The introduction of telemedicine service: With or without reimbursement?

The introduction of telemedicine service into the health care system has been rapidly accelerated during the global COVID-19 pandemic. This paper investigates the optimal introduction strategy and reimbursement policy of telemedicine service by comparing three cases, i.e., the case without telemedicine service, the case providing telemedicine service with reimbursement, and the case providing telemedicine service without reimbursement. Stylized queue models are used to depict the offline and online serving processes. Arriving patients decide to seek offline service, telemedicine service, or balk based on their expected utilities. Mathematical models and duopoly game models are built to study the optimal service capacity and price decisions of the public hospital and the telemedicine firm in those three cases. Our study shows that the introduction of telemedicine service without reimbursement can always be favorable in increasing patients' total utility and social welfare, while the introduction of telemedicine service with reimbursement can be harmful when the government reimbursement rate is low.