Healthcare Referral and Coordination in a Two-Tier Service System via Government Subsidy Scheme

Healthcare referral in a two-tier service system, transferring patients from an overcrowded comprehensive hospital to an idle community hospital has become an important means of Chinese healthcare reform for balancing the supply of and demand for care service at different level hospitals. To effectively implement such a healthcare referral program, the government may offer a subsidy to patients or a comprehensive hospital. The paper examines the operating efficiency of such a subsidy scheme associated with the healthcare referral program. By establishing a game-theoretic queuing model involving patients, hospitals, and government, we first present the optimal strategy in terms of referral rate and capacity level under the centralized and decentralized systems, respectively. We find that both the optimal referral rate and the optimal capacity level for the decentralized system are never more than those for the centralized system. Then when the objective of the government is to maximize the referral rate of patients subject to the constraint that the optimal referral rate for the centralized system is as a maximum (upper bound), we explore a feasible subsidy mechanism in coordinating the overall healthcare system. Our results indicate that for an inadequate budget, the equilibrium subsidy strategy is suboptimal for the two-tier healthcare system; for a relatively medium budget, the equilibrium subsidy strategy is optimal only when subsidizing the comprehensive hospital; for a sufficient budget, there always exists an optimal subsidy strategy for maximizing the patient welfare as well as coordinating the overall healthcare system.