Competition and coordination between traditional and internet hospitals

Abstract

AbstractMotivated by the recent emergence and rapid growth of online healthcare platforms, this paper investigates its impacts on the healthcare ecosystem by taking into consideration of heterogeneous patients, homogeneous service providers and profit-driven hospitals. A game-theoretical model with a queueing framework is developed, and two healthcare systems are considered, including a monopolistic system with either an offline, traditional hospital, or an online, Internet hospital, and a duopolistic system with both kinds of hospitals. Our study finds that in both systems a large population of patients always increases the healthcare supply and demand and the hospital utilization, which leads to an improvement not only in the hospital profitability, but also in the welfare of both patients and service providers. When considering a monopolistic system only, our study suggests that the monopolistic Internet hospital outperforms its counterpart in hospital utilization only when the wait cost is not high (i.e., patients are less sensitive to wait time), especially when the wait cost is medium and the patient-provider ratio is small. When considering a duopolistic system, this study concludes that the decisions of patients, service providers, and hospital managers of both hospitals are interrelated, and that a large population of service providers increases its hospital’s supply, demand, and wage rate, while decreases its wait times. When comparing the two monopolistic with the duopolistic system, the latter outperforms and improves every entity’s utility (i.e., patients, hospital, and society) when there is abundance of service providers with more being allocated to the Internet hospital, whereas the monopolistic system dominates when the patient population is large, and more providers are allocated to the traditional hospital.