Analysis of Medical Markets and Use of Mechanism Design Physician-Patient Interactions and Role of Organizations

Abstract

This paper has been written after a seminar at the Soton business school (University of Southampton), discussing how market design mechanism can be useful for some medical markets, especially in combination with the reversed algorithm, called reversed conjoint model on physicians’ choices (Huttin, 2014, 2017); this first paper provides a description of two cases, one at the micro level of physician and patient interaction and a second one to integrate the organizational level of primary care groups. The first case is a micro representation of a physician-patient interaction, which can be expanded to integrate various types of heterogeneity of demand for care. The second case introduces the organizational level of primary care, with the example of the fundholding system; it leads to opt for a cooperative approach and to integrate variations between over spenders and lower spenders’ physicians. This paper uses the formalization of a game approach and proposes a stream of research for policy design in decision tools for financing reforms in health care. It explores how market failures in health care can be addressed with engineering economics and implementation of rules for different types of interactions in medical markets. Moreover, the limits to address the sources of heterogeneity between practices with tools such as yardstick competition may be addressed with the fast digitalization of the health system.