Abstract
Warranties for healthcare can be greatly beneficial for cost reductions and improvements in patient satisfaction. Under healthcare warranties, healthcare providers receive a lump sum payment for the entire care episode, which covers a bundle of healthcare services, including treatment decisions during initial hospitalization and subsequent readmissions, as well as disease-monitoring plans composed of periodic follow-ups. Higher treatment intensities and more radical monitoring strategies result in higher medical costs, but high treatment intensities reduce the baseline readmission rates. This study intends to provide a systematic optimization framework for healthcare warranty policies. In this paper, the proposed model allows healthcare providers to determine the optimal combination of treatment decisions and disease-monitoring policies to minimize the total expected healthcare warranty cost over the prespecified period. Given the nature of the disease progression, we introduced a delay time model to simulate the progression of chronic diseases. Based on this, we formulated an accumulated age model to measure the effect of follow-up on the patient's readmission risk. By means of the proposed model, the optimal treatment intensity and the monitoring policy can be derived. A case study of pediatric type 1 diabetes mellitus is presented to illustrate the applicability of the proposed model. The findings could form the basis of developing effective healthcare warranty policies for patients with chronic diseases.