Channel Choice and Incentives in Cadaveric Organ Supply Chain

Journal: European Journal of Operational Research (EJOR)

The low rate of cadaveric organ donation is a challenge that most countries struggle with. The situation is more acute in developing nations like India where nearly half a million patients succumb to organ failure every year due to organ shortage. Apart from living organ donors, cadaveric donors are an alternate source of transplantable organs. Cadaveric donors are patients who have suffered brain-death but whose organs are suitable for donation.

Almost 150,000 brain-deaths due to road accidents are reported annually in India according to the Ministry of Road and Transport, Government of India. A significant proportion of these victims could become organ donors, if managed efficiently with an appropriate coordinating system in place. A well-functioning cadaveric organ donation process requires active participation from as well as coordination between multiple entities, including non-transplant organ retrieval centres (NTORC). NTORCs are the hospitals that are not licensed to carry out organ transplants but possess adequate infrastructure to conduct organ retrievals from brain-dead patients. This study focuses on incentivising such non-transplant hospitals to volunteer as organ retrieval hospitals.

In this study, the authors examine factors and alternate decision-making setups that influence the supply of cadaveric organs and identify possible incentives and mechanisms to increase it. They develop a model that captures the interaction between supply-side entities – a coordinating organisation (CO), whose objective is to maximise the social welfare, and a hospital that performs the organ retrieval (NTORC). Under different setups, the authors evaluate the two levers available to the coordinating organisation, its own effort and reimbursement fees, which can be used to induce higher effort by hospitals. They contrast these decisions and payoffs to determine if any benefits are forthcoming from the coordinating organisation’s effort commitment. The authors also examine the hospital’s optimal channel decision in the presence of an unauthorised channel and a low paying authorised channel and derive the conditions under which the hospital would prefer the authorised channel over the unauthorised channel.

The study reveals important findings for the policymakers. For instance, the study results suggest that the CO could leverage the penalty in the unauthorised channel to induce hospital’s participation in the authorised channel, even if the CO’s reimbursement fee ends up being lower than the price offered in the unauthorised channel. This is a counter intuitive finding because conventional wisdom tells us that the primary reason for the hospitals to operate in the unauthorised channel is the economic payoff. The analysis and results indicate that the hospital would be better off to consider the marginal effectiveness of its effort and also the combined benefit to the players in any given channel, rather than being myopic and considering only the absolute economic payoff.

The results also show that the upfront effort commitment by the CO is beneficial to the hospital. Similarly, the effort cost-sharing between the CO and the hospital leads to better outcomes for the hospital. Therefore, the hospitals should work more closely with the CO and seek upfront effort commitment from the CO or seek sharing of effort costs. This will not only help hospitals’ revenues, but also help them contribute towards social welfare, by increasing the pool of cadaveric organs in the supply chain. Thus, the study results provide insights that lead to better outcomes for all the players in the organ retrieval supply chain, and result in the improved organ donation rate.