Cross-Cluster Referral and Opt-out Incentive in Healthcare Systems


TopicCross-Cluster Referral and Opt-out Incentive in Healthcare Systems

SpeakerLIU Liming, Chair Professor and Dean, Faculty of Business, Lingnan University (Hong Kong)


Time9:30am April 2,2018

AbstractExtremely long waiting times and drastic waiting time variations among different hospitals (clusters) of a healthcare system are some of the biggest challenges in healthcare and have long troubled public healthcare system management such as the Hong Kong Hospital Authority (HKHA). Targeted and optimized capacity investment (see Chao et al. 2003) has its constraints and can only do so much, facing a changing operational environment. Other approaches that may help tackle these problems involve public policy issues and would possibly channel public resources to private operators in a two-tier (public and private) healthcare jurisdiction that exists in many countries and regions. With significant courage, HKHA started experimenting two policy approaches separately which we refer to as referral (facilitating patient switching/cross-cluster to a less crowded hospital) and opt-out incentive (co-payment Public-Private Partnership for patient to seek much more expensive treatments in private hospitals). Although positive effects can be observed, the overall system-wide impact and long-term implications of the implementation of these two approaches are not obvious and must be clearly understood for the approaches to be implemented system-wide as full-scale public policies.

  We propose an analytical framework to study these two approaches in the context of Hong Kong’s public healthcare system, and provide managerial insights for proper policy design and implementation. Specifically, we answer the following questions: Are cross-cluster referral and opt-out incentive well founded approaches from system perspective? How does their effectiveness depend on the system parameters and workloads? Should and to what extent should the HKHA endeavors to facilitate cross-cluster referral? What factors should be considered in setting the levels of incentive in PPP programs?

  Our findings are interesting, and some are unexpected. When opt-out is costly, and the system workload is intermediate and imbalanced, cross-cluster referral can significantly reduce the system cost. Otherwise, the option of cross-cluster referral may worsen system performance. Management should not blindly reduce switching cost to over-facilitate cross-cluster referral. Although not eliminating externalities completely, the only publically acceptable incentive scheme of a fixed subsidy to each patient who opts out of the public system is theoretically sound and it benefits not only the recipients, but also other patients and the whole system. It reduces the system cost effectively when system utilization is high. Management should set the right subsidy level mainly based on both the opt-out cost and system utilization.

Introduction to the Speaker


  LIU Liming


  Current Position

  Chair Professor and Dean

  Faculty of Business, Lingnan University (Hong Kong)


  Education & Academic Qualifications

  PhD (Management Science/Operations Research)  1990

  Department of Industrial Engineering

  University of Toronto, Ontario, Canada


  Teaching and Research Interests


  Logistics and supply chain management, risk analysis, stochastic models, port operations and economics, healthcare operations, complex networks