Performance-Based Contracts for Outpatient Medical Services

In recent years, the performance-based approach to contracting for medical services has been gaining popu-larity across different healthcare delivery systems, both in the US (under the name of "Pay-for-Performance",or P4P), and abroad ("Payment-by-Results", or PbR, in the UK). One common element of performance-based compensation is the inclusion of patient service access metrics, in addition to the quality of clinicaloutcomes, in the process of performance evaluation for a provider of healthcare services. For example, theimplementation of the "Payment-by-Results" approach includes appointment scheduling targets designedto shorten patient waiting time, and adherence to these targets is monitored through a dedicated onlineoutpatient appointment system, "Choose-and-Book".The goal of our research is to build a unified performance-based contracting (PBC) framework thatincorporates patient access-to-care requirements and that explicitly accounts for the complex outpatient caredynamics facilitated by the use of an online appointment scheduling system. In our model, a service providerneeds to allocate his service capacity among three patient groups: urgent patients whose service cannot bepostponed, and two groups of non-urgent patients, dedicated patients who insist on getting served by theirfirst-choice provider and flexible patients who will choose another provider if the online appointment systemshows no available appointments with their first-choice provider. The principal wants to minimize her cost(payments made to the provider offset by the waiting-time penalty) of achieving the expected waiting-timetarget. We model the appointment dynamics in the presence of a mixed-patient population as that of anM=D=1 queue and analyze several contracting approaches under adverse selection (asymmetric information)and moral hazard (private actions) settings...