Channel management in outpatient care: Implications of telemedicine and transportation support

Abstract

The COVID-19 pandemic accelerated telemedicine adoption, offering a convenient alternative to in-person care. However, televisits may not fully address health concerns and sometimes require supplementary in-person visits, consuming resources that could have been saved if the initial visit had been in-person. As the pandemic subsides, in-person visits are regaining popularity, prompting providers to reorient resources toward in-person care. Transportation support (or subsidies) for patients, funded by providers or the government, plays a critical role in facilitating in-person visits. In this evolving landscape of telemedicine, we study how an outpatient care provider can optimally balance virtual and in-person services and whether, and how, to engage with transportation subsidies. We connect these two questions by examining how transportation subsidies reshape the provider’s optimal capacity allocation across service channels and, in turn, affect overall patient access. We develop a stylized queueing-game model to represent the operations of a revenue-maximizing provider serving patients who strategically choose between service channels. We find that provider size, measured by total capacity relative to demand, is key. Small and large providers perform best by focusing on one channel without offering subsidies, whereas medium-sized providers benefit from carefully balancing both channels alongside subsidies. Paradoxically, transportation subsidies, which make in-person care more accessible, may reduce overall patient access to care, even when fully funded by the government. This occurs because providers may shift capacity toward a higher-reimbursement channel, ultimately serving fewer patients. Differentiating payment rates between in-person and virtual visits can potentially prevent such reductions. Our study highlights the importance of capacity coordination between channels for providers and cautions policymakers that transportation support may unintentionally harm patient access. Properly designed financial incentives can help prevent such negative outcomes.