Thursday, December 04, 2008

Game-theoretic Modeling of Incentives between Healthcare Consumers and Providers

“The dollar isn't about expense, it's about selection and choice and commitment.” 


Healthcare information access is one of the top uses of Internet today. The internet now has matched physicians as the leading source for health related information. Emerging Web 2.0 sociable technologies are also enablers that promote collaboration amongst the regular people and surge healthcare information delivery. This way, the Internet is redefining the healthcare industry. Internet- based technology is headed towards delivering certain healthcare services more effectively and at lower costs. Newly emerging Internet healthcare stakeholders are poised to wrest control from established “brick-and-mortar” entities that have dominated healthcare for decades. This phenomenon is like the battle between the established Fourth Estate and new media technologies that are giving a hard time to the Press. Press is forced to re-think its survival strategies to sustain in the new Incentive based economic model that has dissipated control from a few fixed established houses to the general consumer and provider masses.

     

These unforeseen transformations need to be anticipated and modeled to benefit the stakeholders efficiently. The Internet has the potential to become the venue for the delivery of certain medical services, particularly those that are information-based. Virtual clinics are already starting to happen and involve online interaction between registered practitioners and patients. Currently, these services have a fixed cost per time financial model for consultation services and completely avoid the insurance companies from this interaction. In effect, this model is in its infancy and does not close the loop between healthcare service providers and delivery.  


Modeling this interaction effectively to analyze how the system performs is a very challenging task. This is more so important in this domain to avoid healthcare risks that may deteriorate the overall system by implementing not so thoughtful delivery channels. 


Game Theory studies strategic interactions between players. Given a set of players’ actions, and their preferences, game theory helps us analyze rational behavior between agents. The art of game theoretic analysis of a problem lies in the formulation of the problem as a matrix of players, strategies (actions) and the payoff(utilities) of the actions. Analyzing this matrix helps us discover best possible cooperating rational behavior among the players (Nash Equilibrium). Studying game-theoretic models (or other models that apply to human interaction) help us suggest ways in which an individual's behavior may be modified to improve one’s own welfare (for eg., applications in economics, decision theory and lately in computer science). By such analysis, the hope is to see the advantages and disadvantages of various strategies. 


More formally, a game is an interaction or a series of interactions between players, which assumes that 1) the players pursue well defined objectives (they are rational) and 2) they take into account their knowledge or expectations of other players behavior (they reason strategically). Players compete to maximize their payoffs with other players to reach an Equilibrium state. 

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