Marketwide Price Transparency Suggests Significant Opportunities For Value-Based Purchasing

Area of Science:

• Health economics
• Healthcare market analysis
• Health services research

Background:

• Price variation in healthcare markets affects value-based purchasing strategies.
• Understanding local market price dynamics is crucial for cost containment.

Purpose of the Study:

• To comprehensively examine fee-for-service paid commercial price variation for 291 outpatient medical services in a large Massachusetts market.
• To identify service categories with the widest price variation and assess potential savings from interventions.

Main Methods:

• Utilized a novel dataset covering nearly all insurer-provider-service triads in a major local market.
• Analyzed price variations across hospital service areas and provider types for outpatient medical services.

Main Results:

• Significant price variation was observed across hospital service areas.
• Medical services at acute hospitals were 76% more expensive on average than at other providers.
• Ambulance/transportation, physical/occupational therapy, and laboratory/pathology testing showed the widest price variation.

Conclusions:

• Steering patients to lower-price providers or implementing price ceilings could yield 9.0-12.8% in potential savings.
• Marketwide price transparency at the insurer-provider-service level can inform policy interventions to reduce healthcare spending.