Optimal pricing and patient satisfaction optimization for healthcare providers

Abstract

The importance of health systems for societies makes it necessary to examine them from a scientific perspective and improve healthcare. Healthcare service prices determine patients' decisions, so setting them correctly is crucial to creating balance in the system. In this research, we propose a bi-level model that includes private providers and the government to suggest optimal prices for healthcare services. The pricing method is suggested based on service quality and patient waiting time, and patients are categorized in two ways: 1) by the severity of their disease and the urgency of their condition, and 2) by their income and sensitivity to service prices. We aim to maximize service providers' profit at an optimal price while maximizing patient satisfaction. To achieve maximum patient utility, the government proposes contracts that increase overall societal utility. This research proposes and compares four cases: non-contract, cost-sharing contract, subsidy contract, and differentiated subsidy contract. Based on Stackelberg's game theory, we consider the government the leader and the private service provider the follower. Numerical results of the research show that the cost-sharing contract allocates support to all patients in society, but it does not achieve significant utility for the whole society, despite covering more patients. The subsidy contract allocates a more significant amount of subsidy to fewer patients and covers only those with an urgent condition. Differentiated subsidy contracts allocate subsidies according to price-sensitive groups, resulting in better use of budget expenditures. The managerial insight of this research, leads managers to consider contracts.