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

Management Science, 2017

Posted: 17 Nov 2017

See all articles by Balaraman Rajan

Balaraman Rajan

California State University, East Bay; University of Rochester - Simon School of Business

Tolga Tezcan

University of Rochester - Simon Business School

Abraham Seidmann

University of Rochester - Simon Business School

Date Written: November 1, 2017

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, though 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.

Keywords: Telemedicine, healthcare, Service optimization

Suggested Citation

Rajan, Balaraman and Tezcan, Tolga and Seidmann, Abraham Avi, Service Systems with Heterogeneous Customers: Investigating the Effect of Telemedicine on Chronic Care (November 1, 2017). Management Science, 2017. Available at SSRN: https://ssrn.com/abstract=3072039

Balaraman Rajan (Contact Author)

California State University, East Bay ( email )

25800 Carlos Bee Boulevard
Hayward, CA California 94542
United States

University of Rochester - Simon School of Business ( email )

Rochester, NY 14627
United States

Tolga Tezcan

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Abraham Avi Seidmann

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-333C
Rochester, NY 14627
United States
585-275-5694 (Phone)
585-275-9331 (Fax)

HOME PAGE: http://www.ssb.rochester.edu/fac/Seidmannav/

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