LOCATION AND SERVICE MIX DECISIONS FOR A MANAGED HEALTH-CARE NETWORK

For managers of managed health care organizations, the problem of desi gning a competitive multiple facility network cannot be solved by exis ting mathematical models. This paper thus presents a nonlinear integer model for determining a facilities design strategy that embodies the economic tradeoffs encompassed in a competitive strategy: minimizing c ost and maximizing market share. The integrated location and service m ix model determines the number, location and service offerings of faci lities that maximize profitability in a two-level hierarchical referra l delivery network where an organization's market share is represented by a multiplicative competitive interaction model. To demonstrate the usefulness of the proposed integrated model, a series of problems is solved by an interchange heuristic and compared to the solutions deriv ed by a simpler approach that ignores market competition.