Providers’ Responses to Price Transparency

Hard for health care consumers to be sensitive to health care prices if they don’t know what those prices are.  Thanks to the price transparency movement an increasing number of consumers have access to fairly accurate information about what they will pay for a medical service, taking into account their health plan’s benefit features like deductibles, copays and network composition.  Unfortunately so far few people appear to use those capabilities.  But if they did, how would providers respond?  That is the question explored by a study in the Journal of Health Economics.   (JHE Article)    Use of price transparency platform available to up to 8 million people from 2010 to 2014 was the data source.  Prices for office visits and lab tests were studied.  The authors attempted to ascertain whether use of the platform appeared to affect providers’ actual prices charged.  The platform rolled out at different times in different geographies.  The platform wasn’t really that widely available, so you are looking at marginal effects.  Only 10% of markets had 10% of the population with access to the platform, and 22% of markets had a 5% penetration rate.  According to the analysis, for every 10% increase in population access to the price transparency platform, lab test prices declined 1.7%, but there was no effect on office visit prices.  Lab tests are pretty much a commodity, so consumers may be more price sensitive in regard to where they are performed, while physicians are more unique and there may be much less price sensitivity to choice of doctor.  I am somewhat dubious about the results, which appear to be small in magnitude and uncertain in attribution of cause and effect.

One potential downside to revelation of actual negotiated prices between providers and health plans is that it could lead to higher prices or facilitate collusion among providers.  And it remains unclear how price-sensitive most health care consumers are.  Health care is emotional and people may have strong feelings about seeing a particular provider no matter the price.  But in general I think the more information people have the better.  If we forced de-consolidation of the provider market, we would have less reason to fear provider collusion.