Graduation Year

2008

Document Type

Thesis

Degree

M.S.I.E.

Degree Granting Department

Industrial Engineering

Major Professor

Kingsley A. Reeves, Jr., Ph.D.

Committee Member

Michael Weng, Ph.D.

Committee Member

Gabriel Picone, Ph.D.

Keywords

Predictive modelling, Logistic regression, Selection bias, Inverse mills ratio, Outsourcing, Integration

Abstract

Patient care programs such as wellness, preventive care and specifically disease management programs, which target the chronically ill population, are designed to reduce healthcare costs and improve health, while promoting the efficient use of healthcare resources, and increasing productivity. The organizational form adopted by the health plan for these programs, i.e. in-sourced vs. outsourced is an important factor in the success of these programs and the extent to which the core objectives listed above are fulfilled.

Transaction cost economics aims to explain the working arrangement for an organization and to explain why sourcing decisions were made by considering alternate organizational arrangements and comparing the costs of transacting under each. This research aims to understand the nature and sources of transaction costs, how they affect the sourcing decision of disease management and other programs, and its effect on the organization, using current industry data. Predictive models are used to obtain empirical results of the influence of each factor, and also to provide cost estimates for each organizational form available, irrespective of the form currently adopted.

The analysis of the primary data obtained by the means of a web-based survey supports and confirms the effect of transaction cost factors on these programs. This implies that in order to reap financial rewards and serve patients better, health plans must aim to minimize transaction costs and select the organizational form that best accomplishes this objective.

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