Perception Bias Effects on Healthcare Management in COVID-19 Pandemic: An Application of Cumulative Prospect Theory

Abstract

Coronavirus disease 2019 (COVID-19) has posed severe threats to human safety in the healthcare sector, particularly in residents in long-term care facilities (LTCFs) at a higher risk of morbidity and mortality. This study aims to draw on cumulative prospect theory (CPT) to develop a decision model to explore LTCF administrators’ risk perceptions and management decisions toward this pandemic. This study employed the policy Delphi method and survey data to examine managers’ perceptions and attitudes and explore the effects of sociodemographic characteristics on healthcare decisions. The findings show that participants exhibited risk aversion for small losses but became risk-neutral when considering devastating damages. LTCF managers exhibited perception bias that led to over- and under-estimation of the occurrence of infection risk. The contextual determinants, including LTCF type, scale, and strategy, simultaneously affect leaders’ risk perception toward consequences and probabilities. Specifically, cost-leadership facilities behave in a loss-averse way, whereas hybrid-strategy LTCFs appear biased in measuring probabilities. This study is the first research that proposes a CPT model to predict administrators’ risk perception under varying mixed gain–loss circumstances involving considerations of healthcare and society in the pandemic context. This study extends the application of CPT into organizational-level decisions. The results highlight that managers counteract their perception bias and subjective estimation to avoid inappropriate decisions in healthcare operations and risk governance for a future health emergency.