE), 2017195-200.

[41] Teymourifar A, Kaya O, Ozturk G. Contracting models for pricing and capacity decisions in healthcare systems. Omega, 2021, 100: 102232.

[42] Wang J, Zhang X, Shi J J. Hospital dual-channel adoption decisions with telemedicine referral and misdiagnosis. Omega, 2023, 119: 102875.

[43] Wang W, Shi X, Xiao H, Zheng X. Optimal pricing strategy for multichannel healthcare services. The 53rd Hawaii International Conference on System Sciences (HICSS), 2020January 7–10, 2020

[44] Wang X, Zhang Z, Yang L, Zhao J. Price and capacity decisions in a telemedicine service system under government subsidy policy. International Journal of Production Research, 2021, 59(17): 5130-5143.

[45] Wu H, Lu N. Service provision, pricing, and patient satisfaction in online health communities. International Journal of Medical Informatics, 2018, 110: 77-89.

[46] Yang D, Wang Y, Mei S. How to balance online healthcare platforms and offline systems? A supply chain management perspective. Managerial and Decision Economics, 2021, 42(2): 502-515.

[47] Yang F, Wang W, Zheng X. Optimal pricing decisions for multichannel healthcare service with differing consemers’ knowledge levels. Journal of Modelling in Management, 2022, 17(4): 1351-1371.

[48] Yang H, Guo X, Wu T, Ju X. Exploring the effects of patient-generated and system-generated information on patients’ online search, evaluation and decision. Electronic Commerce Research and Applications, 2015, 14(3): 192-203.

[49] Yang Y, Zhang X, Lee P K. Improving the effectiveness of online healthcare platforms: An empirical study with multi-period patient-doctor consultation data. International Journal of Production Economics, 2019, 207: 70-80.

[50] Yaraghi N, Gopal R D, Ramesh R. Doctors’ orders or patients’ preferences? Examining the role of physicians in patients’ privacy decisions on health information exchange platforms. Journal of the Association for Information Systems, 2019, 20(7): 14

[51] Yu M, Zhou W, Jiang B. Referral strategies and capacity decisions in a tiered hospital system with gatekeeping designs–Exemplified with Chinese healthcare system. Computers & Industrial Engineering, 2022, 171: 108447.

[52] Zhang X, Perera S C, Wang J-J, Cai T, Gupta V. Coordinating telehealth platform with revenue-sharing contracts under different reimbursement mechanisms. Transportation Research Part E: Logistics and Transportation Review, 2025, 193: 103864.

[53] Zhao H, Liu Z, Li M, Pei Z, Fu L. Optimal pricing and healthcare warranty strategies for chronic diseases. Computers & Industrial Engineering, 2022, 172: 108539.

RIGHTS & PERMISSIONS

Systems Engineering Society of China and Springer-Verlag GmbH Germany

Just Accepted

This article has successfully passed peer review and final editorial review, and will soon enter typesetting, proofreading and other publishing processes. The currently displayed version is the accepted final manuscript. The officially published version will be updated with format, DOI and citation information upon launch. We recommend that you pay attention to subsequent journal notifications and preferentially cite the officially published version. Thank you for your support and cooperation.