Healthcare service enhancement with patient search

Abstract

The rapid development of Internet medical and advanced information technology has allowed patients to effortlessly search for their preferred healthcare services before making medical decisions. However, such strategic search behavior from patients will challenge the efforts of healthcare service providers to enhance their services and create marketing strategies. We investigate a healthcare service provider’s optimal service enhancement strategy with the consideration of patient search. Our primary objective is to figure out how the patient search cost affects the optimal healthcare service level and also the healthcare provider’s corresponding selling strategy. We find that if the fraction of patients who like the service is low, the optimal service level is increasing in the search cost. Whereas, if there are more patients who like the service, with a decrease in search cost, the healthcare provider may increase the service level to attract patients to search their preferences. In addition, by comparing with the scenario wherein patient search behavior is prohibited, we find that the patient search will counter-intuitively dampen the healthcare provider’s incentive on service enhancement. Thus, the underlying patient search would be detrimental to the provider’s profitability. We further find that, even if patients initially perceive their preferences over the healthcare service, such elimination of preference uncertainty (i.e., patient search, in this case, is needless) will not always benefit the healthcare provider, which highly hinges on the fraction of patients who like the healthcare service and the magnitude of search cost.