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Modeling the Impact of an Outcome-Oriented Reimbursement Policy on Clinic, Patients, and Pharmaceutical Firms

Author

Listed:
  • Kut C. So

    (Graduate School of Management, University of California, Irvine, California 92697)

  • Christopher S. Tang

    (The Anderson School, University of California, Los Angeles, 110 Westwood Plaza, Los Angeles, California 90095)

Abstract

Tackling the steep increase in drug costs is an especially important issue among many health care providers and insurers. To entice the clinics to become more cost efficient, the U.S. federal government, as well as many HMOs, have developed various cost containment initiatives recently. However, the impact of these initiatives on the patients' well-being, the clinic's profitability, and the pharmaceutical firm's profitability has not been formally analyzed. In this paper we develop a mathematical model that is intended to examine the impact of a reimbursement policy for drug usage. Despite the simplistic structure of our model, the analysis enhances our understanding of the joint impact of the reimbursement policy on the patients, the clinic, and the pharmaceutical firm. Thus, our analysis can provide valuable information for evaluating the effectiveness of implementing such a reimbursement policy. In addition, we utilize the data gathered from a clinic to help support the assumptions and results of the underlying model.

Suggested Citation

  • Kut C. So & Christopher S. Tang, 2000. "Modeling the Impact of an Outcome-Oriented Reimbursement Policy on Clinic, Patients, and Pharmaceutical Firms," Management Science, INFORMS, vol. 46(7), pages 875-892, July.
    • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:7:p:875-892
    DOI: 10.1287/mnsc.46.7.875.12040
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    References listed on IDEAS

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    1. Christopher S. Tang, 1990. "The Impact of Uncertainty on a Production Line," Management Science, INFORMS, vol. 36(12), pages 1518-1531, December.
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    Cited by:

    1. Anil Aswani & Zuo-Jun Max Shen & Auyon Siddiq, 2019. "Data-Driven Incentive Design in the Medicare Shared Savings Program," Operations Research, INFORMS, vol. 67(4), pages 1002-1026, July.
    2. Nicos Savva & Tolga Tezcan & Özlem Yıldız, 2019. "Can Yardstick Competition Reduce Waiting Times?," Management Science, INFORMS, vol. 65(7), pages 3196-3215, July.
    3. Pengfei Guo & Christopher S. Tang & Yulan Wang & Ming Zhao, 2019. "The Impact of Reimbursement Policy on Social Welfare, Revisit Rate, and Waiting Time in a Public Healthcare System: Fee-for-Service Versus Bundled Payment," Service Science, INFORMS, vol. 21(1), pages 154-170, January.
    4. Hui Zhang & Tao Huang & Tao Yan, 2022. "A quantitative analysis of risk-sharing agreements with patient support programs for improving medication adherence," Health Care Management Science, Springer, vol. 25(2), pages 253-274, June.
    5. Tinglong Dai & Sridhar Tayur, 2020. "OM Forum—Healthcare Operations Management: A Snapshot of Emerging Research," Manufacturing & Service Operations Management, INFORMS, vol. 22(5), pages 869-887, September.
    6. Xiuli Chao & Liming Liu & Shaohui Zheng, 2003. "Resource Allocation in Multisite Service Systems with Intersite Customer Flows," Management Science, INFORMS, vol. 49(12), pages 1739-1752, December.
    7. Fainman, Emily Zhu & Kucukyazici, Beste, 2020. "Design of financial incentives and payment schemes in healthcare systems: A review," Socio-Economic Planning Sciences, Elsevier, vol. 72(C).
    8. Houyuan Jiang & Zhan Pang & Sergei Savin, 2012. "Performance-Based Contracts for Outpatient Medical Services," Manufacturing & Service Operations Management, INFORMS, vol. 14(4), pages 654-669, October.
    9. Tinglong Dai & Mustafa Akan & Sridhar Tayur, 2017. "Imaging Room and Beyond: The Underlying Economics Behind Physicians’ Test-Ordering Behavior in Outpatient Services," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 99-113, February.
    10. Houyuan Jiang & Zhan Pang & Sergei Savin, 2020. "Performance Incentives and Competition in Health Care Markets," Production and Operations Management, Production and Operations Management Society, vol. 29(5), pages 1145-1164, May.
    11. Li, Zhong-Ping & Wang, Jian-Jun, 2021. "Effects of healthcare quality and reimbursement rate in a hospital association," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    12. Sang-Hyun Kim & Morris A. Cohen & Serguei Netessine, 2007. "Performance Contracting in After-Sales Service Supply Chains," Management Science, INFORMS, vol. 53(12), pages 1843-1858, December.
    13. Houyuan Jiang & Zhan Pang & Sergei Savin, 2017. "Improving Patient Access to Care: Performance Incentives and Competition in Healthcare Markets," Working Papers 2017/01, Cambridge Judge Business School, University of Cambridge.

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