Primary care contract design under medicare reimbursement

Designing a reasonable medicare reimbursement method, and optimizing the resources distribution of primary care, are important ways to realize the "strong primary healthcare" reform and promote hierarchical diagnosis. We developed a game-theoretic model to analyze strategies when two primary care providers (PCPs) provide homogeneous or heterogeneous services, respectively. There are three strategies: not contract which is called baseline, patients contract with separate provider which is called strategy 1 and patients contract with medical treatment alliance which is called strategy 2. We found that contract is not always good for PCPs and patients. When the two PCPs provide homogeneous service, contract induces the medical cost decrease and the patients' perceived value increase. However, when the two PCPs provide heterogeneous service, the benefits of the PCPs and the patients decrease under strategy 1, but the opposite is true under strategy 2. Moreover, contract does not always encourage PCPs to improve service value. It has no incentive effect on PCPs with homogeneous service, but strategy 2 is a better motivator than strategy 1 with heterogeneous service. This is a socially optimal strategy.