Departmental Seminar (899): Shima Nassiri, University of Michigan
WHEN: September 26, 2019 3:00 pm-5:00 pm
The Departmental Seminar Series is open to all. U-M Industrial and Operations Engineering graduate students and faculty are especially encouraged to attend.
The seminar will be followed by a reception in the IOE Commons (Room 1709) from 4 p.m. to 5 p.m.
Reference Pricing for Healthcare Services
The traditional payment system between an insurer and providers does not incentivize providers to limit their prices nor patients to choose less expensive providers, hence contributing to high insurer expenditures. Reference pricing has been proposed as a way to better align incentives and control the rising costs of healthcare. In this payment system, the insurer determines the maximum amount that can be reimbursed for a procedure (reference price). If a patient selects a provider charging more than the reference price, the patient is responsible for the entire portion above it. We propose a model to analyze the reference pricing payment scheme. Our model incorporates an insurer who chooses the reference price, multiple competing price-setting providers, and heterogeneous patients who select a provider based on a multinomial logit choice model. Our goal is to understand how reference pricing compares with payment systems where patients pay a fixed or a variable amount. We find that the highest-priced providers under a fixed payment system cut their prices under reference pricing. Moreover, reference pricing often outperforms the fixed and the variable payment system both in terms of expected patient utility and insurer cost, unless the procedure cost is high in relation to the reference price (i.e., the reference price is low). The entire system also benefits from reference pricing despite a loss in provider profit due to lower prices. Furthermore, reference pricing with a variable portion below the reference price tends to perform worse than reference pricing with a fixed payment below the reference price.
Dr. Shima Nassiri is an assistant professor of technology and operations at the University of Michigan Ross School of Business. Her research interests involve (a) designing coordination mechanisms in supply chain and its applications in healthcare and public health policy using game theory and optimization techniques, and (b) studying the behavioral aspects of healthcare operations using econometrics and data-driven methods. She is particularly interested in studying the healthcare policies that are aiming to reduce healthcare expenditure by moving towards performance-based care. She received her Ph.D. from the Foster School of Business at the University of Washington.