Closer to Home: An Estimate-then-Optimize Approach to Improve Access to Healthcare Services

Abstract

Geographic inequalities in access to essential health services are well-documented, extending beyond rural-urban divides to include socioeconomic, racial, and other disparities. Proximity to hospitals, clinics, healthcare providers, and pharmacies varies widely, posing a challenge in deciding where to strategically locate such facilities. Demand for each service depends on local population health, individual preferences, provider capacity, and other factors. This study introduces a novel estimate-then-optimize framework, combining structural demand estimation using the Berry-Levinsohn-Pakes (BLP) approach with a choice-based optimal facility location model to maximize health service utilization. An advantage of this empirical approach is its reliance on aggregate data rather than individual outcomes. 

We illustrate our methodology by examining the Federal Retail Pharmacy Program in California, a public-private partnership that administered millions of COVID-19 vaccinations. Our demand estimates reveal that residents of socioeconomically vulnerable communities are more sensitive to travel distances to pharmacy-based vaccination sites. Augmenting the existing set of pharmacies with 500 strategically selected retail stores serving lower-income communities increases predicted vaccinations by 2.9 percent overall (770,000 additional vaccinations statewide) and by 5.4 percent in the least healthy neighborhoods. By combining a structural demand model with prescriptive analytics, our study offers policymakers and practitioners a systematic, data-driven framework for optimizing healthcare delivery networks. Our case study highlights several key insights that are applicable across settings: (1) demand estimates should account for socioeconomic heterogeneity, (2) optimization-based approaches outperform greedy policies, especially under spatial inequities in access to providers, and (3) an efficient network design prioritizes strategic site selection over simple expansion.

Keywords: structural estimation, BLP, choice model, facility location, healthcare access