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Provider responses to online price transparency.

Christopher M Whaley¹

¹RAND Corporation, 1776 Main Street, Santa Monica 90401, United States.

Journal of Health Economics

|July 13, 2019

Summary

Price transparency initiatives reduced healthcare prices for lab tests by 1-4%. Consumer use of price information drove these changes, showing how lowering search costs can increase competition in healthcare markets.

Area of Science:

Health economics
Market competition
Consumer behavior

Background:

Limited healthcare price information hinders consumers.
Price transparency initiatives aim to address this gap.
Internet-based platforms are emerging as key tools.

Purpose of the Study:

To estimate the effect of price transparency on healthcare provider prices.
To investigate the role of consumer search costs and platform diffusion.
To understand the impact on market competition.

Main Methods:

Utilized data from a nationwide internet-based price transparency platform.
Employed a staggered diffusion approach to analyze price changes.
Differentiated between homogenous (laboratory tests) and differentiated (office visits) services.

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Main Results:

Observed a 1-4% reduction in provider prices for homogenous services (laboratory tests).
Found no significant price response for differentiated services (office visits).
Price reductions were correlated with active consumer utilization of the transparency platform.

Conclusions:

Reducing consumer search costs can stimulate limited price competition in healthcare.
Price transparency is more effective for homogenous services where price comparison is easier.
Active consumer engagement is crucial for realizing the benefits of price transparency.