A data-driven approach to pricing models for balanced public-private healthcare systems

This study focuses on a real-world healthcare system with coexisting public and private hospitals with distinct characteristics. While public hospitals have lower costs, they also suffer from long waiting times and diminishing patients’ perceived quality of care. Conversely, despite their higher fees, private hospitals offer shorter waiting times, leading to a more favorable perception of quality. A balanced healthcare system could provide societal benefits. Pricing strategies greatly influence a patient’s hospital selection. For instance, reduced fees in private hospitals attract more patients, consequently reducing overcrowding in public facilities and elevating the overall quality of services provided. This study aims to develop pricing models to foster a balanced and socially advantageous healthcare system. This system determines private hospital pricing through contract mechanisms with the government. Thus, we delve into the ramifications of various contract models between the government and private hospitals on social utility. Our findings underscore the communal advantages of contract mechanisms. Furthermore, we generalize the proposed models to apply to similar systems.