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Service Systems with Heterogeneous Customers: Investigating the Effect of Telemedicine on Chronic Care

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  • Balaraman Rajan

    (California State University East Bay, Hayward, California 94542)

  • Tolga Tezcan

    (London Business School, London NW1 4SA, United Kingdom)

  • Abraham Seidmann

    (University of Rochester, Rochester, New York 14627)

Abstract

Medical specialists treating chronic conditions typically face a heterogeneous set of patients. Such heterogeneity arises because of differences in medical conditions as well as the travel burden each patient faces to visit the clinic periodically. Given this heterogeneity, we compare the strategic behavior of revenue-maximizing and welfare-maximizing specialists and prove that the former will serve a smaller patient population, spend more time with the patients, and have shorter waiting times. We also analyze the impact of telemedicine technology on patient utility and the specialists’ operating decisions. We consider both the case when specialists can freely set their own fee for service and the case when fees are set exogenously by a third-party payer. We prove that with the introduction of telemedicine, the specialists become more productive and the overall social welfare increases, although some patients, unexpectedly, will be worse off. Our analytical results lead to some important policy implications for facilitating the further deployment of telemedicine in the care of chronically ill patients.

Suggested Citation

  • Balaraman Rajan & Tolga Tezcan & Abraham Seidmann, 2019. "Service Systems with Heterogeneous Customers: Investigating the Effect of Telemedicine on Chronic Care," Management Science, INFORMS, vol. 65(3), pages 1236-1267, March.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1236-1267
    DOI: 10.1287/mnsc.2017.2979
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    Cited by:

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    2. Shujing Sun & Susan F. Lu & Huaxia Rui, 2020. "Does Telemedicine Reduce Emergency Room Congestion? Evidence from New York State," Information Systems Research, INFORMS, vol. 31(3), pages 972-986, September.
    3. Zhou, Cuihua & Hao, Yifei & Lan, Yanfei & Li, Weifeng, 2023. "To introduce or not? Strategic analysis of hospital operations with telemedicine," European Journal of Operational Research, Elsevier, vol. 304(1), pages 292-307.
    4. Xianyi Wang & Xiaofang Wang & Hui He, 2021. "Contracts to Coordinate Healthcare Providers in the Telemedicine Referral System," Sustainability, MDPI, vol. 13(18), pages 1-25, September.
    5. Li, Zhong-Ping & Chang, Aichih (Jasmine) & Zou, Zongbao, 2023. "Design mechanism to coordinate a hierarchical healthcare system: Patient subsidy vs. capacity investment," Omega, Elsevier, vol. 118(C).
    6. 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).
    7. Wang, Jian-Jun & Zhang, Xinmou & Shi, Jim Junmin, 2023. "Hospital dual-channel adoption decisions with telemedicine referral and misdiagnosis," Omega, Elsevier, vol. 119(C).
    8. Wang, Jian-Jun & Li, Zhong-Ping & Shi, Jim (Junmin) & Chang, Ai-Chih (Jasmine), 2021. "Hospital referral and capacity strategies in the two-tier healthcare systems," Omega, Elsevier, vol. 100(C).
    9. Chakraborty, Imon & Ilavarasan, P. Vigneswara & Edirippulige, Sisira, 2021. "Health-tech startups in healthcare service delivery: A scoping review," Social Science & Medicine, Elsevier, vol. 278(C).
    10. Nur Sunar & Jayashankar M. Swaminathan, 2022. "Socially relevant and inclusive operations management," Production and Operations Management, Production and Operations Management Society, vol. 31(12), pages 4379-4392, December.
    11. Zhong-Ping Li & Jian-Jun Wang & Ai-Chih Chang & Jim Shi, 2021. "Capacity reallocation via sinking high-quality resource in a hierarchical healthcare system," Annals of Operations Research, Springer, vol. 300(1), pages 97-135, May.

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