A Model of Hospital Congestion in Developing Countries

Abstract

This paper explains the observed hospital congestion in developing countries as the result of the interaction between ambulatory care physicians who refer patients to hospitals, and hospitals which must detect the severity of the incoming patients’ disease. In an imperfect information environment, physicians might refer to top-tier hospitals patients with mild diseases that could be properly addressed by regular hospitals, just to fulfill patients’ demand for the best care. Yet, the triage capability of top-tier hospitals declines if the hospital is subject to congestion, which, in turn, provides incentives to physicians to refer more patients to these hospitals. The model presents two equilibria, one with perfect triage, and another with triage errors and hospital congestion. In this last equilibrium, a higher hospital size raises the likelihood of congestion.

Keywords: hospital congestion, hospital size, referral system, health policy, developing countries

JEL Classification: I11, I15, D82